UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB


[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934.

                 For the quarterly period ended March 31, 2004

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For transition period from _______________ to  _________________


                        Commission file number 000-30244


                                 CYCO.NET, INC.
                 (Name of small business issuer in its charter)

                                                           Nevada 13-3389415
(State or other jurisdiction                           (IRS Employer ID Number)
       of incorporation)


              400 Gold SW, Suite 1000, Albuquerque, NM    87102
              (Address of principal executive offices)  (Zip code)

                    Issuer's telephone number (505) 248-0000


Check  whether  the  registrant  (1) filed all  reports  required to be filed by
Section 13 or 15 (d) of the  Securities and Exchange Act of 1934 during the past
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.  [X] Yes [ ] No


The  number  of  shares  of  Common  Stock  outstanding  as of May 10,  2004 was
91,751,931.


                                       1
<PAGE>

                                  CYCO.NET,INC.

                                  FORM 10-QSB

                                      INDEX

                                 March 31, 2004



         PART   I  FINANCIAL INFORMATION

         Consolidated Balance Sheet (unaudited)                         3

         Consolidated Statements of Operations (unaudited)              4

         Consolidated Statements of Cash Flows (unaudited)              5

         Notes to Consolidated Financial Statements (unaudited)         6

         Management's Discussion and Analysis of Financial
            Condition and Results of Operations                        10



         PART   II  OTHER INFORMATION

         Legal Proceedings                                             12

         Changes in Securities and Use of Proceeds                     13

         Controls and Procedures                                       14

         Defaults Upon Senior Securities                               14

         Submission of Matters to a Vote of Security Holders           14

         Other Information                                             14

         Exhibits and Reports on Form 8-K                              14




                                       2
<PAGE>

[OBJECT OMITTED]

                                 CYCO.NET, INC.
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2004
                                   (UNAUDITED)


                                     ASSETS
CURRENT ASSETS
  Cash                                                    $    97,472
  Receivables                                                  27,132
  Receivables - AIC                                           148,003
                                                          -----------
     Total current assets                                     272,607
                                                          -----------

PROPERTY AND EQUIPMENT, net of
  accumulated depreciation of $5,187                           22,096
                                                          -----------

OTHER ASSETS
   Deposit                                                     18,673
                                                          -----------

                                                          $   313,376
                                                          ===========

              LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES
  Accounts payable and accrued expenses                   $   322,516
  Notes payable - related party                                13,770
  Interest payable - related party                              6,673
  Accrued expenses - related party                            542,968
  Deferred gain                                               122,641
                                                          -----------
     Total current liabilities                              1,008,568
                                                          -----------

STOCKHOLDERS' (DEFICIT)
   Common Stock, $0.001 par value,
     100,000,000 shares authorized,
      91,751,764 issued and outstanding                        91,752
   Additional paid in capital                               8,776,132
   Deferred stock compensation                               (123,250)
   Stock subscription receivable                           (2,800,000)
   Accumulated (deficit)                                   (6,639,826)
                                                          -----------
                                                             (695,192)
                                                          -----------

                                                          $   313,376
                                                          ===========


               The accompanying notes are an integral part of the
                       consolidated financial statements.

                                        3
<PAGE>

                                 CYCO.NET, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                       Three Months Ended March 31,
                                                          2004              2003
                                                     ------------      ------------
<S>                                                  <C>               <C>
Revenues                                             $         --      $         --
                                                     ------------      ------------
Operating expenses:
General and administrative expenses                       645,930           112,541
Non-cash stock compensation                               248,250                --
                                                     ------------      ------------
   Expenses                                               894,180           112,541

(Loss) from operations                                   (894,180)         (112,541)
                                                     ------------      ------------

Other income (expense):
   Interest expense                                          (571)           (1,362)
                                                     ------------      ------------

Net (loss) before income tax                             (894,751)         (113,903)

Income tax (benefit)                                           --            34,000
                                                     ------------      ------------

Loss before discontinued operations                      (894,751)         (147,903)

Discontinued operations
Net income from discontinued operations, net
 of income taxes of $0 and $34,000, respectively               --           153,331
                                                     ------------      ------------

Net income (loss)                                    $   (894,751)     $      5,428
                                                     ============      ============

Per share information:

Weighted average shares
  outstanding (basic and diluted)                      89,942,552        31,496,419
                                                     ============      ============

Net income (loss) per common share
  (basic and diluted)                                $      (0.01)     $       0.00
                                                     ============      ============
</TABLE>


               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                        4
<PAGE>

                                 CYCO.NET, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


                                                    THREE MONTHS ENDED MARCH 31,
                                                         2004           2003
                                                      ---------      ---------
Cash flows from operating actvities:
Net cash (used in) operating activities               $(359,127)     $ (13,165)
                                                      ---------      ---------

Cash flows from investing activities:
   Purchase of fixed assets                             (11,949)            --
                                                      ---------      ---------
          Net cash (used in) investing activities       (11,949)            --
                                                      ---------      ---------

Cash flows from financing activities
   Proceeds from sale of common stock                   459,249             --
   Increase in bank overdraft                                --          7,530
                                                      ---------      ---------
          Net cash provided by financing activities     459,249          7,530
                                                      ---------      ---------

          Net increase (decrease) in cash                88,173         (5,635)
Beginning cash balance                                    9,299          5,635
                                                      ---------      ---------

Ending cash balance                                   $  97,472      $      --
                                                      =========      =========



               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       5
<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                 MARCH 31, 2004

(1) BASIS OF PRESENTATION

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of  America  ("GAAP")  for  interim  financial  information  and Item  310(b) of
Regulation  S-B.  They  do not  include  all of the  information  and  footnotes
required  by  GAAP  for  complete  financial  statements.   In  the  opinion  of
management,  all adjustments  (consisting only of normal recurring  adjustments)
considered necessary for a fair presentation have been included.  The results of
operations  for the periods  presented  are not  necessarily  indicative  of the
results to be expected for the full year. For further information,  refer to the
audited financial  statements of the Company as of December 31, 2003 and for the
two years then ended,  including  notes thereto,  included in the Company's Form
10-KSB.

