<PAGE>

                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-KSB

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the fiscal year ended August 31, 2001

[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
for the transition period from . . . . to . . . .

                         Commission file number 0-26578

                                   MYRIENT, INC.
                         (formerly known as LMKI, Inc.)
                         ------------------------------
        Exact name of small business issuer as specified in its charter)

            Nevada                                             33-0662114
            ------                                             ----------
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                            Identification No.)

                      65 Enterprise, Aliso Viejo, CA 92656
                -------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (949) 330-6500
                                 --------------
              (Registrant's telephone number, including area code)

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

         Indicate by check mark if there is no disclosure of delinquent filers
in response to Item 405 of Regulation S-B is not contained in this form, and
no disclosure will be contained, to the best of the Issuer's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB. [X]

         State issuer's revenues for its most recent fiscal year. $14,554,970

         Based upon the closing price of $0.140 per share of Common Stock as
reported on the OTC and OTCBB on November 12, 2001, the aggregate market value
of the Issuer's voting and non-voting stock held by non-affiliates was
$4,661,229. Solely for the purposes of this computation, the Issuer's directors
and executive officers have been deemed to be affiliates. Such treatment is not
intended to be, and should not be construed to be, an admission of the Issuer or
such directors an executive officers that any of such persons are "affiliates",
as that term is defined under the Securities Act of 1934, as amended.

         There were 45,294,495 issued and outstanding shares of the Issuer's
Common Stock, $.001 par value per share at November 12, 2001.

                       DOCUMENTS INCORPORATED BY REFERENCE

         If the following documents are incorporated by reference, briefly
describe them and identify the part of the form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to the rule 424(b) or (c) of the Securities Act of 1933 ("Securities
Act"). The listed documents should be clearly described for identification
purposes (e.g., annual report to security holders for fiscal year ended December
24, 1990).

None.

Transitional Small Business Disclosure Format (check one):  Yes [ ]  No [X]



<PAGE>

                                  MYREINT, INC.

                                TABLE OF CONTENTS

PART I

       Item 1.   Description of Business
       Item 2.   Description of Property
       Item 3.   Legal Proceedings
       Item 4.   Submission of Matters to a Vote of Security Holders

PART II

       Item 5.   Market for Myrient, Inc. Common Stock and Related Stockholder
                   Matters
       Item 6.   Management's Discussion and Analysis of Financial Condition
                   and Results of Operations
       Item 7.   Financial Statements
       Item 8.   Changes In and Disagreements With Accountants on Accounting
                   and Financial Disclosure.

PART III

       Item 9.   Directors, Executive Officers, Promoters and Control Persons
                   of Myrient, Inc; Compliance with Section 16(a) of the
                   Exchange Act
       Item 10.  Executive Compensation
       Item 11.  Security Ownership of Certain Beneficial Owners and Management
       Item 12.  Certain Relationships and Related Transactions
       Item 13.  Exhibits and Reports on Form 8-K
       SIGNATURES

                                INTRODUCTORY NOTE

         This Annual Report on Form 10-KSB may be deemed to contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company
intends that such forward-looking statements be subject to the safe harbors
created by such statutes. The forward-looking statements included herein are
based on current expectations that involve a number of risks and uncertainties.
Accordingly, to the extent that this Annual Report contains forward-looking
statements regarding the financial condition, operating results, business
prospects or any other aspect of the Company, please be advised that the
Company's actual financial condition, operating results and business performance
may differ materially from that projected or estimated by the Company in
forward-looking statements. The differences may be caused by a variety of
factors, including but not limited to adverse economic conditions, intense
competition, including intensification of price competition and entry of new
competitors and products, adverse federal, state and local government
regulation, inadequate capital, unexpected costs and operating deficits,
increases in general and administrative costs, lower sales and revenue than
forecast, loss of customers, customer returns of products sold to them by the
Company, termination of contracts, technological obsolescence of the Company's
products, technical problems with the Company's products, price increases for
supplies and components, inability to raise prices, failure to obtain new
customers, litigation and administrative proceedings involving the Company, the
possible acquisition of new businesses that result in operating losses or that
do not perform as anticipated, resulting in unanticipated losses, the possible
fluctuation and volatility of the Company's operating results, financial
condition and stock price, losses incurred in litigation and settling cases,
dilution in the Company's ownership of its business, adverse publicity and news
coverage, inability to carry out marketing and sales plans, loss or retirement
of key executives, changes in interest rates, inflationary factors, and other
specific risks that may be alluded to in this Annual Report or in other reports
issued by the Company. In addition, the business and operations of the Company
are subject to substantial risks, which increase the uncertainty inherent in the
forward-looking statements. In light of the significant uncertainties inherent
in the forward-looking information included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives or plans of the Company will be achieved.

                                        1



<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW
--------
         Myrient, Inc. (the "Company" or "Myrient") is an outsourced Information
Technology (IT) solutions provider that delivers managed services that allow
enterprises to conduct secure communications with remote offices, partners and
customers worldwide. Myrient enables customers to outsource all of their
communications needs, while ensuring the highest level of security and
reliability. The Company manages and controls a nationwide data communications
network that allows it to offer high-quality integrated turnkey solutions. The
Company's services include Managed Private Networking, Broadband Internet
Access, Managed Web Hosting, Storage and off-site disaster recovery services,
Network and Systems Management, and Professional Services.

INDUSTRY BACKGROUND - THE INTERNET

         The Internet is fundamentally changing the way businesses interact with
customers, partners and other businesses and has become an important medium for
both commerce and communications. Improvements in the quality and reliability of
global telecommunications networks and common Internet protocols permit large
volumes of data to be delivered to end users over a variety of Internet-enabled
devices. Businesses are now able to access and distribute a wide array of
services over the Internet, allowing them to implement solutions and migrate
operating functions on-line, market and sell products and services to customers
and offer web-based customer service programs. As a result, businesses are
increasing investments in internet services, network infrastructure, and
information technology personnel and hardware to leverage the reach and
efficiency of the Internet.

         The complexity of successfully deploying and maintaining Internet
operations continues to increase. In particular, the infrastructure required to
deploy and maintain large-scale Internet operations has become increasingly
complex. For example, businesses deploying large-scale Internet operations can
choose from multiple software applications with varying levels of functionality,
including transaction processing, personalization and enterprise systems
integration. In addition, with increasing globalization, businesses often must
maintain their operations in multiple locations and design their infrastructure
to accommodate local standards, while remaining synchronous with operations in
other geographies.

         The in-house expertise required to meet these challenges is significant
and typically requires a host of technical specialists, including network
administrators, systems administrators, database administrators, security
experts, monitoring and management experts, project managers, troubleshooting
specialists and performance engineers. It is often difficult, time consuming and
costly to hire and retain these experts. Even if businesses can effectively hire
and retain these experts, deploying this talent to maintain a business Internet
infrastructure may be inefficient as it diverts resources from enhancing the
business core competencies.

         To effectively manage the increasing complexity of Internet operations,
the Company believes that companies require a new set of infrastructure services
to run Internet operations on an automated basis. A reliable, secure, scalable
and cost-effective infrastructure network would permit businesses to focus on
their core competencies and provide greater functionality and flexibility than
they could otherwise attain on their own. Businesses could also access a robust
technology infrastructure without incurring the time or financial costs
associated with building out equivalent functionality on their own. In addition,
businesses would be able to access the operations capacity they require to
efficiently run their Internet-based software applications and to efficiently
increase or reduce capacity as business needs dictate. The solution would also
consistently deploy and maintain business Internet operations across multiple
locations via centralized network operations centers.

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The Myrient Approach
--------------------
         The Company provides a suite of outsourced IT solutions that address
the challenges associated with deploying, maintaining and growing Internet
operations for critical business functions. Myrient offers its outsourced IT
services through its nationwide infrastructure network to furnish its customers
with guaranteed levels of reliability and the ability to efficiently grow their
Internet operations, helping them to reduce the time it takes to build or expand
their Internet initiatives. Myrient's infrastructure network maintains the
business Internet operations across all levels of the Internet infrastructure,
and allows it to centrally and consistently deploy and maintain its customer's
internet operations across multiple locations. Myrient automates manual tasks
for its clients, thereby reducing the amount of manual intervention required and
increasing the quality and reliability of its outsourced services.

BUSINESS STRATEGY
-----------------
         Myrient offers businesses a new class of Internet infrastructure
services that address the challenges associated with deploying, maintaining and
growing Internet operations for critical business functions. The Company offers
services to provide businesses with guaranteed levels of reliability and the
ability to quickly and efficiently grow their Internet operations, helping them
reduce the time it takes to build or expand their Internet operations, at a cost
savings by outsourcing to Myrient. By combining several different services
outsourced to Myrient, businesses can save incremental dollars associated with
their additional IT needs, reduce internal IT overhead, and allow their
remaining internal resources to focus on the businesses core competencies.

         Myrient's main product offerings are Managed Private Networking;
Managed Hosting Solutions; Off Site Storage and Disaster Recovery Customized
solutions; Network Management; and Broadband Business Class Internet access. The
Company provides businesses outsourced information technology infrastructure
services that addresses the challenges associated with deploying, maintaining
and growing Internet operations for critical business functions. The Company
offers services through its Nationwide Infrastructure Network to furnish its
customers with guaranteed levels of reliability and the ability to efficiently
grow their internet operations, helping them reduce the time it takes to build
or expand their internet initiatives. The Company infrastructure network
supports the business internet operations across the internet infrastructure.
Myrient also centrally and consistently maintains its customer's internet
operations across multiple locations via CentraPath Managed Private Networking
solution.

         Myrient's co-location space contains edge-switches and routing
Equipment necessary to support services to house configured servers and
applications with connectivity as part of a bundled package, or simply as an
area for clients to connect their own servers to the high-speed access of the
Company's partner's fiber-optic networks. The Company is pursuing a Tier-1
service provider business plan without the costs associated with building the
core network infrastructure typically necessary to support Tier-1 services.

         By keeping costs down while developing a large area of coverage, the
Company hopes to identify itself as a profitable next-generation integrated
communications provider operating on a global scale.

COMPETITIVE ADVANTAGES
----------------------
         Myrient is currently establishing a sales and technical staff with
skills related in the outsourced IT solutions industry. Additionally, the
Company implemented training schedules for its employees in an effort to keep
them abreast of the latest information and knowledge from the industry. The
Company's technical teams are cross-trained wherever possible and are encouraged
to obtain technical certification in their respective area of specialization.

                                       3


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BUSINESS MODEL OPTIMIZES COST
-----------------------------
         In an effort to keep costs down, the Company has attempted to lease
rather than build infrastructure in its initial network deployment.
Additionally, by building Myrient's network at the "edge" of its strategic
partners infrastructure, the Company has greater flexibility in solving multiple
internet working problems.

EFFICIENCY
----------
         Myrient has established a network built to support services in specific
geographic regions. The Company has established a network comprised of
functional network elements supporting applications of several best-of-breed
technologies.

         Additionally, the Company's focus is on support systems that harness
and distribute the intelligence of Myrient's carriers and provide the
functionality and access of the carrier through specialized software
applications.

FLEXIBLE NETWORK
----------------
         The Company's business model optimizes network flexibility by utilizing
strategic relationships with multiple carriers. This allows the Company to use
the latest network and software technologies focused on meeting the business
plan. This advantage over embedded network elements and operation support
systems cannot be overstated and is the key to successful competition.

INTEGRATION
-----------
         Myrient's application of many different best-of-breed technologies
allows the Company to seamlessly integrate many different connectivity solutions
and network applications. The Company's use different strategic partners to
customize the optimum solution for its customer.

AUTOMATION AND ADVANCED TELECOMMUNICATIONS TECHNOLOGY
-----------------------------------------------------
         Myrient's network management tools are automated which leads to less
downtime and lower labor costs. The Company uses the latest equipment, works
closely with strategic partners that are leaders in their fields and are not
hampered by existing legacy infrastructures.

CUSTOMER-CENTRIC APPROACH
-------------------------
         Myrient emphasizes direct relationships with its customers. These
relationships enable the Company to learn information from customers regarding
their needs and preferences and help the Company expand its offerings to include
additional value-added services based on customer demand. The Company believes
that these customer relationships increase customer loyalty and reduce turnover.
In addition, existing customers have provided customer referrals which the
Company believes strong relationships will result from further customer
referrals in the future.

         The Company's success depends upon careful planning and the selection
of partners. Myrient meets the customer's needs more effectively by implementing
procedures that work jointly with their partners. These procedures represent the
needs of both the Company and the carriers whose networks the Company utilized,
which the Company believes target the key aspect of successfully providing
ongoing customer-focused support.

PRODUCTS
--------
IP TECHNOLOGY:
         Myrient's network and entire suite of product offerings is based on
Internet Protocol Technology (IP). IP technology is the world's most popular
open-system (non-proprietary) protocol suite because it can be used to
communicate across any set of interconnected networks and is equally well suited
for local area network (LAN) and wide area network (WAN) communications. The IP
suite not only includes lower-layer protocols, but it also specifies common
applications such as electronic mail, terminal emulation, and file transfer. IP
technology is able to realize the convergence of traditional voice type
applications with current and future data/internet type applications. IP
provides operational efficiency when managing a single platform that can carry
any type of service application.

                                       4


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MANAGED PRIVATE NETWORKING:
         Myrient's core competency lies in providing Managed Private Networking
for small-to-medium sized businesses via the CentraPath Managed VPN delivered
over Myrient's patent pending Real Private Network(TM) (RPN(TM)) technology. The
main focus in managing private networks is to maintain and guarantee the highest
quality and reliability standards. The nominal-use of the public internet, has
given the Company a competitive edge, therefore Myrient can ensure a better than
carrier grade quality. Myrient's CentraPath Private Network Service Suite adds
functionality and footprint to its RPN(TM) network, and is an advanced scalable
flexible VPN solution that is a secure, private connection between customers
multiple locations. It is a fully managed, cost effective, rapidly deployable
solution that will work with any broadband carrier. By delivering a last mile
managed VPN solution, business customers can use their existing broadband
connectivity, and outsource the management of the private network to Myrient.

MANAGED STORAGE SOLUTIONS:
                    Backing up business data is vital to any company's survival.
Myrient offers scalable storage-on-demand solutions to match each customer's
growth requirements and unique data storage needs. Myrient provides immediate
access to virtually unlimited storage space. The Company's ZIPBackup(TM) Managed
Storage services include primary storage, which is highly available, reliable,
and scalable, an entire backup and recovery chain, fast restore storage which
adds the capability to restore within minutes, disaster recovery storage with no
hardware or personnel investment. Customer's benefit by outsourcing to Myrient
without having to direct precious time or resources to such challenges as time
to market, capital expense and the storage and management of ever-growing data
needs. If unforeseen growth or seasonal surges affect storage needs, Myrient has
the ability to adapt to the situation.

MANAGED WEB HOSTING:
         Web presence requires increasingly advanced technologies to stay
competitive. Myrient's managed hosting services provide an alternative to
in-house managed operations. The Company provides the end-to-end support needed
to maintain web presence while reducing the expense associated with continuous
operations. Offering a single, turnkey solution, Myrient's entire dedicated
hosting infrastructure is powered by IBM's X Series of dedicated servers, the
most reliable cost efficient equipment in the industry. Myrient also uses
InterNAP's P-NAP (Private Network Access Point) technology, which sends the
customers data along the shortest, most direct path across the internet,
ensuring optimal performance. Myrient's customized hosting services are
business-critical solutions for companies of all sizes. Myrient's corporate
intranet website hosting offers a range of benefits, similar to those of
traditional web hosting with capabilities of being delivered as a package,
including Netavision multimedia streaming, GeoDirector content distribution, and
network management and security services.