The accompanying  consolidated  financial statements include the accounts of the
Company and its  subsidiary.  Intercompany  transactions  and balances have been
eliminated in consolidation.

(2) RECLASSIFICATIONS

Certain amounts from the three months ended March 31, 2003 financial  statements
have been reclassified to conform to current period presentation.

(3) GOING CONCERN

The Company's financial statements are presented on a going concern basis, which
contemplates  the  realization of assets and  satisfaction of liabilities in the
normal course of business.  As of March 31, 2004, the Company has yet to achieve
profitable operations, however has obtained commitments for future requirements,
as disclosed in Notes 8 and 9.

The Company has experienced losses from operations as a result of its investment
necessary to achieve its operating plan, which is long-range in nature.  For the
year ended  December 31, 2003 and for the three months ended March 31, 2004, the
Company incurred net (losses) of ($4,902,363) and ($894,751),  respectively.  At
March 31, 2004,  the Company had a working  capital  (deficit) of ($735,961) and
stockholders'  (deficit) of ($695,192).  The Company's  ability to continue as a
going  concern is  contingent  upon its ability to secure  financing  and attain
profitable operations.

The financial  statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.

(4) EARNINGS PER SHARE

The Company  calculates  net income (loss) per share as required by Statement of
Financial  Accounting  Standards No. 128,  "Earnings per Share." Basic  earnings
(loss) per share is  calculated  by dividing  net income  (loss) by the weighted
average number of common shares  outstanding  for the period.  Diluted  earnings
(loss) per share is  calculated  by dividing  net income  (loss) by the weighted
average  number  of  common  shares  and  dilutive   common  stock   equivalents
outstanding.  During the periods  presented,  common stock  equivalents were not
considered, as their effect would be anti-dilutive.


                                       6
<PAGE>

(5) STOCKHOLDERS' (DEFICIT)

During the quarter ended March 31, 2004, the Company issued  4,550,000 shares of
common stock for net cash  consideration  of  $459,249.  An  additional  975,000
shares were issued in exchange for services valued at $371,500,  the fair market
value of the shares on the date the Company agreed to issue the stock.  Of these
shares,  $123,250 is included in  deferred  stock  compensation  as of March 31,
2004.

(6) DISCONTINUED OPERATIONS

Effective  July 1, 2003 the Company  reached an  agreement  to sell its Internet
tobacco products division.  The Company agreed to dispose of the division due to
the lack of working capital required to resolve the litigation as stated in Note
7.

Operating  results of  discontinued  operations for the three months ended March
31,  2004  and 2003 are  shown  separately  in the  accompanying  statements  of
operations.  Net  sales  and net  income  from  discontinued  operations  are as
follows:

                                      Three months ended March 31,
                                         2004            2003
                                         ----            ----
              Net sales                 $    0       $ 1,481,291
                                        ======       ===========
              Net income                $    0       $   119,331
                                        ======       ===========

(7) CONTINGENT LIABILITIES

On January 28, 2003,  the Company was named in a civil suit filed by the City of
New York as one of  approximately a dozen defendants who engaged in the business
of internet on-line cigarette sales. The suit alleges that the Company failed to
report the names and  addresses  of its  customers  to taxing  authorities.  The
extent of the City's damages is to be determined at trial.

On April 1, 2003,  the State of California  filed a civil action in the Superior
Court of  California,  County of San Diego,  against the  Company's  subsidiary,
alleging  sales of cigarettes to minors,  deceptive  failure to file Jenkins Act
reports  and inform  California  consumers  that they are  required to pay sales
taxes to California.  Based on these factual assertions, the suit's three counts
allege false or misleading  advertising under California Business and Profession
Code 17500:  failure to notify California  purchasers of their obligations under
California  Revenue and  Business  and  Professions  Code 17200.  The suit seeks
injunctive  relief  and  assessment  of  civil  penalties  of  $2,500  for  each
violation,  amounting to no less than $100,000,  plus costs and attorneys' fees.
The case has been  consolidated  with several  other pending suits against other
online tobacco retailers.

On April 1, 2003,  the State of Washington  filed a civil action in the State of
Washington, King County Superior Court against the Company's subsidiary alleging
sales of cigarettes to minors, deceptive failure to file Jenkins Act reports and
inform  Washington  consumers  that they are  required to pay sales taxes to the
Sate of  Washington.  Based on the  factual  assertions,  the suit's four counts
allege   unfair   business   practice,   unfair  method  of   compensation   and
misrepresentation.  The suit sought injunctive relief restraining Cyco.net, Inc.
from  continuing  to engage in unlawful  conduct,  restitution  to consumers and
civil  penalties of up to $2,000 per violation,  plus attorneys' fees and costs.
In March of 2004,  the parties  agreed to settle for  $10,000,  which funds were
released from escrow on April 15, 2004.

On April 1,  2003,  the  State of  Oregon  filed a civil  action in the State of
Oregon,  Marion County against the Company's subsidiary alleging the sale of one
carton of  cigarettes  to a minor using her mother's  name and credit  card,  in
violation of State Unlawful  Trade  Practices Act. The suit sought to enjoin the
Company from doing business in Oregon,  and was settled out of court in the fall
of 2003.

On July 10,  2003,  the State of  Vermont,  filed a civil  action in  Chittenden
County  against the Company's  subsidiary,  alleging the sale of cigarettes to a
minor in violation of seven Vermont Statutes,  deceptive failure to file Jenkins
Act reports and inform the Vermont  consumers  they are  required to pay Vermont
sales  taxes.  The suit seeks to enjoin the Company  from doing  business in the


                                       7
<PAGE>

State of Vermont,  pay civil  damages of up to $10,000 for each sale to a minor,
plus attorney's fees and expenses.

During 2003, the State  District Court of Travis County,  Texas alleged that the
Company did not take effective  measures to prevent the sale of tobacco products
to minors,  in  violation  of the Texas  Deceptive  Trade  Practices  - Consumer
Protection Act.  Subsequent to December 31, 2003,  settlement  negotiations  are
ongoing.

In the remaining  cases,  the Company has contested the allegations and believes
it has  meritorious  defenses  in each case.  It is  uncertain  what  affect the
Company's  sale of its  Internet  tobacco  products  will  have  on the  pending
lawsuits.  Outside counsel for the Company has advised that at this stage in the
proceedings  they  cannot  offer an  opinion as to the  probable  outcome of the
cases.

(8) COMMITMENTS

EMPLOYMENT AGREEMENTS

As a condition to the OSSI stock purchase  agreement  effective January 1, 2004,
the Company has  negotiated an employment  agreement with the  CEO/President  of
OSSI. The agreement  provides for an annual salary of $225,000  through December
31, 2008.

Effective  January 1, 2004, the Company has entered into  employment  agreements
with its three  employees.  The agreements call for aggregate annual salaries of
$294,000, through December 31, 2008.

DISTRIBUTOR AGREEMENT

Effective  January 1, 2004,  the Company,  through its  wholly-owned  subsidiary
OSSI, entered into an exclusive  distributor agreement with a foreign entity. As
per the  terms  of the  agreement,  OSSI is  granted  an  exclusive  license  to
distribute, promote, sell, install, service and otherwise maintain and reproduce
by its own means, certain surveillance  equipment to the U.S. government as well
as non-exclusive rights to certain equipment for both the U.S.  governmental and
commercial entities.  The term of the agreement extends to December 31, 2007 and
provides for an automatic  two-year renewal period.  The agreement calls for the
sale of a minimum of $3,800,000 in equipment and $940,000 in support contracts.

OPERATING LEASE

On January 29, 2004, the Company  entered into an operating  lease agreement for
office space for its subsidiary,  OSSI. The term commences  February 1, 2004 and
continues through April 30, 2007. Future minimum lease payments pursuant to this
agreement are:

                       Year ended
                       December 31             Amount
                       -----------            ---------
                          2004                $  61,485
                          2005                   68,920
                          2006                   70,981
                          2007                   24,253
                                              ---------
                                              $ 225,639


STANDBY EQUITY DISTRIBUTION AGREEMENT

On March 23,  2004,  the  Company  entered  into a Standby  Equity  Distribution
Agreement ("Standby Agreement") with Cornell Capital Partners, pursuant to which
the Company may, at its discretion,  periodically issue and sell to Cornell,  up
to  $20,000,000  of the Company's  common  stock.  This  agreement  replaces the
agreement entered into as of September 2001.


                                       8
<PAGE>

As a condition precedent to the execution of the Standby Agreement,  the Company
and Cornell entered into a Registration  Rights  Agreement,  whereby the Company
has agreed to provide  certain  registration  rights under the Securities Act of
1933,  as amended,  relating to the shares of common  stock  issuable  under the
Standby  Agreement.  The  commitment  period for the Standby  Agreement  extends
through  the  earlier of such time as Cornell  has made  aggregate  advances  of
$20,000,000 or two years from the effective date of the registration statement.

The Company is obligated to pay a cash commitment fee to Cornell, equal to 5% of
each advance,  payable  directly from the gross proceeds of each advance,  to be
held in escrow pursuant the Escrow Agreement entered into with Cornell. Upon the
execution of the Standby  Agreement,  the Company agreed to issue 490,000 shares
of its  common  stock  to  Cornell,  plus an  additional  $10,000  worth  of the
Company's common stock to Newbridge Securities Corporation,  as a placement fee,
per the Placement Agent Agreement,  valued at the fair market value of the stock
as of the date of execution of the agreement.  As of March 31, 2004, the Company
has issued 510,833 shares with an aggregate value of $255,200 in connection with
this agreement.

The  Company  cannot  predict  the number of shares to be  issued,  or the gross
proceeds  to be derived  from the sale of such  shares  pursuant  to the Standby
Agreement,  as the  purchase  price of the shares  will  fluctuate  based on the
prevailing market  conditions.  As of March 31, 2004, no advances have been made
pursuant to this agreement.  The  effectiveness  of the sale of shares under the
Standby  Agreement is  conditioned  upon the Company  registering  the shares of
common stock with the Securities and Exchange Commission.