PROFESSIONAL SERVICES:
         Myrient's professional service consultants deliver a wide range of
support and service options to assist with customers overall IT strategy.
Experienced specialists lay out full-scale global WAN, setup multiple-city
Private Networks, and design in-cabinet co-location networks. The Company's
professional service solutions assist customers to get the most from their
business communications. Myrient provides technical experience to take concepts
to reality. Myrient's professional services specialize in custom network design
and analysis, systems architecture and deployment, application integration,
project management, modeling, testing, disaster recovery, and security
management.

BROADBAND CONNECTIVITY:
         Specializing in high-performance connectivity, Myrient provides
superior service at cost-effective rates. With flexibility, scalability and
large capacity, Myrient provides data transport services for both public
internet as well as private intranet needs. Myrient provides several last mile
solutions through several broadband providers, including SBC, Verizon, Sprint,
AT&T, MCI WorldCom, and many others. Broadband services include T-1, Frame
relay, DS-3, OC-3, Digital Subscriber Line (DSL), Metropolitan Area Network
(MAN), wireless telecommunications, and any other business class broadband
product available to meet customers needs.

         Using these multiple technologies gives the Company a differential
advantage over the competition in that Myrient can mesh together connections
that are available and sensible to its customers at the local and regional level
in a private network environment.

                                       5


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STRATEGIC RELATIONSHIPS
-----------------------
         Myrient has established strategic relationships with several national
communication carriers that provide the Company with access to transit on their
respective network backbones and last-mile connectivity routes.

         Additionally, the Company can co-locate next generation switching and
routing hardware within the infrastructure of these providers and employ network
applications and protocols that allow Myrient to differentiate services and
guarantee service quality, while providing unmatched flexibility, scalability,
and carrier-class reliability.

         Myrient has strategic partnerships with the following providers of
national fiber optic transit, co-location space and last-mile broadband service:

         Level (3): a communications and information services company offering a
         wide selection of IP-based services including broadband transport,
         co-location services and submarine transmission services. Myrient was
         the first service provider to deliver its services over the Level (3)
         Network. The Level (3) Network includes metropolitan networks in 56
         U.S. markets and 21 international markets connected by an approximately
         16,000-mile U.S. inter-city (long-distance) network, an approximately
         4,750 mile European inter-city network and both transpacific and
         transatlantic undersea cables.

         Enfrastructure: today's only full-service infrastructure and facilities
         provider delivering a completely integrated and supportive work
         environment. Enfrastructure overcomes typical operating obstacles by
         combining workspace, technology infrastructure, business support, and
         professional services - leaving Myrient free to concentrate on their
         core competencies. Via the Enfrastructure relationship, Myrient can
         leverage Enfrastucture's access to IBM hardware, and enables Myrient to
         sell services based on IBM gear at extremely aggressive rates that
         still provide decent margins to Myrient.

         InterNAP: a leading provider of fast, reliable and centrally managed
         internet connectivity services targeted at businesses seeking to
         maximize the performance of mission-critical internet-based
         applications. Customers connected to one of InterNAP's Private-Network
         Access Points ("P-NAPs") have their data optimally routed to and from
         destinations on the internet in a manner that minimizes the use of
         congested public network access points and private peering points. This
         optimal routing of data traffic over the multiplicity of networks that
         comprise the Internet enables higher transmission speeds, lower
         instances of packet loss and greater quality of service.

         New Edge Networks: the leading national wholesale DSL provider in
         small, midsize and semi-rural markets. Through its network and other
         network-to-network interfaces, they can deliver business-class and
         consumer-grade high-speed DSL access as well as advanced broadband
         services such as inter-LATA wide area networks, virtual private
         networks and frame relay to other carriers and enterprise customers in
         almost every telephone LATA in the United States.

SALES AND MARKETING
-------------------
         The Company sells and markets its services nationwide primarily through
a direct sales force and indirectly through its sales and marketing channels.

         Myrient has focused its marketing efforts on increasing brand
recognition, market awareness and lead generation. The Company will continue to
invest in building brand recognition nationwide through public relations
programs, interactions with industry analysts, trade shows, and advertising.

         Myrient's marketing professionals have developed a methodology to
identify the businesses that would benefit from the Company's services. When
businesses are identified in a target market, the Company will employ a targeted
local marketing strategy utilizing enterprise solutions personnel. Using
industry experience and engineers, its personnel initiate contact with potential
customers. The Company's personnel are trained in customer oriented,
solution-based sales techniques and product knowledge. The enterprise team
focuses on customers that have a longer buying cycle. Business prospects are
developed through market research, referrals from telemarketers and referrals
from other customers.

                                        6


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CUSTOMER SUPPORT AND OPERATIONS
-------------------------------
         Myrient's Customer Loyalty Team (CLT) works to maximize the simplicity
and convenience of data communications and network access for customers. They
provide customers with a single point of contact for implementation, maintenance
and operations support.

IMPLEMENTATION
--------------
         Myrient manages the implementation of services for each customer. It
works together with strategic partners to ensure that solutions are delivered,
tested, and in good working order for all customer offices throughout the
network.

MAINTENANCE
-----------
         The Company's network operations center provides network surveillance
for all equipment in its customers' network. The Company is able to detect and
correct many of its customers' maintenance problems remotely, often before the
customer is aware of the problem. Customer-initiated maintenance and repair
requests are managed and resolved primarily through the help desk. The Company's
information management system, which generates reports for tracking maintenance
problems, allows the Company to communicate maintenance problems from the
customer service center to the network operations center 24 hours a day, seven
days a week.

COMPETITION
-----------
         The market for outsourced IT services is rapidly evolving and intensely
competitive. The Company expects competition to persist and intensify in the
future. In addition to in-house solutions, its primary current and prospective
competitors include: providers of co-location or web site hosting and related
services; technology vendors that have recently announced their intentions to
offer some of the services that the Company offers currently to a portion of its
targeted customer base; and providers of Internet systems integration or
professional services.

         The Company faces competition from many companies with significantly
greater financial resources, well-established brand names and large installed
customer bases. Although it believes competition in many second and third tier
cities is less intense than competition in larger cities, Myrient expects the
level of competition in its market to intensify in the future.

NATIONAL LONG DISTANCE CARRIERS
-------------------------------
         National long distance carriers, such as AT&T, MCI WorldCom, and
Sprint, have deployed large-scale data networks, sell connectivity to
businesses, and have high brand recognition. They also have interconnection
agreements with many of the traditional telephone companies and are beginning to
offer competitive services.

OTHER FIBER-BASED CARRIERS
--------------------------
         Companies such as Allegiance, ChoiceOne, Intermedia and Williams have
extensive fiber networks in many metropolitan areas, primarily providing
high-speed data and voice circuits to small and large corporations. They also
have interconnection agreements with the traditional telephone companies under
which they have acquired co-location space in many large markets.

WIRELESS AND SATELLITE DATA SERVICE PROVIDERS
---------------------------------------------
         Several companies, including Motorola Satellite Systems and Hughes
Communications, are emerging as satellite-based data service providers. These
companies use a variety of new and emerging technologies to provide high-speed
data services.

         The Company may be unable to compete successfully against these
competitors. The most significant competitive factors include, among others;
transmission speed, service reliability, breadth of product offerings, cost for
performance, network security, ease of access and use, content bundling,
customer support, brand recognition, operating experience, capital availability
and exclusive contracts with customers, including Internet service providers and
businesses with multiple offices. Myrient believes its services compete

                                        7


<PAGE>

favorably within its service markets with respect to transmission speed, service
reliability, breadth of product offerings, cost for performance, network
security, ease of access and use, content bundling, customer support, and
operating experience. Many of the Company's competitors enjoy competitive
advantages over Myrient based on their brand recognition and exclusive contracts
with customers.

INTELLECTUAL PROPERTY
---------------------
         Myrient regards its products, services and technology as proprietary
and attempts to protect them with copyrights, trademarks, trade secret laws,
restrictions on disclosure and other methods. There can be no assurance these
methods will be sufficient to protect the Company's technology and intellectual
property. The Company also may enter into confidentiality agreements with its
employees and consultants, and generally control access to and distribution of
its documentation and other proprietary information. Despite these precautions,
it may be possible for a third party to copy or otherwise obtain and use its
products, services or technology without authorization, or to develop similar
technology independently. Effective copyright, trademark and trade secret
protection may be unavailable or limited in certain foreign countries, and the
global nature of the Internet makes it virtually impossible to control the
ultimate destination of Myrient's proprietary information.

         There can be no assurance that the steps the Company has taken will
prevent misappropriation or infringement of its technology. In addition,
litigation may be necessary in the future to enforce its intellectual property
rights, to protect Myrient trade secrets or to determine the validity and scope
of the proprietary rights of others. Such litigation could result in substantial
costs and diversion of resources and could have a material adverse effect on its
business, operating results and financial condition. Some of Myrient's
information is a matter of public record and can be readily obtained by
competitors and potential competitors, possibly to Myrient's detriment.

GOVERNMENT REGULATION
---------------------
         A significant portion of the services that the Company offers will be
subject to regulation at the federal and/or state levels. The Federal
Communications Commission (FCC), and state public utility commissions (PUC)
regulate telecommunications common carriers, which are companies that offer
telecommunications services to the public or to all prospective users on
standardized rates and terms. The Company's data transport services are common
carrier services.

         The FCC exercises jurisdiction over common carriers, and their
facilities and services, to the extent they are providing interstate or
international communications. The various state utility commissions retain
jurisdiction over telecommunications carriers, and their facilities and
services, to the extent they are used to provide communications that originate
and terminate within the same state. The degree of regulation varies from state
to state.

         In recent years, the regulation of the telecommunications industry has
been in a state of flux as the United States Congress and various state
legislatures have passed laws seeking to foster greater competition in
telecommunications markets. The FCC and state commissions have adopted many new
rules to implement those new laws and to encourage competition. These changes,
which are still incomplete, have created new opportunities and challenges for
its competitors and us. Certain of these and other existing federal and state
regulations are currently the subject of judicial proceedings, legislative
hearings and administrative proposals that could change, in varying degrees, the
manner in which this industry operates. Neither the outcome of these proceedings
nor their impact upon the telecommunications industry or us can be predicted at
this time. Indeed, future federal or state regulations and legislation may be
less favorable to us than current regulations and legislation and therefore have
a material and adverse impact on its business and financial prospects by
undermining Myrient's ability to provide DSL services at competitive prices. In
addition, the Company may expend significant financial and managerial resources
to participate in proceedings setting rules at either the federal or state
level, without achieving a favorable result.

                                       8


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FEDERAL REGULATION AND LEGISLATION
----------------------------------
         Through Myrient's strategic partners, Myrient must comply with the
requirements of a common carrier under the Communications Act of 1934, as
amended, to the extent the Company provides regulated interstate services. These
requirements include an obligation that the Company charges, terms and
conditions for communications services must be "just and reasonable" and that
Myrient may not make any "unjust or unreasonable discrimination" in its charges
or terms and conditions. The FCC also has jurisdiction to act upon complaints
against common carriers for failure to comply with their statutory obligations.
Myrient is not currently subject to price cap or rate of return regulation at
the federal level and is not currently required to obtain FCC authorization for
the installation, acquisition or operation of its facilities.

         The FCC has established different levels of regulation for dominant and
non-dominant carriers. Of domestic carriers, only the large traditional local
telephone companies are classified as dominant carriers and all other providers
of domestic common carrier service, including the Company, are classified as
non-dominant carriers. As a non-dominant carrier, Myrient is subject to less FCC
regulation than are dominant carriers.

         The 1996 Telecommunications Act, enacted on February 8, 1996, made
comprehensive changes to the Communications Act. It represents a significant
milestone in telecommunications policy by establishing competition in local
telephone service markets as a national policy.

         The 1996 Telecommunications Act removes many state regulatory barriers
to competition and forecloses state and local governments from creating laws
preempting or effectively preempting competition in the local telephone service
market.

         The 1996 Telecommunications Act places substantial interconnection
requirements on the traditional local telephone companies.

         Traditional local telephone companies are required to provide physical
co-location, which allows companies such as Myrient and other inter-connectors
to install and maintain their own network termination equipment in the central
offices of traditional local telephone companies, and virtual co-location only
if requested or if physical co-location is demonstrated to be technically
infeasible. This requirement is intended to enable the Company, along with other
competitive carriers, to deploy its equipment on a relatively convenient and
economical basis.

         Traditional local telephone companies are required to un-bundle
components of their local service networks so that other providers of local
service can compete for a wide range of local service customers. This
requirement is designed to provide Myrient flexibility to purchase only the
equipment required to deliver its services.

         Traditional local telephone companies are required to establish
"wholesale" rates for their services to promote resale by competitive local
exchange carriers and other competitors. Traditional local telephone companies
are required to establish number portability, which allows a customer to retain
its existing phone number if it switches from the traditional local telephone
companies to a competitive local service provider.

         The 1996 Telecommunications Act in some sections is self-executing. The
FCC issues regulations interpreting the 1996 Telecommunications Act that impose
specific requirements upon which Myrient's competitors and the Company rely. The
outcome of various ongoing FCC rulemaking proceedings or judicial appeals of
such proceedings could materially affect its business and financial prospects by
increasing the cost or decreasing the Company's flexibility in providing
broadband services. The FCC prescribes rules applicable to interstate
communications, including rules 33 implementing the 1996 Telecommunications Act,
a responsibility it shares in certain respects with the state regulatory
commissions. As part of its effort to implement the 1996 Telecommunications Act,
the FCC issued an order governing interconnection in August 1996. A federal
appeals court for the Eighth Circuit, however, reviewed the initial rules and
overruled some of their provisions, including some rules on pricing and
nondiscrimination. In January 1999, the United States Supreme Court reversed
elements of the Eighth Circuit's ruling, finding that the FCC has broad
authority to interpret the 1996 Telecommunications Act and issue rules for its
implementation, specifically including authority over pricing methodology. The
Supreme Court upheld the FCC's directive to the traditional local telephone
companies to combine individual elements for competitors, and to allow
competitors to pick and choose among provisions in existing interconnection
agreements. The Supreme Court also found that the FCC's interpretation of the
rules for establishing individual elements of a network system was not

                                        9


<PAGE>

consistent with standards prescribed in the 1996 Telecommunications Act, and
required the FCC to reconsider and better justify its delineation of individual
elements. The pick and choose rule permits a competitive carrier to select
individual provisions of existing interconnection agreements yet still tailor
its interconnection agreement to its individual needs by negotiating the
remaining provisions. Although the FCC has tentatively concluded that local
copper telephone lines should continue to remain available as an unbundled
element, there is no certainty as to the FCC's outcome on this issue or as to
other network elements that the traditional local telephone companies will be
required to un-bundle. Moreover, this proceeding, as well as a companion FCC
rulemaking, addresses related issues of significant importance to the Company,
including:

         o   the manner in which copper telephone lines should be subject to
             unbundling;

         o   compatibility among DSL services and between DSL and non-DSL
             services; and

         o   the sharing of copper telephone lines between DSL data services
             offered by one provider and voice services offered by another
             provider.

         In addition, some traditional telephone companies may take the position
that they have no obligation to provide individual elements of their network
systems, including copper telephone lines, until the FCC issues new rules.