(9) SUBSEQUENT DEBENTURE AGREEMENT

Subsequent  to March 31,  2004,  the Company  entered  into a Secured  Debenture
Agreement,  whereby up to $500,000 of 5% secured,  convertible debentures may be
issued.  On May 7, 2004,  the Company  received net  proceeds of $170,447  after
payment of expenses in the amount of $79,553, from the sale of $250,000 worth of
debentures.  The  debentures  bear interest at 5% per annum and are secured by a
security  agreement covering  substantially all business assets.  Principal plus
accrued  interest are either  payable in full two years after the date of issue,
or  convertible  at the Holder's  option,  into shares of the  Company's  common
stock. The conversion  provision  entitles the Holder at any time, and from time
to time, to convert all or any part of the principal plus accrued  interest into
the Company's $.001 par value common stock (the "Conversion  Shares"),  at a per
share  price  equal to the  lesser of an amount  equal to (i) 120% of the quoted
closing bid price of the stock on the date of the debenture  agreement,  or (ii)
80% of the  lowest  quoted  closing  bid  price  during  the five  trading  days
immediately  preceding the conversion  date.  Interest is payable at maturity or
conversion,  either in cash or  shares of the  Company's  common  stock,  at the
Holder's option.  If payment is made in the form of common stock, the value will
be  calculated  based on the quoted  closing bid price on the day the payment is
due, or the day of payment, if later than the due date.

The  Company,  at its  option,  may redeem  all or a portion of the  outstanding
debentures at a rate of 120% of the amount redeemed plus interest.  In the event
of redemption,  the Holder will receive a warrant to purchase  $50,000 shares of
the Company's  common stock for every $100,000  redeemed,  on a pro-rata  basis.
Such warrants will be exercisable on a cash basis, at 120% of the quoted closing
bid price on the closing  date.  The warrants  will have "piggy back" and demand
registration  rights and will  remain in effect for two years  after the closing
date.  The Company is required to register the resale of the  Conversion  Shares
under  the  Securities  Act of 1933,  as  amended,  pursuant  to the terms of an
Investor Registration Rights Agreement, attendant to the Debenture Agreement.


                                       9
<PAGE>

                                 CYCO. NET, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Effective July 1, 2003,  Cyco.net,  Inc. sold its tobacco operations to American
Indian CigCo,  LLC. In  conjunction  with this sale American  Indian CigCo (AIC)
agreed to purchase  2,000,000 shares of the Company's common stock. The purchase
price  aggregated  $3,000,000  in the form of 2 notes  payable as  follows:  (1)
payment  for the assets of the  business  in the form of a note in the amount of
$200,000  payable in 12 equal  monthly  installments  of $16,667  commencing  on
August 1, 2003 and (2) payment for the 2,000,000 common shares is payable in the
form of a $2,800,000  note with  interest at 7% per annum,  on an interest  only
basis.  As of March 31,  2003,  AIC is three  months in arrears  of its  payment
agreement  on  the  $200,000  note.  The  interest  payments  are  due  annually
commencing on July 31, 2004 and the  principal  balance is due on July 31, 2008.
Accrued  interest  receivable  at  March  31,  2004,  of  $147,000  has not been
reflected in the accompanying financial statements, as recognition will occur as
proceeds are received.

Because  the sale of the  business  and the common  shares were made to a thinly
capitalized   entity  and  significant   uncertainties   exist  related  to  the
collectibility  of the amounts due, the gain from the sale of the business  will
be deferred  until such time as the proceeds are collected or until such time as
the cash flows from the operating activities of the business sold are sufficient
to fund the debt  service.  The deferred  portion of the gain on the sale of the
business  aggregating  $122,641  at March  31,  2004 is  reflected  as  deferred
revenue.

On a go forward basis, revenues and expenses from tobacco sales will be shown as
operating  results of  discontinued  operations and are shown  separately in the
accompanying statements of operations.

On  November  19,  2003,  Cyco.net,   Inc.  purchased  Orion  Security  Systems,
Inc.(OSSI),  a  corporation  in the  development  stage,  that  provides  secure
computer network and management  solutions,  and video surveillance  systems via
satellite  communication.  The business  combination has been accounted for as a
purchase.  The  results  of  operations  of  OSSI  have  been  included  in  the
accompanying financial statements since the effective date of the acquisition.

GOING CONCERN

The Company's financial statements are presented on a going concern basis, which
contemplates  the  realization of assets and  satisfaction of liabilities in the
normal course of business.  As of March 31, 2004, the Company has yet to achieve
profitable operations, however has obtained commitments for future requirements,
as disclosed in Notes 8 and 9.

The Company has experienced losses from operations as a result of its investment
necessary to achieve its operating plan, which is long-range in nature.  For the
year ended  December 31, 2003 and for the three months ended March 31, 2004, the
Company incurred net (losses) of ($4,902,363) and ($894,751),  respectively.  At
March 31, 2004,  the Company had a working  capital  (deficit) of ($735,961) and
stockholders'  (deficit) of ($695,192).  The Company's  ability to continue as a
going  concern is  contingent  upon its ability to secure  financing  and attain
profitable operations.

The financial  statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.

THREE MONTHS ENDED MARCH 31, 2004 COMPARED WITH THE THREE MONTHS ENDED MARCH 31,
2003

There were no sales of OSSI's products in the three months ended March 31, 2004.
Revenues  and expenses  for the same period last year were  attributable  to the
sale  of  tobacco  products  and  as  discussed  above  have  been  included  in
discontinued operations.

General and  administrative  expenses for the first quarter ended March 31, 2004
were  $645,930  as compared  to  $112,541  for the same  period  last year.  The
increase  of   approximately   $533,389  was   primarily  due  to  increases  in
professional fees of $346,817, (relating primarily to stockholder relations, the
Standby  Equity  Distribution  Agreement  and  consulting  fees  incurred by the


                                       10
<PAGE>

Company's  wholly  owned  subsidiary  OSSI),  an increase in payroll  expense of
$138,853 due to the addition of three  employees in OSSI, an increase of $35,575
in  travel  and an  increase  of  $12,144  in  utilities,  telephone  and  other
miscellaneous  expenses. In addition to the general and administrative  expenses
there was  $248,250 of non-cash  stock  compensation  expenses  reported for the
quarter ended March 31, 2004, to reflect the issuance of shares of the Company's
common stock in exchange for services.