         In March 1998, several traditional local telephone companies petitioned
the FCC for relief from certain regulations applicable to the DSL and other
advanced data services that they provide, including their obligations to provide
copper telephone lines and resold DSL services to competitive carriers. In
August 1998, the FCC concluded that DSL services are telecommunications services
and, therefore, the traditional local telephone companies are required to allow
interconnection of their facilities and equipment used to provide data transport
functionality, un-bundle local telecommunications lines and offer for resale DSL
services. In the same proceeding, the FCC issued a notice of proposed rulemaking
seeking comments on its tentative conclusion that traditional local telephone
companies should be permitted to create separate affiliates to provide the DSL
34 services. Under the separate affiliate proposal, traditional local telephone
companies would be required to provide wholesale service to other broadband
carriers at the same rates, terms and conditions that it provided to its
separate affiliate. The outcome of this proceeding remains uncertain. Any final
decision in this proceeding that alters Myrient's relationship with the
traditional local telephone companies could adversely affect the Company's
ability to provide broadband services at a competitive price.

         In March 1999, the FCC adopted regulations that require the traditional
local telephone companies to permit other carriers to collocate all equipment
necessary for interconnection. This requirement includes equipment that the
Company may uses to provide DSL data services. The FCC also adopted limits on
the construction standards and other conditions for co-location that may be
imposed by traditional local telephone companies. These rules should reduce the
Company's co-location costs and expedite its ability to provide service to new
areas. There is no guarantee that these new rules will be implemented fully by
the Traditional local telephone companies. Therefore, the benefits of these
rules may be delayed pending interpretation and enforcement by state and federal
regulators. These rules are currently subject to appeal by several traditional
local telephone companies.

         The 1996 Telecommunications Act also directs the FCC, in cooperation
with state regulators, to establish a universal service fund that will provide
subsidies to carriers that provide service to individuals that live in rural,
insular, and high-cost areas. A portion of carriers' contributions to the
universal service fund also will be used to provide telecommunications related
facilities for schools, libraries and certain rural health care providers. The
FCC released its initial order in this context in June 1997, which requires all
telecommunications carriers to contribute to the universal service fund. The
FCC's implementation of universal service requirements remains subject to
judicial and additional FCC review. Additional changes to the universal service
regime, which could increase costs, could have an adverse affect on the Company.

STATE REGULATION
----------------
         In October 1998, the FCC deemed data transmission to the Internet as
interstate services subject only to federal jurisdiction. However, this decision

                                       10


<PAGE>

is currently subject to reconsideration and appeal. Also, some services that are
not limited to interstate access potentially may be classified as intrastate
services subject to state regulation. All of the states where Myrient operates,
or intends to operate, require some degree of state regulatory commission
approval to provide certain intrastate services and maintain ongoing regulatory
supervision. In most states, intrastate tariffs are also required for various
intrastate services, although Myrient's services are not subject to price or
rate of return regulation. Actions by state public utility commissions could
cause us to incur substantial legal and administrative expenses and adversely
affect its business.

LOCAL GOVERNMENT REGULATION
---------------------------
         In certain instances, strategic partners may be required to obtain
various permits and authorizations from municipalities, such as for use of
rights-of-way, in which Myrient operates local distribution facilities. Whether
various actions of local governments over the activities of telecommunications
carriers, including requiring payment of franchise fees or other surcharges,
pose barriers to entry for competitive local exchange carriers that violate the
1996 Telecommunications Act or may be preempted by the FCC is the subject of
litigation. While the Company is not a party to this litigation, it may be
affected by the outcome. If municipal governments impose conditions on granting
permits or other authorizations or if they fail to act in granting such permits
or other authorizations, the cost of providing broadband services may increase
or negatively impact the ability to expand the Company's network on a timely
basis and adversely affect its business.

SUBSIDIARIES
------------
         Myrient has three wholly owned subsidiaries: Landmark Communications,
Inc., a Nevada Corporation doing business as Landmark Long Distance Inc. in the
State of California; Color Networks, Inc., a California corporation; and
Mobilenetics Corp., a Delaware corporation. All of the above are inactive with
no assets and are being dissolved, except for Landmark Communications, Inc.

EMPLOYEES
---------
         The Company employs fifty-five (55) full-time employees as of November
12, 2001. None of the employees are represented by collective bargaining
agreements and the Company considers relations with its employees to be good.

MAJOR SUPPLIERS
---------------
         The Company is dependent on the telecommunications carriers and other
carriers and suppliers to connect its network. Myrient relies on traditional
telecommunication carriers to transmit its traffic over local and long distance
networks. These networks may experience disruptions that are not easily
remedied.

         Additionally, the Company depends on certain suppliers of hardware and
software. If its suppliers fail to provide Myrient with network services,
equipment or software in the quantities, at the quality levels and at the times
it is required, or if Myrient cannot develop alternative supply sources, it will
be difficult, if not impossible, for Myrient to provide its services.

         Myrient's success depends on negotiating and entering into strategic
partner interconnection agreements with providers of communications bandwidth.
Myrient must enter into and renew interconnection agreements with providers of
communications bandwidth in each of its target markets in order to provide
service in that market. These agreements govern, among other things, the price
and other terms regarding location of equipment in the offices of providers of
communications bandwidth which house telecommunications equipment and from which
local telephone company service is provided, known as central offices, and
Myrient's lease of copper telephone lines that connect those central offices to
its customers. Delays in obtaining interconnection agreements would delay
Myrient's entrance into target markets and could have a material adverse effect
on its business and prospects. Myrient's interconnection agreements generally
have limited terms of one to two years and the Company cannot assure you that
new agreements will be negotiated or that existing agreements will be extended
on terms favorable to Myrient.

         The Company faces risks associated with its lease of bandwidth from
network suppliers. Myrient leases its bandwidth from Level (3) Communications.
The Company is dependent upon their ability to satisfy their obligations. If
they cannot, the Company will incur significant expenses to utilize other
sources of bandwidth. The Company also has risks associated with their ability
to build-out their networks under construction and its access to that bandwidth.

                                       11


<PAGE>

         Myrient is subject to a variety of risks relating to its recent lease
of fiber-based telecommunications bandwidth from the Company's various global
network suppliers, including its strategic alliance with Level (3), and the
delivery, operation and maintenance of such bandwidth. Such risks include, among
others, the following:

         o   the risk that financial, legal, technical and/or other matters may
             adversely affect such suppliers' ability to perform their
             respective operation, maintenance and other services relating to
             such bandwidth, which may adversely affect the use of such
             bandwidth;

         o   the risk that Myrient will not have access to sufficient additional
             capital and/or financing on satisfactory terms to enable us to make
             the necessary capital expenditures to take full advantage of such
             bandwidth;

         o   the risk that such suppliers may not continue to have the necessary
             financial resources to enable them to complete, or may otherwise
             elect not to complete, their contemplated build-out of their
             respective fiber optic telecommunications systems; and

         o   the risk that such build-out may be delayed or otherwise adversely
             affected by presently unforeseeable legal, technical and/or other
             factors.

         The Company cannot assure that it will be successful in overcoming
these risks or any other problems encountered in connection with its lease of
sufficient bandwidth.

PATENTS, TRADEMARKS, LICENSES
-----------------------------
         The Company currently has one patent pending on networking technology.
The Company has five applications on file with the U.S. Patent and Trademark
Office for RPN(TM), Real Private Network(TM), Myrient(TM), ZipDSL(TM), and A
Myriad of Enterprise Solutions(TM).

COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
-------------------------------------------------
         The Company currently has no costs associated with compliance with
environmental regulations. However, there can be no assurances that the Company
will not incur such costs in the future.

ITEM 2.  DESCRIPTION OF PROPERTY
         Effective February 16, 2001, the Company began leasing approximately
20,000 square feet of office space in Aliso Viejo, California at a monthly
rental rate of approximately $37,800 per month. This facility serves as the
primary place of business. The lease expires on August 31, 2002.

ITEM 3.  LEGAL PROCEEDINGS
         The Company may from time to time be involved in various claims,
lawsuits, disputes with third parties, actions involving allegations of
discrimination, or breach of contract actions incidental to the operation of its
business. The Company is not currently involved in any such litigation that it
believes could have a materially adverse effect on its financial condition or
results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On July 31, 2001 the Company had an annual shareholders meeting with
voting for appointment of Directors, amendment of the Articles of Incorporation,
approval of an increase in the authorized shares of common stock, and
reappointment of the independent auditors. A majority of the quorum present at
the meeting in person or by proxy re-elected Teresa M. Throenle, Barry W. Hall,
and Bryan L. Turbow to serve as directors until the next shareholder meeting or
until new directors are otherwise elected or appointed. A majority of the quorum
present at the meeting in person or by proxy approved the increase of the
authorized number of shares of common stock from 50 million to 75 million. In
conjunction with this, the shareholders approved the restatement of the
Articles of Incorporation of the Company to reflect such changes. Finally, the
shareholders ratified the appointment of Corbin & Wertz as the independent
auditors of the Company.

                                       12


<PAGE>

         Of the 39,985,535 shares of common stock issued and outstanding and
entitled to vote, 20,179,992 voting shares were present, constituting 50.05% of
the outstanding shares, and thus a quorum was present either in person or by
proxy to conduct a shareholder meeting. Each item required 10,089,997 votes,
that is, over 50% of the quorum, to pass shareholder approval. The number of
votes cast for each item was as follows:

Toan V. Dinh                                8,267,709 votes; not elected
Barry W. Hall                              23,423,858 votes; elected
Teresa M. Throenle                         23,405,595 votes; elected
Bryan L. Turbow                            21,224,882 votes; elected
Increase of the authorized shares          23,216,845 votes; passed
Adoption of restated articles              23,382,801 votes; passed
Ratification of independent auditors       23,375,768 votes; passed

                                     PART II

ITEM 5.  MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTER'S

         The following table sets forth the high and low bid prices for shares
of the Company common stock for the periods noted, as reported by the National
Daily Quotation Service and the NASDAQ Bulletin Board. Quotations reflect
inter-dealer prices, without retail mark-up, markdown or commission and may not
represent actual transactions.

                                                            BID  PRICES
                                                         HIGH          LOW
--------------------------------------------------------------------------------

         YEAR ENDED AUGUST 31, 2000

         First Quarter                                    5.875         2.750
         Second Quarter                                  15.375         5.875
         Third Quarter                                   15.500         3.625
         Fourth Quarter                                   7.937         1.187

         YEAR ENDED AUGUST 31, 2001

         First Quarter                                  $ 0.437       $ 0.343
         Second Quarter                                   0.460         0.430
         Third Quarter                                    0.320         0.270
         Fourth Quarter                                   0.200         0.170

         YEAR ENDED AUGUST 31, 2002

         First Quarter (through Nov 12, 2001)             0.140         0.135

NUMBER OF SHAREHOLDERS
----------------------
         The number of beneficial holders of record of the Common Stock of the
Company as of the close of business on November 12, 2001 was approximately 504.
Many of the shares of the Company's Common Stock are held in a "street name" and
consequently reflect numerous additional beneficial owners.

DIVIDEND POLICY
---------------
         To date, the Company has declared no cash dividends on its Common
Stock, and does not expect to pay cash dividends in the next term. The Company
intends to retain future earnings, if any, to provide funds for operation of its
business.

RECENT SALES OF UNREGISTERED SECURITIES
--------------------------------------
         In June 2001, the Company issued 140,000 shares of common stock valued
at $25,200 (based on the closing bid price of the Company's common stock on the
date of grant) to a non-affiliated, accredited investor for securing leased
facilities. This transaction was an issuance of securities by the issuer not
involving any public offering and is therefore covered by the exemption allowed
under Section 4(2) of the Securities Act of 1933.

                                       13


<PAGE>

         In July 2001, the Company issued 370,000 shares of common stock valued
at $51,800 (based on the closing bid price on the date of grant) to the former
Chairman and CEO and expensed the entire amount under general and administrative
expenses in the accompanying statement of operations as of August 31, 2001. This
transaction was an issuance of securities by the issuer not involving any
public offering and is therefore covered by the exemption allowed under Section
4(2) of the Securities Act of 1933.

         In July 2001, the Company issued 5,000,000 shares of common stock
valued at $700,000 (based on the closing bid price on the date of grant) to
restore the 5,000,000 shares of common stock the current President provided as
collateral against a note payable to the former Chairman and CEO. Upon final
settlement with the former Chairman and CEO it was agreed that the Company would
transfer the 5,000,000 collateral shares to the former Chairman and CEO and
restore the shares of common stock to the current President. This transaction
was an issuance of securities by the issuer not involving any public offering
and is therefore covered by the exemption allowed under Section 4(2) of the
Securities Act of 1933.

ITEMS 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The following discussion contains certain forward-looking statements
that are subject to business and economic risks and uncertainties, and the
Company's actual results could differ materially from those forward-looking
statements. The following discussion regarding the financial statements of the
Company should be read in conjunction with the financial statements and notes
thereto.

GENERAL OVERVIEW
         The Company's operating results have fluctuated in the past and may in
the future fluctuate significantly, depending upon a variety of factors,
including the timely deployment and expansion of new network architectures, the
incurrence of related capital costs, variability and length of the sales cycle
associated with the Company's product and service offerings, the receipt of new
value-added network services and consumer services subscriptions and the
introduction of new services by the Company and its competitors. Additional
factors that may contribute to variability of operating results include but not
limited to: the pricing and mix of services offered by the Company; customer
retention rate; market acceptance of new and enhanced versions of the Company's
services; changes in pricing policies by the Company's competitors; the
Company's ability to obtain sufficient supplies of sole or limited-source
components; user demand for network and Internet access services; balancing of
network usage over a 24-hour period; the ability to manage potential growth and
expansion; the ability to identify, acquire and integrate successfully suitable
acquisition candidates; and charges related to acquisitions. In response to
competitive pressures, the Company may take certain pricing or marketing actions
that could have a material adverse affect on the Company's business. As a
result, variations in the timing and amounts of revenue could have a material
adverse affect on the Company's quarterly operating results. Currently, the
Company does not have the systems available to provide segment information. Due
to the foregoing factors, the Company believes the period-to-period comparisons
of its operating results are not necessarily meaningful and that such
comparisons cannot be relied upon as indicators of future performance. In the
event that the Company's operating results in any future period fall below the
expectations of securities analysts and investors, the trading price of the
Company's common stock would likely decline.

REVENUE
         Net sales totaled $14,554,970 for the year ending August 31, 2001, a
$6,567,418 increase over net sales of $7,987,552 for the year ending August 31,
2000. Myrient has billed but not recognized approximately $772,000 of deferred
revenue, as the services have not yet been performed as of August 31, 2001.
These increases reflect the growth in revenue from Private Networking, Broadband
Internet Access, Internet and Intranet based Web Hosting, Hosted Application
Services, Intelligent Routing and Content Delivery Services, Network and Systems
Management, Professional Services, from marketing arrangements with new
strategic partners, and sale of equipment to support these product offerings.

                                       14


<PAGE>

COST OF SALES
         Cost of sales increased $5,063,468 during the year ending August 31,
2001 to $10,733,755 from $5,670,287 for the year ending August 31, 2000. Cost of
sales consists primarily of access charges from local exchange carriers,
backbone and internet access costs, and the cost of customer equipment to
support network systems. The Company's cost from provider fees significantly
increased during the fiscal year, especially in the fourth quarter, having an
impact on the Company's margins and ability to continue to provide these
services. Gross profits decreased from 29% in 2000 to 26% in 2001. The Company
expects its gross profits to increase with the focus on higher margin managed
services.