During the three months ended March 31, 2004,  the major  components  of general
and administrative expenses were approximately $10,653 in advertising,  $198,704
in payroll  expenses,  $368,820 in  professional  fees,  $8,021 in rent, $793 in
depreciation,  $39,061  in  travel,  $6,610  in  telephone,  $5,554  in  general
liability insurance and $7,714 in utilities and other miscellaneous expenses.

 During the three months ended March 31, 2003,  the major  components of general
and administrative expenses were approximately $6,200 in advertising, $59,851 in
payroll  expenses,  $22,003  in  professional  fees,  $6,346 in rent,  $6,322 in
amortization  and  depreciation,  $3,486 in  travel,  and  $8,333 in  telephone,
utilities and other miscellaneous expenses.


The Company had a net loss of  ($894,751)  for the three  months ended March 31,
2004,  compared  to net income of $5,428  for the same  period  last  year.  The
increase in net loss was primarily  attributable  to increased  expenses and the
lack of revenue in the first quarter.

FINANCIAL RESOURCES AND LIQUIDITY

For the quarter ended March 31, 2004, cash used in operations was $359,127, cash
used in  investing  activities  was  $11,949,  and cash  provided  by  financing
activities  was $459,249.  This resulted in a net increase in cash of $88,173 in
the quarter  ended March 31, 2004.  Cyco.net had  cash-on-hand  of $97,472 as of
March 31, 2004.

Cyco.net's  primary  need for cash  during  the next 12 months  are  to  satisfy
current  liabilities of  $1,008,568,  as well as to support  Cyco.net's  current
operations. Cyco.net's current operations are expected to be $170,000 per month,
including payroll,  rent,  utilities and litigation costs.  Cyco.net in the next
twelve  months  expects  to  receive  the  balance of  $148,003  of the  current
receivable  from AIC and  hopes to  attain  profitable  operations  through  its
SatSecure System and ComSecure Controller sales. However,  Cyco.net will need to
raise  additional  capital to finance  growth.  Such capital is expected to come
from the sale of  securities,  including  the sale of  common  stock  under  the
Standby Equity Distribution Agreement.

In March 2004,  Cyco.net  entered into a Standby Equity  Distribution  Agreement
with Cornell Capital  Partners,  LP. This agreement  replaces the Standby Equity
Distribution  Agreement  entered  into  in  September  2001.  Pursuant  to  this
agreement, Cyco.net may, at its discretion for up to 2 years, periodically issue
and sell shares of common stock for a total purchase price of $20.0 million.  If
Cyco.net  requests an advance under the Standby Equity  Distribution  Agreement,
Cornell Capital  Partners,  L.P. will purchase shares of common stock for 99% of
the volume  weighted  average price on the  Over-the-Counter  Bulletin  Board or
other  principal  market on which  our  common  stock is  traded  for the 5 days
immediately following the notice date. Cornell Capital Partners, L.P. intends to
sell any shares purchased under the Standby Equity Distribution Agreement at the
market  price.  The  effectiveness  of the sale of the shares  under the Standby
Equity  Distribution  Agreement is  conditioned  upon Cyco.net  registering  the
shares of common stock with the Securities and Exchange Commission.

Subsequent  to March 31,  2004,  the Company  entered  into a Secured  Debenture
Agreement,  whereby up to $500,000 of 5% secured,  convertible debentures may be
issued.  On May 7, 2004,  the Company  received net  proceeds of $170,447  after
payment of expenses in the amount of $79,553, from the sale of $250,000 worth of
debentures.


                                       11
<PAGE>

FORWARD-LOOKING STATEMENTS

Information  included or  incorporated  by  reference in this filing may contain
forward-looking  statements.  This  information  may  involve  known and unknown
risks,  uncertainties  and other  factors  which may cause our  actual  results,
performance or achievements to be materially  different from the future results,
performance  or  achievements   expressed  or  implied  by  any  forward-looking
statements.  Forward-looking statements,  which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the  words  "may",  "will",  "should",  "expect",  "anticipate",  "estimate",
"believe",  "intend",  or  "project",  or the  negative  of these words or other
variations on these words or comparable terminology.

This filing contains forward-looking statements, including statements regarding,
among other things,  (a) our projected sales and  profitability,  (b) our growth
strategies,  (c) anticipated  trends in our industry,  (d) our future  financing
plans and (e) our anticipated needs for working capital. These statements may be
found under  "Management's  Discussion and Analysis or Plan of  Operations"  and
"Business",  as well as in this filing  generally.  Actual events or results may
differ materially from those discussed in forward-looking statements as a result
of various  factors,  including,  without  limitation,  the risks outlined under
"Risk Factors" and matters described in this filing generally. In light of these
risks and  uncertainties,  there can be no  assurance  that the  forward-looking
statements contained in this filing will in fact occur.

PART II

ITEM 1.  LEGAL PROCEEDINGS

On January 28, 2003,  the Company was named in a civil suit filed by the City of
New York as one of  approximately a dozen defendants who engaged in the business
of internet on-line cigarette sales. The suit alleges that the Company failed to
report the names and  addresses  of its  customers  to taxing  authorities.  The
extent of the City's damages is to be determined at trial.

On April 1, 2003,  the State of California  filed a civil action in the Superior
Court of  California,  County of San Diego,  against the  Company's  subsidiary,
alleging  sales of cigarettes to minors,  deceptive  failure to file Jenkins Act
reports  and inform  California  consumers  that they are  required to pay sales
taxes to California.  Based on these factual assertions, the suit's three counts
allege false or misleading  advertising under California Business and Profession
Code 17500:  failure to notify California  purchasers of their obligations under
California  Revenue and  Business  and  Professions  Code 17200.  The suit seeks
injunctive  relief  and  assessment  of  civil  penalties  of  $2,500  for  each
violation,  amounting to no less than $100,000,  plus costs and attorneys' fees.
The case has been  consolidated  with several  other pending suits against other
online tobacco retailers.

On April 1, 2003,  the State of Washington  filed a civil action in the State of
Washington, King County Superior Court against the Company's subsidiary alleging
sales of cigarettes to minors, deceptive failure to file Jenkins Act reports and
inform  Washington  consumers  that they are  required to pay sales taxes to the
Sate of  Washington.  Based on the  factual  assertions,  the suit's four counts
allege   unfair   business   practice,   unfair  method  of   compensation   and
misrepresentation.  The suit sought injunctive relief restraining Cyco.net, Inc.
from  continuing  to engage in unlawful  conduct,  restitution  to consumers and
civil  penalties of up to $2,000 per violation,  plus attorneys' fees and costs.
In March of 2004,  the parties  agreed to settle for  $10,000,  which funds were
released from escrow on April 15, 2004.

On April 1,  2003,  the  State of  Oregon  filed a civil  action in the State of
Oregon,  Marion County against the Company's subsidiary alleging the sale of one
carton of  cigarettes  to a minor using her mother's  name and credit  card,  in
violation of State Unlawful  Trade  Practices Act. The suit sought to enjoin the
Company from doing business in Oregon,  and was settled out of court in the fall
of 2003.

On July 10,  2003,  the State of  Vermont,  filed a civil  action in  Chittenden
County  against the Company's  subsidiary,  alleging the sale of cigarettes to a
minor in violation of seven Vermont Statutes,  deceptive failure to file Jenkins
Act reports and inform the Vermont  consumers  they are  required to pay Vermont
sales  taxes.  The suit seeks to enjoin the Company  from doing  business in the
State of Vermont,  pay civil  damages of up to $10,000 for each sale to a minor,
plus attorney's fees and expenses.


                                       12
<PAGE>

During 2003, the State  District Court of Travis County,  Texas alleged that the
Company did not take effective  measures to prevent the sale of tobacco products
to minors,  in  violation  of the Texas  Deceptive  Trade  Practices  - Consumer
Protection Act. Settlement negotiations are ongoing.

In the remaining  cases,  the Company has contested the allegations and believes
it has  meritorious  defenses  in each case.  It is  uncertain  what  affect the
Company's  sale of its  Internet  tobacco  products  will  have  on the  pending
lawsuits.  Outside counsel for the Company has advised that at this stage in the
proceedings  they  cannot  offer an  opinion as to the  probable  outcome of the
cases.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

During the quarter ended March 31, 2004, the Company issued  4,550,000 shares of
common stock for cash  consideration of $467,500.  An additional  975,000 shares
were issued in exchange for services  valued at $371,500,  the fair market value
of the  shares  on the date the  Company  agreed to issue  the  stock.  Of these
shares,  $123,250 is reflected as deferred  stock  compensation  as of March 31,
2004.

On March 23,  2004,  the  Company  entered  into a Standby  Equity  Distribution
Agreement with Cornell Capital  Partners,  pursuant to which the Company may, at
its discretion, periodically issue and sell to Cornell, up to $20,000,000 of the
Company's common stock. This agreement replaces the agreement entered into as of
September 2001. Upon the execution of the Standby Agreement,  the Company agreed
to issue  490,000  shares of its common  stock to  Cornell,  plus an  additional
$10,000 worth of the Company's common stock to Newbridge Securities Corporation,
as a placement fee, per the Placement Agent Agreement, valued at the fair market
value of the stock as of the date of execution of the agreement. As of March 31,
2004, the Company has issued 510,833 shares with an aggregate  value of $255,200
in connection with this agreement.

In May 2004, the Company entered into a Secured Debenture Agreement,  whereby up
to $500,000 of 5% secured, convertible debentures may be issued. On May 7, 2004,
the Company  received net proceeds of $170,447  after payment of expenses in the
amount of $79,553, from the sale of $250,000 worth of debentures. The debentures
bear interest at 5% per annum and are secured by a security  agreement  covering
substantially  all business  assets.  Principal plus accrued interest are either
payable  in full two  years  after  the date of  issue,  or  convertible  at the
Holder's  option,  into shares of the  Company's  common stock.  The  conversion
provision entitles the Holder at any time, and from time to time, to convert all
or any part of the principal plus accrued  interest into the Company's $.001 par
value common stock (the "Conversion  Shares"), at a per share price equal to the
lesser of an amount  equal to (i) 120% of the  quoted  closing  bid price of the
stock on the date of the debenture  agreement,  or (ii) 80% of the lowest quoted
closing  bid price  during  the five  trading  days  immediately  preceding  the
conversion date.  Interest is payable at maturity or conversion,  either in cash
or shares of the Company's common stock, at the Holder's  option.  If payment is
made in the form of common  stock,  the value  will be  calculated  based on the
quoted  closing  bid price on the day the payment is due, or the day of payment,
if later than the due date.