SELLING EXPENSE
         Selling expense consists primarily of personnel expenses, including
salary and commissions, and costs for customer support functions. Marketing and
selling expense decreased $2,060,813 to $1,484,162 for the year ending August
31, 2001 from $3,544,975 for the year ending August 31, 2000. Marketing and
selling expense for the year ended August 31, 2001 included payroll related
costs of $1,402,291 and advertising and promotion expense of $81,871. Marketing
and selling expense for the year ending August 31, 2000 included payroll and
related costs of $3,312,674, advertising and promotion expenses of $172,374 and
trade show expenses of $59,927. The decrease was directly related with the
reduction of approximately 150 individuals involved in reselling retail based
business class DSL connectivity. The Company's sales focus changed to higher
margin managed services, including Real Private Network(TM) (RPN(TM))
technology, Internet and Intranet based Web Hosting, Hosted Application
Services, Intelligent Routing and Content Delivery Services, Network and Systems
Management, and Professional Services.

GENERAL AND ADMINISTRATIVE EXPENSE
         General and administrative expense consists primarily of personnel
expense, rent and professional fees. General and administrative expense
decreased $4,631,633 to $9,785,897 for the year ending August 31, 2001 from
$14,417,530 for the year ending August 31, 2000. General and administrative
expense for the year ending August 31, 2001 primarily consisted of $2,533,570
in administrative wages, technical support engineers and related taxes and
benefits; $940,366 in depreciation expense; $1,891,664 of bad debt expense for
uncollectible accounts receivable; $741,727 in operating equipment leases;
$350,826 in systems implementation costs; $1,243,756 for professional fees;
$624,088 in rent expense; $299,199 in telephone expenses; $796,716 of non-cash
charged for the issuance of common stock and options for services rendered and
for compensation; $191,679 in research and development expenses; and $172,306 in
other operating expenses. During the fiscal year 2001, the Company recorded the
loss on disposal of property and equipment of $106,280 compared to none in
fiscal year 2000. The significant reduction of expenses in the current fiscal
year was due to an approximate $683,000 voluntary reduction in wages; $584,000
reduction of other operating expenses; $2,221,000 reduction of non-cash charged
for the issuance of common stock and options for services rendered for
compensation; $2,846,000 for goodwill amortization, systems implementation costs
and severance pay which did not continue in the current fiscal year offset by an
increase in bad debt expense for uncollectible accounts receivable of
$1,702,000. Currently, the Company is continuing to take aggressive steps to
decrease future general and administrative expenses, reflecting increased
operational efficiencies.

INTEREST EXPENSE
         Interest expense decreased $278,748 to $494,552 for the year ending
August 31, 2001 as compared to $773,300 for the year ending August 31, 2000. The
decrease in interest is primarily related to the reduction of the prime interest
rate during the fiscal year and the non-cash beneficial conversion interest
recorded in the prior year of $481,904 offset by additional borrowings in fiscal
year 2001. Interest expenses in the current year related to $30,461 incurred on
capital leases, $71,421 incurred on the lines of credit, $105,003 incurred on a
convertible note payable, $152,938 incurred on the related parties notes
payable; $55,790 of interest on notes payable and $84,335 of other interest;
offset by $5,396 of interest income compared to interest expense in the prior
year of $67,212 incurred on capital leases, $30,000 incurred on the line of
credit, $30,000 incurred on a convertible note payable, $164,184 incurred on the
related parties notes payable and $428,571 non-cash charge for a beneficial
conversion feature on a convertible note and warrants valued at $53,333 in
connection with the issuance of the convertible note.

                                       15


<PAGE>

NET LOSS
         As a result of the above, the Company incurred a net loss of $8,152,247
for the year ending August 31, 2001 as compared to $20,481,888 for the year
ending August 31, 2000. For the fiscal years ended August 31, 2001 and 2000, the
Company incurred a loss of $0.22 and $0.68 per share, respectively. The
Company's near term focus is to become profitable by increasing enterprise
business and reducing all expenses to minimum levels. However, the Company
believes that we will still incur losses in the near term and cannot assure that
the Company will be profitable in the future.

ASSETS AND LIABILITIES
         Assets decreased by $3,043,298 from $6,934,378 as of August 31, 2000 to
$3,891,080 as of August 31, 2001. The decrease was due primarily to decreases in
accounts receivable of $670,019, net property and equipment of $2,442,477, other
assets of $101,423 and increase in cash of $170,621. Liabilities increased by
$3,750,960 from $17,167,825 as of August 31, 2000 to $20,918,785 as of August
31, 2001. The increase was primarily to increases in accounts payable and
accrued expenses of $1,795,758, notes payable of $1,242,485, payroll and payroll
related liabilities of $835,775, notes payable-related parties of $299,145;
offset with a decrease in the line of credit of $100,000, convertible note
payable of $93,750, capitalized lease debt of $83,977 and other liabilities of
$144,476. The increase in accounts payable and accrued expenses are associated
with Internet service provider fees. During the current fiscal year the Company
agreed to repurchase certain shares of its Preferred stock resulting in
borrowings of $1,200,000 to fund the repurchase. During the fiscal year 2001,
the Company borrowed $2,134,905 from related parties for operating funds,
repurchased shares of common stock from the former Chairman and CEO for an
increase in notes payable of $1,000,000, made payments on related party notes in
the amount of $749,464 and converted $2,613,738 (including interest of $233,442)
of debt into equity.

STOCKHOLDERS' (DEFICIT) EQUITY
         Stockholders' deficit increased by $6,794,258 from a deficit of
$10,233,447 as of August 31, 2000 to a deficit of $17,027,705 as of August 31,
2001. The increase is attributable to the current year net loss of $8,152,247
and dividends accrued on Preferred stock of $106,459, retirement of common
shares with an estimated fair market value of $1,000,000, repurchase of
Preferred stock for $1,200,000, offset by accrued dividends of $237,614 included
in the repurchase and conversion of Preferred stock to common stock; the
estimated fair market value of the non-cash issuance of common stock, options
and warrants of $796,716, cash profit of $16,380 from a short swing sale and the
conversion of debt to equity in the amount of $2,613,738.

LIQUIDITY AND CAPITAL RESOURCES
GENERAL
         Overall, the Company had positive cash flows of $170,621 in fiscal year
2001 resulting from $1,460,579 of cash provided by the Company's financing
activities and $502,264 of cash provided by operating activities, offset by
$1,792,222 of cash used in operating activities.

CASH FLOWS FROM OPERATIONS
         Net cash provided by operating activities of $502,264 in fiscal year
2001 was primarily due to the increase of operating liabilities, principally
accounts payable and  accrued expense of $4,883,640, payroll and related taxes
of $835,775, accrued interest payable of $220,121; decrease in other assets of
$101,423; fair market value of stock issued for services of $796,716; allowance
for doubtful accounts and bad debt expense of $1,891,614; depreciation expense
of $940,366; and the loss on impairment of long-lived assets and disposal of
property and equipment of $206,451; offset by the net loss of $8,152,247 and the
increase of accounts receivable of $1,221,645.

CASH FLOWS FROM INVESTING
         Net cash used in investing activities of $1,792,222 in fiscal year 2001
funded purchases of property and equipment to replace equipment previously
leased by the Company.

CASH FLOWS FROM FINANCING
         Net cash provided by financing activities of $1,460,579 in fiscal year
2001 was primarily due to the proceeds from related parties of $2,134,905,
borrowings on the line of credit of $794,000 and the proceeds from a short swing
sale of $16,380; offset primarily by the repurchase of Preferred stock for
$500,000, and repayments on notes payable and capitalized leases obligations of
$984,706.

                                       16


<PAGE>

         To date, the Company has satisfied its cash requirements primarily
through debt and equity financings and capitalized lease financings. The
Company's principal uses of cash are to fund working capital requirements and to
service its capital lease and debt financing obligations. The Company hopes that
it will generate positive cash flow from operations within the next twelve-month
period. There can be no assurances that the Company will be successful in
securing additional financing, and if secured, it will be sufficient to satisfy
working capital needs.

LONG-TERM FINANCING
         The Company believes that its anticipated funds from operations will be
insufficient to fund its working capital and other requirements through August
31, 2002. Therefore, the Company will be required to seek additional funds
either through debt or equity financing to finance its long-term operations
("Additional Funds"). Should the Company fail to raise the Additional Funds, the
Company will have insufficient funds for the Company's intended operations for
the next twelve months that may have a material adverse effect on the Company's
long-term results of operations.

CONTINGENT LIABILITIES
         During fiscal 2000, the Company had been billed approximately
$2,469,317 from  third parties, for consulting services and related computer
components in connection with the implementation of certain software programs.
The Company evaluated a proposal for software implementation of various software
products and decided not to enter into formal agreement. Myrient had expensed
the entire amount under general and administrative expense in the accompanying
statement of operations as of August 31, 2000. The Company has retained the
services of an outside consultant to examine the appropriateness of such
services and related charges. As of August 31, 2001, the Company has accrued
approximately $2,469,317 but has made no payment towards this liability nor has
the final payment amount been settled.

         As of May 31, 2000, the Company entered into an agreement with a
software vendor for software licenses and promotional support with the intention
of reselling these licenses to customers as part of its Managed Service
offering. To date, the Company has not received the promotional support services
portion of this agreement and as of August 31, 2000 declared that the related
assets did not provide any future benefit to the Company. As a result, the
Company recognized an impairment of $1,260,718 during fiscal year ended August
31, 2000. As of August 31, 2001 the debt is recorded under accounts payable in
the accompanying Balance Sheet and continues to be negotiated with the vendor.

         As of August 31 2001, the Company entered into an agreement with a
third party supplier which provides DSL communication access with an outstanding
balance of approximately $6,733,000 recorded under accounts payable in the
accompanying Balance Sheet as of August 31, 2001. The agreement calls for the
sale of existing lines and a repayment plan for the remaining debt after
applying the sale proceeds to offset debt and accrued interest (see Exhibit 10).

         The Company has recorded an accrual for the past due payroll taxes due
to the under-payment of the Company's payroll tax liability. As a result, the
Company has accrued approximately $1,303,000 including interest and penalties at
August 31, 2001 in the accompanying balance sheet. The Company is currently
negotiating this matter and hopes to establish an agreeable payment plan within
the near future.

GOING CONCERN
         The Company's independent certified public accountants have stated in
their report included in this Form 10-KSB, that the Company has incurred
operating losses in the last two years, has a working capital deficit, under
payment of payroll taxes, and a significant stockholders' deficit. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.

CAPITAL EXPENDITURES
         The Company has no capital expenditures of significance planned for the
next twelve months.

INFLATION
         Management believes that inflation has not had a material effect on the
Company's results of operations.

                                       17


<PAGE>

ITEM 7.  FINANCIAL STATEMENTS
         The consolidated financial statements and supplementary financial
information that are required to be filed under this item are presented as an
exhibit. Exhibits and Reports on Form 10-KSB in this document, and are
incorporated herein by reference.

ITEM     8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE The Company had no changes in and disagreements
         with accountants on
Accounting and financial disclosure during the fiscal year ended August 2001.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         The following table sets forth the names and ages of the current
directors and executive officers of the Company, the principal offices and
positions with the Company held by each person and the date such person became a
director or executive officer of the Company. The Board of Directors elects the
executive officers of the Company annually. The directors serve one-year terms
until their successors are elected. The executive officers serve terms of one
year or until their death, resignation or removal by the Board of Directors.
There are no family relationships between any of the directors and executive
officers. In addition, there was no arrangement or understanding between any
executive officer and any other person pursuant to which any person was selected
as an executive officer.

The directors and executive officers of the Company are as follows:

Name                       Age   Position(s)
--------------------------------------------------------------------------------

Bryan L. Turbow            33    Director, President and
                                   Chief Technology Officer

Barry W. Hall              53    Director, Chairman of the Board

Teresa M. Throenle         39    Director

Vincent J. Roth            33    General Counsel, Secretary and Treasurer

         The following is a brief summary of the business experience of the
Company's executive officers and directors:

         BRYAN L. TURBOW has been a member of the Board of Directors since
October 1999. In 1986 Mr. Turbow founded Mobilenetics and was its President and
sole stockholder. Mobilenetics was a telecommunications consulting and systems
integration company that merged with Myrient in June 1999.

         BARRY HALL was Executive Vice President, Chief Financial Officer of
Styleclick, Inc. a publicly traded Internet services provider and distributor
of consumer products. Mr. Hall has held this position in Styleclick and its
predecessor company from October 1999 through July 31, 2001. From May 1998 until
August 1999 he was Chief Operating Officer of Interactive Light, Inc. a
developer and marketer of digital interactive entertainment systems and
platforms. From January 1998 to April 1998 Mr. Hall was Chief Financial Officer
of Apparel Technologies, Inc. a developer of digital printing technologies for
the apparel industry. From January 1996 to September 1997 he was Executive Vice
President, Chief Financial Officer of EarthLink Network, Inc. a nationwide
Internet Service Provider. Prior to that Mr. Hall was Chairman and Chief
Executive Officer of California Amplifier, a developer, manufacturer and
marketer of wireless communications components and subsystems.

         TERESA M. THROENLE was appointed to the Company's Board of Directors on
May 18, 2000. Ms. Throenle is the Chief Financial Officer of SeaWest Financial
Corporation, a financing company with a current loan portfolio of $140 million
and a growth rate of 600% per year over the last three years and profitability
growth of over 1200%. Ms. Throenle possesses over fourteen years of experience
in executive financial management. Prior to joining SeaWest, Ms. Throenle
founded Insight Financial Management, Inc., instructed for the University of
Southern California-Business Expansion Network and taught for the Women's

                                       18


<PAGE>

Enterprise Development Corp. Ms. Throenle holds a Master of Business
Administration from Pepperdine University and a Bachelor of Science in
Professional Accounting from California State University, Long Beach. Her
professional affiliations include candidate membership in the California
Society of Certified Public Accountants and the Association of Certified Fraud
Examiners.

         VINCENT J. ROTH, Esquire started with the Company in June 2000. The
Board of Directors appointed him Secretary/Treasurer in September 2000.  The
Board later appointed him General Counsel in March 2001. Mr. Roth's training
and experience are focused in business transactions. Prior to the Company,
Mr. Roth practiced as a sole practitioner for a short period and was a contract
administrator for two years with Facey Medical Group. Mr. Roth also worked in
healthcare management for six years with the Hospital of the University of
Pennsylvania. Mr. Roth is licensed to practice law in California. He received
his Juris Doctor and Master of Business Administration from Temple University.
He also holds a Master of Liberal Arts in Sociology from the University of
Pennsylvania and a Bachelor of Business Administration in Human Resources and
Marketing from Temple University. He is now a candidate for a graduate law
program, the Master of Laws in Business and Corporate Law at the University of
San Diego School of Law.

AGREEMENTS
         The Company entered into an employment agreement with Chris Capadouca
in May 2000, pursuant to which he agreed to serve as the Chief Information
Officer. This employment agreement had a three-year term and provided for base
salary of $150,000, allowances for bonuses based upon goals and fringe benefits.
The agreement provided for a maximum of twelve months of severance compensation,
as defined, in certain cases of termination. During fiscal 2001, Mr. Capadouca
resigned as Chief Information Officer and no severance compensation was
required.

         The Company entered into an employment agreement with Leonard Kajimoto
in June 2000, pursuant to which he agreed to serve as the Vice President of
Operations. This employment agreement has a three-year term and provides for a
base salary of $140,000 the first year, $125,000 the second year and $110,000
the third year with allowances for bonuses based upon goals and fringe benefits.
The agreement provides for a maximum of twelve months of severance compensation,
as defined, in certain cases of termination.