ITEM 3.  CONTROLS AND PROCEDURES

(a)      EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES:

Within 90 days prior to the date of this Report,  we carried out an  evaluation,
under the supervision and with the  participation of our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure  controls and  procedures.  Based on this  evaluation,  our Chief
Executive  Officer and Chief  Financial  Officer  concluded  that our disclosure
controls  and  procedures  are  effective  in timely  alerting  them to material
information  required to be included in our periodic reports that are filed with


                                       13
<PAGE>

the  Securities and Exchange  Commission.  It should be noted that the design of
any  system of  controls  is based in part upon  certain  assumptions  about the
likelihood of future events,  and there can be no assurance that any design will
succeed in achieving  its stated goals under all  potential  future  conditions,
regardless of how remote.

(b)      CHANGES IN INTERNAL CONTROLS:

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls during the period covered
by this report or from the end of the reporting  period to the date of this Form
10-QSB.

ITEM 4.  DEFAULTS UPON SENIOR SECURITIES

             None

ITEM 5.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

             None

ITEM 6.  OTHER INFORMATION

            None

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)

The following exhibits are filed as part of this filing:

<TABLE>
<CAPTION>
EXHIBIT
NO.         DESCRIPTION                                              LOCATION
-------     -----------------------------------------------------    ----------------------------------------------
<S>         <C>                                                      <C>
2.1         Acquisition Agreement between Ave and DMI                Incorporated by reference to Exhibit 2.1 to
                                                                     the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

2.2         Letter of Intent between Ave and Cyco.net dated          Incorporated by reference to Exhibit 2.2 to
            July 9, 1999                                             the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

3.1         Certificate of Amendment to Change name to Ave, Inc.     Incorporated by reference to Exhibit 2.7 to
            dated 5/7/90                                             the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

3.2         Certificate of Agreement of Merger of DeLuxe Onyx        Incorporated by reference to Exhibit 2.8 to
            Company dated January 23, 1987                           the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

3.3         Certificate and Agreement of Merger of DeLuxe dated      Incorporated by reference to Exhibit 2.9 to
            1/23/87                                                  the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001
</TABLE>


                                       14
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO.         DESCRIPTION                                              LOCATION
-------     -----------------------------------------------------    ----------------------------------------------
<S>         <C>                                                      <C>
3.4         Certificate Amending Certificate of Incorporation        Incorporated by reference to Exhibit 2.10 to
            dated January 23, 1987                                   the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

3.5         Ave, Inc. By Laws                                        Incorporated by reference to Exhibit 3.0 to
                                                                     the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

3.6         Articles in Incorporation of Cyco.net, Inc. the Wholly   Incorporated by reference to Exhibit 21.1 to
            Owned Subsidiary Cyco.net, Inc. (formerly Ave, Inc.)     the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

3.7         Certificate of Amendment to Articles of Cyco.net, Inc.   Incorporated by reference to Exhibit 21.2 to
            to change name from Ave, Inc. to Cyco.net, Inc.          the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

3.8         Certificate of Amendment of Cyco.net, Inc.               Incorporated by reference to Exhibit 21.3 to
                                                                     the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

3.9         By-Laws of Cyco.net, Inc.                                Incorporated by reference to Exhibit 21.5 to
                                                                     the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

3.10        Articles of Amendment and Restatement to Articles of     Incorporated by reference to Exhibit 3.10 to
            Incorporation of AVE, Inc.                               Cyco.net's Registration Statement on Form SB-2
                                                                     filed with the Securities and Exchange
                                                                     Commission on September 13, 2001

3.11        Certificate of Amendment to Articles of Incorporation    Incorporated by reference to Exhibit 3.11 to
            of Cyco.net, Inc. filed with Nevada Secretary of State   Cyco.net's Registration Statement on Form SB-2
            on August 9, 2001                                        filed with the Securities and Exchange
                                                                     Commission on September 13, 2001

4.1         Stock Specimen                                           Incorporated by reference to Exhibit 2.4 to
                                                                     the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

10.1        Line of Credit Agreement dated August 9, 1999            Incorporated by reference to Exhibit 10.0 to
                                                                     the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001

10.2        Amendment to Line of Credit Agreement dated August 9,    Incorporated by reference to Exhibit 10.1 to
            1999                                                     the Company's Annual Report on Form 10-KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 16, 2001
</TABLE>


                                       15
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO.         DESCRIPTION                                              LOCATION
-------     -----------------------------------------------------    ----------------------------------------------
<S>         <C>                                                      <C>
10.3        Promissory note from Cyco.net, Inc. to Francisco         Incorporated by reference to Exhibit 99 to the
            Urrea, Jr.                                               Company's Annual Report on Form 10-KSB as filed
                                                                     with the Securities and Exchange Commission on
                                                                     April 16, 2001

10.4        May Davis Extension Agreement                            Incorporated by reference to Exhibit 99 to the
                                                                     Company's Quarterly Report on Form 10-QSB
                                                                     filed with the Securities and Exchange
                                                                     Commission on January 4, 2001

10.5        R. Gene Klawetter Letter of Resignation                  Incorporated by reference to Exhibit 99.2 to
                                                                     the Company's 8-K filed with the Securities
                                                                     and Exchange Commission on August 22, 2000

10.6        Lease Agreement                                          Incorporated by reference to Exhibit 99.3 to
                                                                     the Company's 8-K filed with the Securities
                                                                     and Exchange Commission on August 22, 2000

10.7        Equity Line of Credit Agreement dated as of August       Incorporated by reference to Exhibit 10.7 to
            2001 between Cyco.net and Cornell Capital Partners,      the Company's 10-QSB for the quarter ended
            L.P.                                                     September 30, 2001 filed with the Securities
                                                                     and Exchange Commission on November 12, 2001