         The Company entered into a severance agreement effective August 8, 2000
and restated and amended November 15, 2000, with the former Chairman and CEO as
follows:

         o        the Company agreed to pay the former Chairman and CEO a
                  severance amount of $120,000 payable in twelve equal monthly
                  installments beginning August 10, 2000. During fiscal 2000,
                  the Company made payments in the amount of $10,000 in
                  connection with the severance liability. During fiscal 2001,
                  the Company paid the remaining amount of $110,000;

         o        during fiscal 2001, the Company and the former Chairman and
                  CEO agreed to offset a note payable to the former Chairman
                  and CEO with certain accounts receivable in the amount of
                  $600,000 from Speedsl.com, Inc., a related party;

         o        during fiscal 2001, the former Chairman and CEO returned
                  15,000,000 shares of common stock and the Company adjusted his
                  note payable, valued at $1,000,000 (based on the closing bid
                  price on the date of the agreement);

         o        during fiscal 2001, the Company secured the note payable to
                  the former Chairman and CEO with 5,000,000 shares of common
                  stock from the current President; and

         o        during fiscal 2001, the former Chairman and CEO agreed to
                  cancel 2,000,000 options, which were outstanding at August 31,
                  2000.

         In August 2001, the Company reached a settlement with the former
Chairman and CEO. Pursuant to the settlement, the former Chairman and CEO
Foreclosed on the 5,000,000 freely trading shares of common stock owned by the
President as payment in full on his note payable. In addition, the Company
issued an additional 370,000 shares of restricted common stock to the former
Chairman and CEO for other negotiated items. As a result, the promissory note

                                       19


<PAGE>

in the amount of $1,940,979 (including interest of $216,028) was eliminated
from the Company's books. Upon the conclusion of the settlement, the Company
issued 5,000,000 shares of common stock to the current President to restore his
holdings. The Company recorded the reduction of the note payable and the accrued
interest against the issuance of the 5,000,000 shares of common stock issued to
the note from the President with no net impact to the statements of operations,
as the transactions was with a majority shareholder. The Company valued the
additional 370,000 shares of common stock at $51,800 (based on the closing bid
price on the date of settlement) and expensed the entire amount under general
and administrative expenses in the accompanying statement of operations as of
August 31, 2001.

         Additionally, the settlement calls for an ongoing sale restriction on
the shares issued to the former Chairman and CEO. Only 1% of the total
outstanding shares may be sold each quarter until such time as the former
Chairman and CEO transfers all of the 5,000,000 shares and files a form 13D with
the Securities and Exchange Commission listing his current ownership interest in
the Company. The former Chairman and CEO agreed to provide monthly transaction
records consisting of all transaction confirmations and the portions of his
monthly brokerage statements relating to any transaction of the Company stock
and the monthly statements for all accounts in which the Company stock transfers
are effected. The former Chairman and CEO also agreed that so long as he owns
the 5,000,000 shares of the Company stock, he will not exercise his voting
rights on such stock and the Company will not recognize voting rights for these
shares while owned by the former Chairman and CEO.

         Effective August 8, 2000 the Company entered into a severance agreement
with its former Chief Operating Officer ("COO"). The agreement required the
Company to pay the former COO a severance amount of $120,000 payable in twelve
equal monthly installments beginning August 10, 2000. During fiscal 2000, the
Company made payments in the amount of $10,000 in connection with the severance
liability. During fiscal 2001, the Company paid the remaining amount of
$110,000.

         In conjunction with these severance agreements, the former CEO and COO
executed irrevocable proxies for third parties to vote their shares.

         In August 2001, the Company entered into an employment agreement with
James Ferguson, pursuant to which he agreed to serve as the Executive Vice
President of World Wide Sales. This employment agreement has a one-year term and
provides for base salary of $100,000, allowances for bonuses based upon goals
and fringe benefits. The agreement provides for a maximum of two months of
severance compensation after one full year of employment, as defined, in certain
cases of termination.

SECTION16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the
       Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and persons who hold
more than 10% of a registered class of its equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of its equity securities. These individuals are required to
furnish the Company with copies of all Section 16(a) forms they file. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to us and written representations that no other reports were required
during the year ended August 31, 2000, all Section 16(a) filing requirements
applicable to these individuals were complied with.

         During November 2000, it was discovered that the former CFO and
beneficial owner (as defined by the Securities Exchange Act of 1934), had
profited from purchases and subsequent sales of the Company's common stock held
for less than six (6) months (a "short-swing" profit). Pursuant to Section 16(b)
of the Securities Exchange Act of 1934, the Company acted to recover these

profits from the former CFO. As a result, the Company received $16,380, which
has been credited to additional paid-in capital as a contribution to
shareholders' deficit.

ITEM 10.  EXECUTIVE COMPENSATION
         The Summary Compensation Table below sets forth information for
services in all capacities, which we paid or accrued for the fiscal years ended
August 31, 2001, 2000 and 1999. Other than as set forth herein, no executive
officer's salary and bonus exceeded $100,000 in any of the applicable years. The
following information includes the annual dollar value of salaries, bonus
awards, the number of stock options granted and certain other compensation, if
any, whether paid or declared.

                                       20


<PAGE>
<TABLE>
                               SUMMARY COMPENSATION TABLE
<CAPTION>
                                                                                LONG-TERM
                                                 ANNUAL                       COMPENSATION
                                 FISCAL       COMPENSATION       RESTRICTED    SECURITIES
                               YEAR ENDED   -----------------      STOCK       UNDERLYING       LTIP
NAME AND PRINCIPAL POSITION    AUGUST 31    SALARY($)  (BONUS)     AWARDS       OPTIONS        PAYOUTS  OTHER
---------------------------    ----------   ---------  -------   ----------   ------------     -------  -----
<S>                               <C>       <C>          <C>     <C>          <C>              <C>       <C>
William Kettle (1)                2001      $   -         -          -              -             -       -
Former Chairman of the Board      2000      $120,000      -          -              -             -       -
of Directors and former           1999      $   -         -          -          3,000,000         -       -
Chief Executive Officer

Toan V. Dinh (2)                  2001      $   -         -      1,277,778          -             -       -
Former Vice Chairman of Board     2000      $   -         -          -              -             -       -
of Directors and former           1999      $   -         -          -              -             -       -
Chief Executive Officer

Bryan L. Turbow (3)               2001      $120,000      -      5,000,000          -             -       -
Director,                         2000      $120,000      -          -              -             -       -
President and                     1999      $120,000      -          -              -             -       -
Chief Technology Officer

Adela M. Kettle (4)               2001      $   -         -          -              -             -       -
Former Director and former        2000      $120,000      -          -              -             -       -
Chief Operations Officer          1999      $   -         -          -              -             -       -

John Diehl (5)                    2001      $   -         -          -              -             -       -
Former Director and former        2000      $120,000      -          -            200,000         -       -
Chief Financial Officer           1999      $   -         -          -            500,000         -       -

Chris Capadouca (6)               2001      $   -         -          -              -             -       -
Former Director and former        2000      $150,000      -          -            350,000         -       -
Chief Information Officer         1999      $   -         -          -              -             -       -

Leonard Kajimoto                  2001      $125,000      -          -            200,000         -       -
Vice President, Operations        2000      $140,000      -          -            150,000         -       -
                                  1999      $   -         -          -              -             -       -

Vincent J Roth                    2001      $113,000      -          -            150,000         -       -
General Counsel,                  2000      $   -         -          -              -             -       -
Secretary and Treasurer           1999      $   -         -          -              -             -       -

Barry W Hall                      2001      $   -         -         25,000          -             -       -
Director                          2000      $   -         -          -            150,000         -       -
                                  1999      $   -         -          -              -             -       -

Teresa M Throenle                 2001      $   -         -         25,000         25,000         -       -
Director                          2000      $   -         -          -              -             -       -
                                  1999      $   -         -          -              -             -       -
</TABLE>
---------------
(1)      During the year ended August 31, 2000, Mr. William Kettle resigned from
         his position as Chairman and Chief Executive Officer. Per the
         settlement agreement, all remaining options were cancelled.

(2)      During the year ended August 31, 2001, Mr. Toan V. Dinh accepted the
         position of Chief Executive Officer and was given 277,778 shares of the
         Company's common stock valued at $50,000 as a consulting fee and
         2,000,000 shares of the Company's common stock valued at $270,000 as a
         signing bonus which vest over a two year period. On May 24, 2001, Mr.
         Toan V. Dinh resigned from his position of Chief Executive Officer and
         1,000,000 shares were cancelled.

(3)      During fiscal 2001, 5,000,000 shares of common stock from Mr. Turbow
         were pledged as collateral in negotiating with the former Chairman and
         CEO. Upon final settlement with the former Chairman and CEO, the
         pledged shares were transferred to the former Chairman and CEO and the
         Company agreed to restore the 5,000,000 shares of common stock to Mr.
         Turbow.

                                       21


<PAGE>

(4)      During the year ended August 31, 2000, Mrs. Adela M. Kettle resigned
         from her position as Director and Chief Operations Officer.

(5)      During the year ended August 31, 2000, Mr. John Diehl resigned from his
         position as Director and Chief Financial Officer. Per the settlement
         agreement, all remaining options expired August 2001.

(6)      During fiscal 2001, Mr. Chris Capadouca resigned from his position as
         Director and Chief Information Officer. Per the settlement agreement,
         100,000 vested options remained exercisable until January 2002 and all
         other grants were cancelled.

OPTION/SAR GRANTS IN LAST FISCAL YEAR
         The following table provides information on option grants for the
fiscal year ended August 31, 2001 to individuals named in the Company's Summary
Compensation table above. No stock appreciation rights ("SAR's") were awarded on
fiscal 2001.

<TABLE>
                                INDIVIDUAL GRANTS
<CAPTION>
                                          % OF TOTAL
                                        OPTIONS GRANTED         EXERCISE
                       OPTIONS           TO EMPLOYEES           PRICE PER       EXPIRATION
NAME                  GRANTED(#)        IN FISCAL YEAR            SHARE            DATE
---------------       ----------        ---------------         ---------       -----------
<S>                     <C>                   <C>                <C>             <C>
Leonard Kajimoto        200,000                9%                $0.160          08/28/2011
Vincent J Roth          150,000                7%                $0.160          08/28/2011
</TABLE>

<TABLE>
               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR END OPTION/SAR VALUE
<CAPTION>
                                              NUMBER OF SECURITY
                      NUMBER                  UNDERLYING UNEXERCISED       VALUE OF UNERCISABLE
                      OF                      OPTIONS/SARS AT FISCAL       IN THE MONEY OPTIONS/SARS
                      SHARES       VALUE      YEAR END                     AT FISCAL YEAR END
NAME                  ACQUIRED    REALIZED    EXERCISABLE/UNEXERCISABLE    EXERCISABLE/UNEXERCISABLE
-------------------   ---------  ----------   -------------------------    -------------------------
<S>                   <C>        <C>             <C>                        <C>          <C>
Chris Capadouca           -      $   -             100,000 /    -           $    -     / $    -
Leonard Kajimoto          -      $   -             100,000 / 250,000        $    -     / $    -
Vincent J Roth            -      $   -             100,000 /  50,000        $    -     / $    -
Barry W Hall              -      $   -             150,000 /    -           $    -     / $    -
Teresa M. Throenle        -      $   -              25,000 /    -           $    -     / $    -
</TABLE>

DIRECTOR'S COMPENSATION
-----------------------
       The directors of the Company are presently receiving no compensation for
time and responsibilities.

2000/1999 STOCK OPTION PLANS
----------------------------
         In February 2000, the Company's Board of Directors and majority
shareholders approved the Myrient, Inc. 2000 Stock Option Plan ("the 2000
plan"), effective March 1, 2000. An aggregate of 5,000,000 shares of common
stock are reserved for issuance under the 2000 plan. The exercise price for each
option shall be equal to 85% to 110% of the fair market value of the common
stock on the date of grant, as defined, and shall vest over no more than a
five-year period. The plan shall terminate ten years after its adoption by the
Board of Directors and may be terminated by the Board of Directors on any
earlier date, as defined.

         During fiscal 2000, the Board of Directors granted to various
employees, pursuant to the 2000 plan, an aggregate of 1,101,300 options (net of
407,570 options that were issued and cancelled during fiscal 2000) at exercise
prices ranging from $1.30 to $10.875 (based on the closing bid price of the
Company's common stock on the date of each grant). During fiscal year 2001,
560,960 of these options were cancelled. The options vest through August 2003
and are exercisable through August 2005.

                                       22


<PAGE>

         On November 7, 1999 the Company's Board of Directors and majority
shareholders approved the Myrient, Inc. Amended and Restated 1999 Stock Option
Plan ("the 1999 plan"), effective April 13, 2000. An aggregate of 5,000,000
shares of common stock are reserved for issuance under the 1999 plan. The
exercise price for each option shall be equal to 85% to 110% of the fair market
value of the common stock on the date of grant, as defined, and shall vest over
no more than a five-year period. The plan shall terminate ten years after its
adoption by the Board of Directors and may be terminated by the Board of
Directors on any earlier date, as defined.

         During fiscal 2000, the Board of Directors granted to various
employees, pursuant to the 1999 plan, an aggregate of 1,276,560 options (net of
643,800 options that were issued and cancelled during fiscal year 2000) at
exercise prices ranging from $4.531 to $15.00 (based on the closing bid price of
the Company's common stock on the date of each grant). The options vest through
January 2003 and are exercisable through January 2005. In addition, the Board of
Directors granted to various employees, pursuant to the 1999 plan, an aggregate
of 103,600 options (net of 13,000 issued and cancelled during fiscal year 2000)
at an exercise price of $4.00 resulting in $26,000 (net of cancelled options) of
compensation expense to be charged to the Company over the two year vesting
period under APB 25.

         During fiscal 2001, the Board of Directors granted to various
employees, pursuant to the 2000 plan, an aggregate of 1,442,500,000 options (net
of 428,500 options that were issued and cancelled during fiscal 2001) at
exercise prices ranging from $0.14 to $4.000 (based on the closing bid price of
the Company's common stock on the date of each grant). The options vest through
December 2003 and are exercisable through August 2011.

ITEM 11. SECURITY OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND BENEFICIAL
         OWNERS OF GREATER THAN 5% OF THE COMPANY'S COMMON STOCK

         The following table sets forth information with respect to the
beneficial ownership of Myrient's common stock owned, as of November 12, 2001
by:

         o        holders of more than 5% of the Company's common stock;
         o        each of the directors;
         o        the executive officers; and
         o        all directors and executive officers of the Company as a group

         As of August 31, 2001, an aggregate of 44,874,796 shares of Myrient's
common stock were issued and outstanding. For purposes of computing the
percentages under this table, it is assumed that all options and warrants to
acquire the Company's common stock which have been issued to the directors,
executive officers and the holders of more that 5% of common stock and are fully
vested or will become fully vested within 60 days of the date of this Annual
Report have been exercised by these individuals and the appropriate number of
shares of Myrient's common stock have been issued to these individuals.