10.8        Warrant dated as of August 2001 given by Cyco.net to     Incorporated by reference to Exhibit 10.7 to
            Cornell Capital Partners, L.P.                           the Company's 10-QSB for the quarter ended
                                                                     September 30, 2001 filed with the Securities
                                                                     and Exchange Commission on November 12, 2001

10.9        Registration Rights Agreement dated August 2001          Incorporated by reference to Exhibit 10.7 to
            between Cyco.net and Cornell Capital Partners, L.P.      the Company's 10-QSB for the quarter ended
                                                                     September 30, 2001 filed with the Securities
                                                                     and Exchange Commission on November 12, 2001

10.10       Escrow Agreement dated as of August 2001 among           Incorporated by reference to Exhibit 10.7 to
            Cyco.net, Cornell Capital Partners, L.P., Butler         the Company's 10-QSB for the quarter ended
            Gonzalez LLP and First Union National Bank               September 30, 2001 filed with the Securities
                                                                     and Exchange Commission on November 12, 2001

10.11       Asset Purchase and Investment agreement dated            Incorporated by reference to Exhibit 10.11 to
            June 13, 2003 between Cyco.net, Inc. and                 the Company's Quarterly Report on Form 10QSB
            American Indian Cigco, LLC.                              as filed with the Securities and Exchange
                                                                     Commission on August 19,2003.

10.12       One Year Installment Note dated June 13, 2003,           Incorporated by reference to Exhibit 10.12 to
            between Cyco.net, Inc. and American Indian Cigco, LLC.   the Company's Quarterly Report on Form 10QSB
                                                                     as filed with the Securities and Exchange
                                                                     Commission on August 19,2003
</TABLE>


                                       16
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO.         DESCRIPTION                                              LOCATION
-------     -----------------------------------------------------    ----------------------------------------------
<S>         <C>                                                      <C>
10.13       Five Year Capital Note dated June 13, 2003,              Incorporated by reference to Exhibit 10.13 to
            among Cyco.net, Inc., American Indian Cigco, LLC         the Company's Quarterly Report on Form 10QSB
            and CigCo-Epic Venture.                                  as filed with the Securities and Exchange
                                                                     Commission on August 19,2003

10.14       Purchase Agreement dated November 19, 2003 between       Incorporated by reference to Exhibit 10.11 to
            Cyco.net, Inc. and Orion Security Services, Inc.         the Company's 8K dated November 19, 2003 filed
                                                                     with the Securities and Exchange Commission on
                                                                     December 4, 2003.

10.15       Standby Equity Distribution Agreement dated as March     Incorporated by reference to Exhibit 10.15 to 2004
            between Cyco.net and Cornell Capital Partners, LP        the Company's Annual Report on Form 10KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 13,2004

10.16       Registration Rights Agreement dated as of March 2004     Incorporated by reference to Exhibit 10.15 to
            between Cyco.net and Cornell Capital Partners, LP        the Company's Annual Report on Form 10KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 13,2004

10.17       Placement Agent Agreement dated as of March 2004         Incorporated by reference to Exhibit 10.15 to
            between Cyco.net and Cornell Capital Partners, LP        the Company's Annual Report on Form 10KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 13,2004

10.18       Employment Agreement dated as of January 1, 2004         Incorporated by reference to Exhibit 10.15 to
            between Cyco.net and Richard Urrea                       the Company's Annual Report on Form 10KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 13,2004

10.19       Employment Agreement dated as of January 1, 2004         Incorporated by reference to Exhibit 10.15 to
            between Cyco.net and Daniel Urrea                        the Company's Annual Report on Form 10KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 13,2004

10.20       Securities Purchase Agreement dated as of May 2004       Provided herewith
            between Cyco.net and Cornell Capital Partners, LP

10.21       Secured Debenture dated as of May 2004 given by          Provided herewith
            Cyco.net to Cornell Capital Partners, LP

10.22       Investor Registration Rights Agreement dated as of May   Provided herewith
            2004 between Cyco.net and Cornell Capital Partners, LP

10.23       Irrevocable Transfer Agent Instructions                  Provided herewith

14.1        Code of Ethics                                           Incorporated by reference to Exhibit 10.15 to
                                                                     the Company's Annual Report on Form 10KSB as
                                                                     filed with the Securities and Exchange
                                                                     Commission on April 13,2004

31.1        Certification re: Section 302 (CEO)                      Provided herewith
</TABLE>


                                       17
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO.         DESCRIPTION                                              LOCATION
-------     -----------------------------------------------------    ----------------------------------------------
<S>         <C>                                                      <C>
31.2        Certification re: Section 302 (CFO)                      Provided herewith

32.2        Certification re: Section 906 (CEO)                      Provided herewith

32.2        Certification re: Section 906 (CFO)                      Provided herewith
</TABLE>



                                       18
<PAGE>

(b)  There were no reports on Form 8-K filed under the Securities Exchange Act
     of 1934 during the quarter ended March 31, 2004.

On December 4, 2003, Cyco.net, Inc. filed a report on Form 8K announcing the
acquisition of Orion Security Services, Inc. on November 19, 2003.


<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  Report  to be  signed  in its  behalf by the
undersigned, thereunto duly authorized.



CYCO.NET, INC.



By: /s/ Richard A. Urrea                May 14, 2004
    --------------------------
    Richard A. Urrea
    President and Chief Executive Officer (Principal
    Executive Officer)


By: /s/ Daniel Urrea                    May 14, 2004
    --------------------------
    Daniel Urrea
    Chief Financial Officer (Principal Accounting Officer)




                                       19