                                       23


<PAGE>

NAME AND ADDRESS OF                      AMOUNT AND NATURE OF       PERCENT OF
 BENEFICIAL OWNER                       BENEFICIAL OWNERSHIP(1)        CLASS
-------------------                     -----------------------     ----------
William J. Kettle                               5,370,000              12.0%
65 Enterprise
Aliso Viejo, CA  92656

Toan V. Dinh                                    1,314,701(2)            2.9%
65 Enterprise
Aliso Viejo, CA  92656

Bryan L. Turbow                                12,000,000(3)           26.7%
65 Enterprise
Aliso Viejo, CA  92656

John W. Diehl                                     500,000               1.1%
65 Enterprise
Aliso Viejo, CA  92656

Christopher A. Capadouca                          100,000(4)             *
65 Enterprise
Aliso Viejo, CA  92656

Leonard Kajimoto                                  395,000(5)             *
65 Enterprise
Aliso Viejo, CA  92656

Vincent J. Roth                                   174,692(6)             *
65 Enterprise
Aliso Viejo, CA  92656

Barry W. Hall                                     175,000(7)             *
65 Enterprise
Aliso Viejo, CA  92656

Teresa M. Throenle                                 50,000(8)             *
65 Enterprise
Aliso Viejo, CA  92656

All directors and executive
officers of the Company as
a group                                        20,079,393              44.7%

------------
*  Less than one percent (1%)

1.   Beneficial ownership has been determined in accordance with Rule 13d-3
     under the Securities Exchange Act of 1934. Unless otherwise noted, Myrient
     believes that all persons named in the table have sole voting and
     investment power with respect to all shares of common stock beneficially
     owned by them.

2.   Includes 36,923 non-employee warrants of Myrient's common stock issuable
     upon exercise of vested warrants.

3.   During fiscal 2001, 5,000,000 shares of common stock from Mr. Turbow were
     pledged as collateral for the note payable due to the former Chairman and
     CEO. Upon final settlement with the former Chairman and CEO it was agreed
     that the Company would transfer the 5,000,000 collateral shares of common
     stock to the former Chairman and CEO and the Company would re-issue
     5,000,000 shares of common stock to Mr. Turbow.

4.   Includes 100,000 shares of Myrient's common stock issuable upon exercise of
     vested options. Represents options issued in accordance with the 2000 Stock
     Option Plan.

5.   Includes 350,000 shares of Myrient's common stock issuable upon exercise of
     vested options. Represents options issued in accordance with the 2000 Stock
     Option Plan.

6.   Includes 150,000 shares of Myrient's common stock issuable upon exercise of
     vested and non-vested options. Represents options issued in accordance with
     the 2000 Stock Option Plan.

                                       24


<PAGE>

7.   Includes 150,000 shares of Myrient's common stock issuable upon exercise of
     vested options. Represents options issued in accordance with the 2000 Stock
     Option Plan.

8.   Includes 25,000 shares of Myrient's common stock issuable upon exercise of
     vested options. Represents options issued in accordance with the 2000 Stock
     Option Plan.

ITEM 12. TRANSACTIONS WITH OFFICERS AND DIRECTORS AND OTHER BUSINESS
         RELATIONSHIPS

         During fiscal 2000, the then Chairman and CEO of the Company entered
into a verbal contract with Speedsl.com, Inc. which is owned and operated by
the son of the former Chairman and CEO, to be a reseller of access services.
During fiscal 2000, the Company invoiced Speedsl.com, Inc. approximately
$593,000 for access services fees and approximately $395,000 of for routers, of
which $600,000 was offset against a note payable to the former Chairman and CEO
(see Item 9). Cost incurred by the Company for such services were approximately
$988,000, that are at customer locations.

         During fiscal 2001, the Company invoiced Speedsl.com, Inc.
approximately $191,000 for access service fees and $245,000 for disconnect fees.
Speedsl.com, Inc. made payments of approximately $103,000. During the fiscal
year the Company wrote off the remaining $721,000 due from Speedsl.com, Inc.

         During November 2001, the Company negotiated with the former Chairman
and CEO to retire his holdings of 15,000,000 shares of his common stock valued
at $1,000,000 which was added to the note payable owed to him (see Note 6).

         During fiscal 2001, pursuant to a settlement agreement with the former
Chairman and CEO, the Company issued 5,000,000 shares of common stock to the
current President and 370,000 shares of common stock to the former Chairman and
CEO for certain legal fees incurred..

         During fiscal 2001, the Company issued 2,000,000 shares of common stock
to the CEO valued at $270,000 (based on the closing bid price of the Company's
common stock on the date of grant) as compensation. The shares were to vest over
a one-year period. Subsequent to the issuance, the CEO resigned in which the
Company and the then CEO agreed to cancel 1,000,000 of the original shares
issued, resulting in the Company recognizing compensation expense of $135,000 in
the accompanying statement of operations as of August 31, 2001.

                                       25


<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

INDEX TO EXHIBITS

EXIBIT NO       DESCRIPTION

  (3.1)         Adoption of amended Articles of Incorporation voted on and
                passed during the annual shareholders meeting of July 31, 2001
                and attached.

  (3.2)         By-Laws of the Company previously filed in the original
                registration statement Form 10-SB and are incorporated herein by
                this reference and made part of this 10-KSB.

 (10.1)         Purchase and sale agreement by and between Covad Communications
                Company and Myrient dated August 31, 2001.

 (23.1)         Consent of experts and counsel.

  (B)           Reports on Form 8-K
-----------------------------------

Resignation of registrant's Chief Executive Officer, dated, June 1, 2001.

Notice of settlement with former Chairman and Chief Executive Officer, dated
August 23, 2001.

(The above reports on Form 8-K have been filed during the last fiscal quarter,
(June 1, 2001 through August 31, 2001).)

                                       26



<PAGE>

                                  [SIGNATURES]

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date: November 29, 2001

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

MYRIENT, INC. (Registrant)

Signature                           Title                      Date
---------                           -----                      ----

/S/ Bryan L. Turbow                 Director and               November 29, 2001
--------------------------------    President/CTO
Bryan L. Turbow

/S/ Barry Hall                      Director and               November 29, 2001
--------------------------------    Chairman of the Board
Barry Hall

/S/ Teresa M. Throenle              Director                   November 29, 2001
--------------------------------
Teresa M. Throenle

                                       27


<PAGE>

INDEX TO FINANCIAL STATEMENTS

                                                                     PAGE
                                                                     -----
Report of Independent Auditors' . . . . . . . . . . . . . . . . . .   F-1

Consolidated Balance Sheet. . . . . . . . . . . . . . . . . . . . .   F-2

Consolidated Statements of Operations for the Two Years
Ended August 31, 2001 and 2000. . . . . . . . . . . . . . . . . . .   F-3

Consolidated Statements of Stockholders' Deficit
for the Two Years Ended August 31, 2001 and 2000. . . . . . . . . .   F-4

Consolidated Statements of Cash Flows for the Two Years
Ended August 31, 2001 and 2000. . . . . . . . . . . . . . . . . . .   F-5

Notes to Consolidated Financial Statements. . . . . . . . . . . . .   F-7

                                       28



<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of Myrient, Inc:

         We have audited the accompanying consolidated balance sheet of Myrient,
Inc. (the "Company") and subsidiaries as of August 31, 2001 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
each of the years in the two-year period then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Myrient,
Inc. as of August 31, 2001 and the results of their operations and their cash
flows for each of the years in the two-year period then ended, in conformity
with accounting principles generally accepted in the United States of America.

         The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As disclosed in Note
1, the Company has incurred significant operating losses in the last two years,
has a working capital deficit of $17,396,508, has liabilities from the
underpayment of payroll taxes, is not in compliance with certain restrictive
loan covenants and has a stockholders' deficit of $17,027,705 at August 31,
2001. These factors, among others, raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are described in Note 1. The consolidated financial statements do not
include any adjustments that may result from the outcome of this uncertainty.

                                                     /s/ CORBIN & WERTZ

Irvine, California
October 26, 2001

                                       F-1



<PAGE>

                                  MYRIENT, INC.
                           Consolidated Balance Sheet

                                                                  August 31,
                                                                --------------
                                                                     2001
                                                                --------------
ASSETS
  Current assets:
    Cash                                                        $     183,498
    Accounts receivable, net of allowance for
      doubtful accounts of approximately $770,000                     963,185
                                                                --------------
         Total current assets                                       1,146,683

    Property and equipment, net                                     2,492,866

    Deposits and other assets                                         251,531
                                                                --------------
                                                                $   3,891,080
                                                                ==============

LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities:
    Accounts payable and accrued liabilities                    $  14,273,070
    Line of credit borrowings                                         500,000
    Notes payable                                                   1,242,485
    Convertible note payable                                          906,250
    Accrued payroll and related liabilities                         1,393,131
    Accrued interest payable                                          129,842
    Current portion of capital lease obligations                       98,413
                                                                --------------
         Total current liabilities                                 18,543,191

  Obligations under capital lease, net of current portion              56,276
  Related party notes payable                                       2,319,318
                                                                --------------
         Total liabilities                                         20,918,785
                                                                --------------

  Stockholders' deficit:
    Preferred stock, $.001 par value;
     10,000,000 shares authorized,
     No shares issued and outstanding                                        -
    Common stock, $.001 par value;
     75,000,000 shares authorized,
     44,874,796 shares issued and outstanding                          44,875
    Additional paid-in capital                                     16,859,270
    Accumulated deficit                                           (33,931,850)
                                                                --------------
         Total stockholders' deficit                              (17,027,705)
                                                                --------------
                                                                $   3,891,080
                                                                ==============

                      See independent auditors' report and
             accompanying notes to consolidated financial statements

                                       F-2


<PAGE>
<TABLE>

                                        MYRIENT, INC.
                           Consolidated Statements of Operations
<CAPTION>

                                                              Years Ended August 31,
                                                          -----------------------------
                                                              2001            2000
                                                          -------------   -------------
<S>                                                       <C>             <C>
Net sales                                                 $ 14,554,970    $  7,987,552

Cost of goods sold                                          10,733,755       5,670,287
                                                          -------------   -------------
    Gross profit                                             3,821,215       2,317,265
                                                          -------------   -------------

Operating expenses:
     Selling                                                 1,484,162       3,544,975
     General and administrative                              9,785,897      14,417,530
     Loss on impairment of long-lived assets                   100,171       4,060,948
     Loss on disposal of property and equipment                106,280             -
                                                          -------------   -------------
         Total operating expenses                           11,476,510      22,023,453

                                                          -------------   -------------
Loss from operations                                        (7,655,295)    (19,706,188)

Interest expense                                               494,552         773,300
                                                          -------------   -------------

Loss before provision for income taxes                      (8,149,847)    (20,479,488)

Provision for income taxes                                       2,400           2,400
                                                          -------------   -------------

Net loss                                                  $ (8,152,247)   $(20,481,888)
                                                          =============   =============

Net loss available to common stockholders per share       $      (0.22)   $      (0.68)
                                                          =============   =============

Basic/diluted weighted average common shares
  outstanding                                               37,793,222      36,524,870
                                                          =============   =============
</TABLE>

                      See independent auditors' report and
             accompanying notes to consolidated financial statements

                                       F-3


<PAGE>
<TABLE>
                                                MYRIENT, INC.
                               Consolidated Statements of Stockholders' Deficit
                     For each of the years in the two-year period ended August
                     31, 2001
<CAPTION>
                                   Common Stock       Preferred Stock    Additional                    Total
                                  ----------------    ----------------     Paid-in    Accumulated  Stockholders'
                                  Shares    Amount    Shares    Amount     Capital      Deficit       Deficit
                               ---------------------------------------------------------------------------------
<S>                             <C>         <C>         <C>     <C>      <C>          <C>            <C>
Balance at September 1, 1999    36,115,666  $36,116        -    $   -    $ 1,834,125 $   (963,756) $    906,485
Issuance of Series A 6%
 convertible preferred Stock
 for cash, net of commission
 paid of $421,900                      -        -        5,000       5     4,578,195          -       4,578,200
Preferred stock dividend
 imputed due to beneficial
 conversion feature of
 preferred stock                       -        -          -       -       4,060,000   (4,060,000)          -
Accrued preferred stock
 dividends                             -        -          -       -             -       (167,500)     (167,500)
Conversion of preferred
 stock, including $36,345
 of accrued dividends              343,539      344     (1,000)     (1)       36,002          -          36,345
Estimated fair market value
 of warrants issued with
 convertible note payable             -         -          -       -          53,333          -          53,333
Interest imputed due to
 beneficial conversion
 feature of convertible
 note payable                          -        -          -       -         428,571          -         428,571
Estimated fair market value
 of common stock issued for
 purchase of Color Networks         75,000       75        -       -         599,925          -         600,000
Estimated fair market value
 of options and warrants
 issued for services and
 acquisitions                          -        -          -       -       3,065,768          -       3,065,768
Issuance of common stock
 for cash                          738,462      738        -       -         599,262          -         600,000
Estimated fair market value
 of common stock issued for
 compensation                        3,900        4        -       -          29,790          -          29,794
Estimated fair market value
 of common stock issued for
 services                           11,800       12        -       -          46,433          -          46,445
Exercise of stock options        5,000,000    5,000        -       -          66,000          -          71,000
Net loss                               -        -          -       -             -    (20,481,888)  (20,481,888)
                               ---------------------------------------------------------------------------------
Balance at August 31, 2000      42,288,367   42,289      4,000       4   $15,397,404  (25,673,144)  (10,233,447)
Accrued preferred stock
 dividends                             -        -          -       -             -       (106,459)     (106,459)
Conversion and repurchase of
 preferred stock, including
 $237,614 of accrued dividends   4,429,281    4,429     (4,000)     (4)     (966,811)         -        (962,386)
Estimated fair market value
 of options and warrants
 issued for services                   -        -          -       -         316,598          -         316,598
Profit from short swing
 sale                                  -        -          -       -          16,380          -          16,380
Common stock converted to
 to debt                       (15,000,000) (15,000)       -       -        (985,000)         -      (1,000,000)
Estimated fair market value
 of common stock issued for
 services and compensation       3,124,409    3,124        -       -         476,994          -         480,118
Estimated fair market value
 of common stock issued for
 conversion of debt             10,032,739   10,033        -       -       2,603,705          -       2,613,738
Net loss                               -        -          -       -             -     (8,152,247)   (8,152,247)
                               ---------------------------------------------------------------------------------
Balance at August 31, 2001      44,874,796  $44,875        -    $  -     $16,859,270 $(33,931,850) $(17,027,705)
                               =================================================================================
                                     See independent auditors' report and
                            accompanying notes to consolidated financial statements
</TABLE>
                                                   F-4


<PAGE>

                                  MYRIENT, INC.
                      Consolidated Statements of Cash Flows

                                                       Year ended August 31,
                                                   -----------------------------
Cash flow from operating activities:                   2001            2000
                                                   -------------   -------------
Net loss                                           $(8,152,247)   $(20,481,888)
Adjustments to reconcile net loss to net
  cash used in operating activities:
    Bad debt expense                                  1,891,664          50,000
    Depreciation                                        940,366         464,244
    Amortization of goodwill                                -           480,600
    Loss on impairment of long-lived assets             100,171       4,060,948
    Loss on disposal of property and equipment          106,280             -
    Estimated fair market value of stock,
     options and warrants issued for services           796,716       3,022,007
    Beneficial conversion on convertible
     note payable                                           -           428,571
    Warrants issued in connection with
     convertible note payable                               -            53,333
    Changes in operating assets and liabilities:
        Accounts receivable                          (1,221,645)       (845,354)
        Other assets                                    101,423          16,341
        Accounts payable and accrued liabilities      4,883,640      10,210,142
        Accrued payroll and related liabilities         835,775         423,607
        Accrued interest payable                        220,121         140,051
                                                   -------------   -------------
  Net cash (used in) provided by
   operating activities                                 502,264      (1,977,398)
                                                   -------------   -------------
Cash flows from investing activities:
  Deposits                                                  -          (239,630)
  Purchases of other assets                                 -           (78,441)
  Purchases of property and equipment                (1,792,222)     (5,030,457)
                                                   -------------   -------------
  Net cash used in investing activities              (1,792,222)     (5,348,528)
                                                   -------------   -------------
Cash flow from financing activities:
  Net proceeds from issuance of common stock and
    exercise of stock options                               -           655,500
  Net proceeds from issuance of convertible
    preferred stock, net of commission of $421,900          -         4,578,200
  Principal borrowings in line of credit                294,000         600,000
  Proceeds from related party notes payable           2,134,905         787,440
  Proceeds from convertible note payable                    -         1,000,000
  Principal repayments on convertible note payable      (93,750)            -
  Principal repayments on notes payable                 (57,515)            -
  Repayment on related party notes payable             (749,464)       (313,497)
  Repayment on capitalized leases                       (83,977)        (94,532)
  Profit from short swing sale                           16,380             -
                                                   -------------   -------------
  Net cash provided by financing activities           1,460,579       7,213,111
                                                   -------------   -------------
Net (decrease) increase in cash                         170,621        (112,815)
Cash at beginning of year                                12,877         125,692
                                                   -------------   -------------
Cash at end of year                                $    183,498    $     12,877
                                                   =============   =============
Supplemental cash flow disclosures:
  Cash paid during the year for interest           $    182,000    $    151,000
                                                   =============   =============
  Cash paid during the year for taxes              $      2,400    $      2,400
                                                   =============   =============

                      See independent auditors' report and
             accompanying notes to consolidated financial statements

                                       F-5


<PAGE>

Supplemental disclosure on non-cash investing and financing activities:
-----------------------------------------------------------------------

During the year ended August 31, 2000, the Company incurred capital lease
obligations in the amount of $240,633 for the acquisition of property and
equipment.

See accompanying notes to consolidated financial statements for additional
non-cash investing and financing activities during fiscal year 2001 and
2000.

                      See independent auditors' report and
             accompanying notes to consolidated financial statements

                                       F-6


<PAGE>

                                  MYRIENT, Inc.
                   Notes to Consolidated Financial Statements
                       For the year ended August 31, 2001

NOTE 1.  ORGANIZATION AND BASIS OF PRESENTATION

Organization and Operations
---------------------------
         Myrient, Inc. (the "Company" or "MYRIENT") is a Nevada corporation
engaged in providing high-speed Internet access, data, voice and video streaming
services to individuals and businesses.

Going Concern
-------------
         The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern, which contemplates, among
other things, the realization of assets and satisfaction of liabilities in the
normal course of business. The Company has negative working capital of
$17,396,508, liabilities from underpayment of payroll taxes (see Note 6), a
stockholders deficit of $17,027,705, significant losses from operations through
August 31, 2001 and non-compliance with restrictive loan covenants, among other
matters, that raise substantial doubt about its ability to continue as a going
concern.

         The Company's continued existence is dependent upon several factors
including the Company's ability to fund operations and restructure liabilities
and debt.

         The Company's near and long-term operating strategies focus on
exploiting existing and potential competitive advantages while eliminating or
mitigating competitive disadvantages. In response to current market conditions
and as a part of its ongoing corporate strategy, the Company is pursuing several
initiatives intended to increase liquidity and better position the Company to
compete and operate under current market conditions.

         Several completed and ongoing initiatives, which the Company hopes to
accomplish, are as follows:

o        Since August 2001, the Company has consolidated its equipment and
         network requirements without compromising levels of service. Through
         management of equipment utilization and space requirements the Company
         should be able to significantly reduce overhead costs.

o        Additionally, the Company is aggressively pursuing other cost cutting
         programs to achieve positive cash flow from operations in the very near
         future.

o        The Company is currently working on restructuring liabilities and debt
         to maximize cash flows. The Company is also exploring various
         fundraising alternatives.

o        From July 2000 through December 2000(under previous executive
         management) the Company had been delinquent on paying payroll taxes
         (see Note 6). The Company has submitted a proposal to the taxing
         authorities to repay this liability which is currently under
         consideration.

         Current market conditions have affected and are continuing to affect
the Company's operating results and liquidity. The Company operates within an
industry that is subject to rapid technological change and intense competition.
During the months ahead, the Company will be forced to make difficult decisions
regarding, among other things, the future direction and capital structure at the
Company. The Company has retained financial and legal advisors who are reviewing
the financial alternatives available to the Company.

         Management of the Company believes that the results of operations
Combined with available working capital will be sufficient to fund future
operations. In the absence of significant revenues, profits, and increased
working capital, the Company intends to fund operations through additional debt
and equity financing arrangements which management believes may be insufficient
to fund its capital expenditures, working capital, and other cash requirements
for the fiscal year ending August 31, 2002. Therefore, the Company may be
required to seek additional funds to finance its long-term operations. The
successful outcome of future activities cannot be determined at this time and
there are no assurances that, if achieved, the Company will have sufficient
funds to execute its intended business plan or generate positive operations
results.

                                      F-7


<PAGE>

         These circumstances raise substantial doubt about the Company's ability
to continue as a going concern. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Basis of Presentations
----------------------
         The consolidated financial statements include the accounts of Myrient,
Inc. and its wholly owned subsidiaries; Mobilenetics Corp. ("Mobilenetics"),
Landmark Communications, Inc. ("Landmark") and Color Networks, Inc. ("Color
Networks"). All significant intercompany balances and transactions have been
eliminated in consolidation.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates
----------------
         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, and
reported amounts of revenue and expenses during the reporting period. Actual
results could differ materially from those estimates. Significant estimates made
by management are, among others, provisions for losses on accounts receivable,
realizability of long-lived assets and payroll tax liabilities.

Fair Value of Financial Instruments
-----------------------------------
         The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 107 ("SFAS No. 107"): "Disclosures About Fair
Value of Financial Instruments." SFAS No. 107 requires disclosure of fair value
information about financial instruments when it is practicable to estimate that
value. The carrying amounts of the Company's financial instruments as of August
31, 2001 approximate their respective fair values because of the short-term
nature of these instruments. Such instruments consist of cash, accounts
receivable, accounts payable, accrued expenses, line of credit, convertible note
payable and notes payable. The fair value of related party notes payable is not
determinable as the borrowings are with a related party.

Property and Equipment
----------------------
         Property and equipment is stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
depreciable assets, which range from three to seven years. Equipment under
capital lease obligations is depreciated over the shorter of the estimated
useful life or the term of the lease. Management evaluates useful lives
regularly in order to determine recoverability taking into consideration current
technological conditions. Repairs and maintenance are charged to expense as
incurred while improvements are capitalized. Upon the sale or retirement of
property and equipment, the accounts are relieved of the cost and the related
accumulated depreciation, with any resulting gain or loss included in the
statement of operations. As of August 31, 2001 and 2000, the Company assessed
certain equipment to be impaired and wrote off these remaining balances (see
below).

Intangible Assets
-----------------
         Intangible assets included goodwill that represented the excess of the
purchase price over the estimated fair value (see Note 3). Goodwill was
amortized using the straight-line method over a period of 5 years. Regularly,
the Company assesses the intangible assets for impairment based on
recoverability of the balances from expected future operating cash flows on an
undiscounted basis. As of August 31, 2000, the Company assessed the goodwill to
be impaired and wrote off the remaining balances (see below).

                                       F-8


<PAGE>

Impairment of Long-Lived Assets
-------------------------------
         The Company evaluates the recoverability of long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121 ("SFAS No.
121"), "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of." SFAS No. 121 requires recognition of impairment of
long-lived assets in the event the net book value of such assets exceeds the
future undiscounted cash flows attributable to such assets. At August 31, 2001
and 2000, management determined that the Company's long-lived assets have been
impaired as follows:

o        In fiscal 2001, Management wrote down the value of certain property and
         equipment obtained during the normal course of business. Due to the
         change in market conditions for these assets the Company recognized an
         impairment loss of approximately $101,000 on the related property and
         equipment in the accompanying statement of operations.

o        In fiscal 2000, Management wrote down the value of certain property and
         equipment obtained in connection with the acquisition of Color Networks
         (see Note 3). Due to the goodwill associated with the acquisition being
         impaired and the related assets providing no future benefit, the
         Company recognized an impairment loss of approximately $135,000 on the
         related property and equipment (see Note 3) in the accompanying
         statement of operations.

o        In fiscal 2000, Management wrote off the value of all of its intangible
         assets. The Company recognized impairment losses of approximately
         $2,667,000 (see Note 5), in the accompanying statement of operations.

o        In fiscal 2000, based upon the uncertainties in the realizability in
         certain other assets, the Company wrote off the value of software
         licenses in fiscal year 2000. The Company recognized an impairment loss
         of approximately $1,261,000 (see Note 6) in the accompanying statement
         of operations.

         Management believes that the impairment losses recognized on long-lived
assets, including property and equipment, intangible assets, and other assets,
are adequate. There can be no assurance, however, that market conditions or
demand for the Company's products will not change which could result in
additional future long-lived asset impairments.

Deferred Revenue
----------------
         Deferred revenue represents billings in advance for fees related to
internet access, data, voice and video services relating to future periods. The
Company recognizes deferred revenue in the statement of operations as the
service is provided. The Company has billed but not recognized approximately
$772,000 of deferred revenue as the related services have not yet been performed
as of August 31, 2001.

Revenue Recognition
-------------------
         Fees for Internet access, data, voice and video services are recognized
as services are provided.

         In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition," which outlines the
basic criteria that must be met to recognize revenue and provides guidance for
presentation of revenue and for disclosure related to revenue recognition
policies in financial statements filed with the Securities and Exchange
Commission. The effective date of this pronouncement is the fourth quarter of
the fiscal year beginning after December 15, 1999. The adoption of this standard
had no material impact on the Company's results of operations, financial
position or cash flows.

Advertising
-----------
         The Company expenses the cost of advertising when incurred as selling
expense. Advertising expenses were approximately $81,000 and $173,000 for the
fiscal years ended August 31, 2001 and 2000, respectively.

                                       F-9


<PAGE>

Income Taxes
------------
         The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."
Under SFAS No. 109 deferred tax assets and liabilities are recognized for the
expected tax consequences of attributable differences between the tax bases and
reported amounts of assets and liabilities. Deferred tax assets and liabilities
are computed using enacted tax rates expected to apply to taxable income in the
years in which temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities from a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation
allowance is provided for significant deferred tax assets when it is more likely
than not that such assets will not be recovered.

Loss Per Share
--------------
         The Company has adopted Statement of Accounting of Financial Accounting
Standards No. 128 ("SFAS No. 128") "Earnings per Share." Under SFAS No. 128,
basic earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares assumed to be
outstanding during the period of computation. Diluted earnings per share is
computed similar to basic earnings per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential shares had been issued and if the additional common
shares were dilutive (no shares where considered additional common stock
equivalents at August 31, 2001 and 2000). The Company's net loss has been
increased for the effect of accrued dividends to preferred stockholders and the
effect of the preferred stockholder beneficial conversion feature (see Note 11).
Stock options and warrants outstanding are not considered common stock
equivalents, as the affect on net loss per share would be anti-dilutive.

Stock-Based Compensation
------------------------
         The Company accounts for non-employee stock based compensation under
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123") "Accounting
for Stock-Based Compensation." SFAS No. 123 defines a fair value based method of
accounting for stock based compensation. However, SFAS No. 123 allows an entity
to continue to measure compensation cost related to stock and stock options
issued to employees using the intrinsic method of accounting prescribed by
Accounting Principles Board Opinion No. 25("APB 25"), "Accounting for Stock
issued to Employees". Under APB 25, compensation cost, if any, is recognized
over the respective vesting period based on the difference, on the date of
grant, between the fair value of the Company's common stock and the grant price.
Entities electing to remain with the accounting method of APB 25 must make pro
forma disclosures of net income and earnings per share, as if the fair value
method of accounting defined in SFAS No. 123 had been applied. The Company has
elected to account for its stock based compensation to employees under APB 25
(see Note 8).

         In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation, an
interpretation of APB 25". FIN 44 clarifies the application of APB 25 for (a)
the definition of employee for purposes of applying APB 25 (b) the criteria for
determining whether a plan qualifies as a non-compensatory plan, (c) the
accounting consequence for various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1, 2000,
but certain provisions cover specific events that occur after either December
15, 1998, or January 12, 2000. The adoption of FIN 44 did not have a material
effect on the financial statements.

Concentration Risk
------------------
         The Company grants credit to customers within the United States and do
not require collateral. The Company's ability to collect receivables is affected
by economic fluctuations in the geographic areas served by the Company. Reserves
for uncollectible amounts are provided, based on past experience and a specific
analysis of the accounts, which management believes are sufficient. Two
customers accounted for approximately 18% of total product sales for fiscal 2001
and approximately 25% of total product sales for fiscal 2000. At August 31, 2001
two customers accounted for approximately 21% of accounts receivable.

                                      F-10


<PAGE>

Risks and Uncertainties
-----------------------
         The Company operates in a highly competitive industry that is subject
to intense competition, government regulation and rapid technological change.
The Company's operations are subject to significant risk and uncertainties
including financial, operational, technological, regulatory and other risks
associated with an emerging business, including the potential risk of business
failure.

Segment Information
-------------------
         The Company adopted Statement of Financial Accounting Standards No. 131
("SFAS No. 131"), "Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 establishes standards for the way that public
companies report information about operating segments and related disclosures
about products and services, geographic areas and major customers in annual
consolidated financial statements. The Company accounts for its operations and
manages its business as one segment.

Comprehensive Income
--------------------
         The Company has adopted Statement of Financial Accounting Standards
No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income." SFAS No. 130
established the standard for reporting and display of comprehensive income and
its components in a full set of general-purpose financial statements. The
adoption of SFAS No. 130 has not materially impacted the Company's financial
position or results of operations as the Company has no items of comprehensive
income.

Derivative Instruments and Hedging Activities
---------------------------------------------
         The FASB issued Statement of Financial Accounting Standards No. 133
("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities on the balance sheet
at their fair value. This statement, as amended by SFAS No. 137 and No. 138, is
effective for financial statements for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The adoption of this standard did not have a
material impact on the Company's results of operations, financial position or
cash flows.

Accounting for Website Development Costs
----------------------------------------
         In March 2000, the Emerging Issues Task Force reached a consensus on
Issue No. 00-2, "Accounting for Web Site Development Costs" ("EITF 00-2") to be
applicable to all web site development costs incurred for the quarter beginning
after June 30, 2000. The consensus state that for specific web site development
costs, the accounting for such costs should be accounted for under AICPA
Statement of Position 98-1 (SOP 98-1), "Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use." The adoption of this standard
did not have a material impact on the Company's results of operations, financial
position or cash flows.

Recent Accounting Pronouncements
--------------------------------
         In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 141 ("SFAS No. 141"), "Business Combinations," which is effective
for business combinations initiated after June 30, 2001. SFAS No. 141 eliminates
the pooling of interest method of accounting for business combinations and
requires that all business combinations occurring after July 1, 2001 are
accounted for under the purchase method. The Company does not expect SFAS No.
141 to have a material impact on its financial statements.

         In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 142 ("SFAS No. 142"), "Goodwill and Other Intangible Assets,"
which is effective for fiscal years beginning after December 15, 2001. Early
adoption is permitted for entities with fiscal years beginning after March 15,
2001, provided that the first interim financial statements have not been
previously issued. SFAS No. 142 addresses how intangible assets that are

                                      F-11



<PAGE>

acquired individually or with a group of other assets should be accounted for in
the financial statements upon their acquisition and after they have been
initially recognized in the financial statements. SFAS No. 142 requires that
goodwill and intangible assets that have indefinite useful lives not be
amortized but rather be tested at least annually for impairment, and intangible
assets that have finite useful lives be amortized over their useful lives. SFAS
No. 142 provides specific guidance for testing goodwill and intangible assets
that will not be amortized for impairment. In addition, SFAS No. 142 expands the
disclosure requirements about goodwill and other intangible assets in the years
subsequent to their acquisition. Impairment losses for goodwill and
indefinite-life intangible assets that arise due to the initial application of
SFAS No. 142 are to be reported as resulting from a change in accounting
principle. However, goodwill and intangible assets acquired after June 30, 2001
will be subject immediately to the provisions of SFAS No. 142. The Company has
not yet assessed the impact, if any, SFAS No. 142 may have on its financial
statements, but does not expect SFAS 142 to have a material impact on its
financial statements.

         In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 143 ("SFAS No. 143"), "Accounting for Asset Retirement
Obligations." SFAS No. 143 establishes standards associated with the retirement
of tangible long-lived assets and the associated asset retirement costs. This
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002.  The Company has not yet assessed the impact,
SFAS No. 143 may have on its financial statements, but does not expect SFAS
No. 143 to have a material impact on its financial statements.

         In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144 ("SFAS No. 144"), "Accounting for the Impairment or Disposal
of Long-Lived Assets."  SFAS No. 144 addresses financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets to
be disposed of. The provisions of SFAS No. 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001, and
interim periods within these fiscal years, with early adoption encouraged. The
Company does not expect SFAS No. 144 to have a material impact on its financial
statements.

NOTE 3.  BUSINESS COMBINATIONS

         Effective December 6, 1999, the Company acquired Color Networks, Inc.
("Color Networks"), in a business combination accounted for as a purchase. Color
Networks is a provider of communications consulting and systems integration
services. It services a diverse base of customers that are located primarily in
California. The Company issued 75,000 shares of restricted common stock (see
Note 8) in consideration for 100% of the issued and outstanding shares of common
stock of Color Networks. The fair market value of the stock issued was $8.00 per
share (based on the closing bid price of the Company's common stock on date of
grant), for consideration totaling $600,000. In addition, the Company issued
options to two officers of Color Networks to purchase 15,000 shares of common
stock of the Company at an exercise price of $8.00 per share with a fair market
value of $120,000 (estimated by the Company based on the Black-Scholes option
pricing model). The options vested immediately and expire December 5, 2004. Due
to Color Networks operations being immaterial to those of the Company for the
three months ended September 1999 through December 6, 1999, no pro forma
financial statements are presented for the year ended August 31, 2000.

       The acquisition of Color Networks can be summarized as follows:

       Assets acquired                            $    411,884
       Liabilities assumed                          (1,160,434)
                                                  -------------
       Fair value of net assets acquired              (748,550)
       Fair value of consideration tendered            720,000
                                                  -------------
       Goodwill assigned to acquisition           $  1,468,550
                                                  =============

         The results of operations of Color Networks are included in the
accompanying consolidated financial statements from December 6, 1999. The
balance of the goodwill at August 31, 2000 was written off when the Company
determined that the goodwill was not recoverable from future cash flows of the
Color Networks assets (see Notes 2 and 5).

                                      F-12


<PAGE>

NOTE 4.  PROPERTY AND EQUIPMENT

         Property and equipment consists of the following:

                                                    August 31,
                                                       2001
                                                   ------------
         Computer equipment                        $ 1,910,067
         Equipment                                   1,865,305
         Furniture and fixtures                         22,077
                                                   ------------
                                                     3,797,449
         Less: Accumulated depreciation             (1,304,583)
                                                   ------------
                                                   $ 2,492,866
                                                   ============

NOTE 5.  INTANGIBLE ASSETS

         Intangible assets consisted of goodwill associated with the
acquisitions of Color Networks in fiscal 2000 (see Note 3) and Mobilenetics in
fiscal 1999. The Company assessed the intangible assets for impairment at
year-end based on recoverability of the balances from expected future operating
cash flows on an undiscounted basis. As of August 31, 2000, the Company assessed
the goodwill to be impaired and wrote off the remaining balances (see Notes 2
and 3).

                                              Mobilenetics     Color Networks
                                              ------------     --------------

         Goodwill                             $ 1,767,062      $   1,468,550
         Accumulated amortization                (441,765)          (127,188)
                                              ------------     --------------
                                                1,325,297          1,341,362
         Less impairment loss                  (1,325,297)        (1,341,362)
                                              ------------     --------------
         Balance, August 31, 2000 and 2001    $         -      $           -
                                              ============     ==============

NOTE 6.  COMMITMENTS AND CONTINGENCIES

Leases
------
         The Company is a lessee of certain property and equipment under capital
lease agreements that expire on various dates through August 2004. Terms of the
leases require monthly payments ranging from $830 to $2,420, including interest
ranging from 18% to 28%. The asset and liability under capital lease are
recorded at the lower of the present value of the minimum lease payments or the
fair market value of the related assets.

         In addition, the Company leases certain property and equipment under
operating lease agreements, which expire on various dates through August 2004
and provide for monthly lease payments ranging from $630 to $37,800. The Company
lease for its facilities expires August, 2002.

                                      F-13


<PAGE>

         The future minimum annual lease payments under these agreements as of
August 31, 2001 are as follows:

                                           CAPITAL      OPERATING
                                           LEASES        LEASES        TOTAL
                                          -----------  -----------  -----------
2002                                      $  124,000   $1,705,000   $1,829,000
2003                                          51,000      423,000      474,000
2004                                          10,000        8,000       18,000
Thereafter                                      -            -            -
                                          -----------  -----------  -----------
Total minimum lease payments                 185,000   $2,136,000   $2,321,000
                                                       ===========  ===========
Less: amount representing interest            30,311
                                          -----------
Present value of minimum lease payments      154,689
Less:  current portion                        98,413
                                          -----------
Long-term capitalized lease obligation    $   56,276
                                          ===========

         Rent and equipment expense under operating leases for the fiscal years
ended August 31, 2001 and 2000 was $1,366,000 and $890,069, respectively.
Interest expense incurred pursuant to the capital lease obligations was $30,461
and $67,212 for the fiscal years ended August 31, 2001 and 2000, respectively.

         The following is an analysis of the leased equipment under capital
leases as of August 31, 2001, which is included in property and equipment (see
Note 4).

         Computer equipment               $  250,536
         Accumulated depreciation           (143,095)
                                          -----------
                                          $  107,441
                                          ===========

Line of Credit
--------------
         In January 2001, the Company entered into a line of credit agreement
(the "Line") with a financial institution. The Line bears interest at 10% and
matured on September 1, 2001. The Company is currently negotiating with the
lender to obtain a forbearance agreement and to extend the maturity date. The
Line is secured by 1,000,000 shares of the Company's common stock owned by the
current President of the Company. The terms of the Agreement provide for
borrowings up to $500,000. During fiscal 2001, the Company has converted
approximately $294,000 due to the lender under this line into 2,177,778 shares
of common stock (based on the closing bid price on the date of conversion). At
August 31, 2001, the Company's outstanding borrowings totaled $500,000. The
Line requires the Company to maintain certain non-financial covenants and
financial reporting, with which the Company is in compliance at August 31, 2001.
Interest expense incurred on the line totaled $25,068 for the fiscal year ended
August 31, 2001 which is recorded under accrued interest payable in the
accompanying Balance Sheet at August 31, 2001.

Notes Payable
-------------
         In March 2001, the Company converted the then existing line of credit
with an outstanding balance of $600,000 into a secured 10% note payable (the
"Note"). The Note, which is secured by substantially all assets of the Company,
provides for monthly principal payments of $18,750, plus interest, beginning
June 2001 and increasing to $28,125, plus interest, beginning December 2001 with
a balloon payment of $346,875 due on May 30, 2001. The Note requires the Company
to maintain certain income and solvency ratios, as defined. As of August 31,
2001, the Company was not in compliance with the covenants and was in default on
its payments. The Company is currently negotiating with the note holder to
obtain a forbearance agreement. As of August 31, 2001, the outstanding balance
on the Note totaled $542,485. Interest expense incurred on the Note totaled
$13,675 during the fiscal year ending August 31, 2001. Interest expense on the
line of credit prior to the conversion totaled $46,353 and $30,000 during the
fiscal years ending August 31, 2001 and 2000, respectively.

                                      F-14


<PAGE>

Convertible Note Payable
------------------------
         In May 2001, the Company entered into a convertible note agreement with
a financial institution for $1,000,000, which is secured by substantially all of
the Company's assets. The Note, which bears interest at the
prime rate (6.5% at August 31, 2001) plus 2%, was originally due August 3, 2000,
and is convertible to common stock if not paid by August 3, 2000 at a share
price equal to the lesser of the share price on the date of the agreement or at
a 30% discount of the share price as of date of conversion. In connection with
the beneficial conversion feature of this note, the Company recorded imputed
interest of $428,571 in the accompanying statements of operations during the
fiscal year ending August 31, 2000. In connection with this transaction, the
Company issued warrants to the financial institution to purchase 15,686 shares
of the Company's common stock with an estimated fair market value of $53,333
(pursuant to SFAS No. 123 utilizing the Black-Scholes option pricing model) that
was recorded as a debt discount and amortized to interest expense in the
accompanying statement of operations as of August 31, 2000. During fiscal 2001,
the Company negotiated the extension of the maturity date to May 30, 2002. The
negotiated note provides for monthly principal payments of $31,250, plus
interest, beginning June 2001, increasing to $46,875 in December 2001 with a
balloon payment of $578,125 due May 30, 2002. As of August 31, 2001, the
outstanding balance on the Note was $906,250. The note requires the Company to
maintain certain net worth and solvency ratio covenants, with which the Company
was not in compliance as of August 31, 2001. The Company is currently
negotiating with the financial institution to obtain a forbearance agreement.
Interest expense incurred on the note totaled $105,003 and $30,000 for the
fiscal years ended August 31, 2001 and 2000, respectively.

Mesora Note Payable
--------------------
         During fiscal 2001, the Company issued a note payable to Mesora
Investments, LLC ("Mesora") a shareholder, to repurchase 777,777 shares of the
Company's common stock (see Note 8). The Mesora note, which is secured by the
underlying shares of common stock repurchased and personally guaranteed by the
former CEO, bears interest at 12% per annum, provides for payment of principal
and interest by May 17, 2001. The Company has made no payments related to the
Mesora note and is in the process of negotiating an extension of the maturity
date. As Mesora has the right to foreclose on the shares of common stock, the
Company has reflected these 777,777 common shares as outstanding as of August
31, 2001. As of August 31, 2001, the outstanding balance on the Mesora note
payable totaled $700,000. Interest expense incurred on the Mesora note totaled
$42,115 which is included in accrued interest payable in the accompanying
Balance Sheet as of August 31, 2001.

Other Stockholder Notes Payable
-------------------------------
         From time to time, the Company borrows funds from several of its
stockholders for working capital purposes under unsecured notes payable. During
fiscal 2001, the Company had principal borrowings of $1,287,888 from various
stockholders and made principal repayments of $149,464. Certain notes require
monthly payments ranging from $5,000 to $40,000 with all principal and interest
due on maturity dates through February 2001. The remaining notes require
principal and interest on demand. Certain notes are convertible into restricted
common stock at a price equal to the fair market value on the date of
conversion, less a 15% discount for restricted common stock. During fiscal 2001,
certain note holders converted $378,759 of notes payable (including accrued
interest of $17,414) into 2,854,961 shares of common stock (based on the closing
bid price on the date of conversion) (see Note 8). The notes accrue interest at
rates ranging from 8% to 21%. The outstanding balance on these notes totaled
$1,472,301 plus accrued interest of $62,659, which is included in accrued
interest payable at August 31, 2001. Interest expense of $63,749 and $46,495 was
incurred for the fiscal year ended August 31, 2001 and 2000, respectively. As of
the date of the report, certain notes totaling $487,000 were in default.

                                      F-15


<PAGE>

Former Employee
---------------
         From time to time, the Company had borrowed funds for working capital
purposes from its then Chairman and Chief Executive Officer ("CEO") who resigned
August 8, 2000. The note, as amended, required monthly payments ranging from
$125,000 to $252,000 with all principal and interest due by September 15, 2001
and accrued interest at 8%. During fiscal 2001, the Company made principal
payments of $600,000 on the outstanding note payable. In addition the Company
repurchased 15,000,000 shares of common stock owned by the former Chairman and
CEO and increased the related note payable by $1,000,000, value of the common
stock (see below). Interest expense incurred for the fiscal years ended August
31, 2001 and 2000 is $89,189 and $117,689, respectively.

        During fiscal 2001, the Company had borrowed funds from its then Vice
Chairman and CEO who resigned May 24, 2001, for working capital purposes. During
fiscal 2001, the Company had principal borrowings of $847,017 and made no
principal payments. The notes are due upon demand and are non-interest bearing.
The Company is currently negotiating new terms with the former Vice Chairman and
CEO.

Severance Agreements
--------------------
         The Company entered into a severance agreement effective August 8, 2000
and restated and amended November 15, 2000, with the former Chairman and CEO, as
follows:

         o        the Company agreed to pay the former Chairman and CEO a
                  severance amount of $120,000 payable in twelve equal monthly
                  installments beginning August 10, 2000. During fiscal 2000,
                  the Company made payments in the amount of $10,000 in
                  connection with the severance liability. During fiscal 2001,
                  the Company paid the remaining amount of $110,000;

         o        during fiscal 2001, the Company and the former Chairman and
                  CEO agreed to offset a note payable to the former Chairman
                  and CEO with certain accounts receivable in the amount of
                  $600,000 from Speedsl.com, Inc., a related party;

         o        during fiscal 2001, the former Chairman and CEO returned
                  15,000,000 shares of common stock valued at $1,000,000 (based
                  on the closing bid price on the date of the agreement) and the
                  Company increased its note payable (see Note 8);

         o        during fiscal 2001, the Company secured the note payable to
                  the former Chairman and CEO with 5,000,000 freely trading
                  shares of common stock from the current President; and

         o        during fiscal 2001, the former Chairman and CEO agreed to
                  cancel 2,000,000 options, which were outstanding at August 31,
                  2000.

         In August 2001, the Company reached a settlement with the former
Chairman and CEO. Pursuant to the settlement, the former Chairman and CEO
foreclosed on the 5,000,000 shares of common stock held by the President as
payment in full on his note. In addition, the Company issued an additional
370,000 shares to the former Chairman and CEO for other negotiated items. As a
result, the promissory note in the amount of $1,940,979 (including accrued
interest of $216,028) was eliminated from the Company's books (see above). Upon
the conclusion of the settlement, the Company issued 5,000,000 restricted shares
of common stock to the current President to restore his holdings. The Company
recorded the reduction of the note payable and the accrued interest against the
issuance of the 5,000,000 shares of common stock issued to the President with no
net impact to the statement of operations, as the transactions was with a
majority shareholder. The Company valued the additional 370,000 shares of common
stock at $51,800 (based on the closing bid price on the date of settlement) and
expensed the entire amount under general and administrative expenses in the
accompanying statement of operations as of August 31, 2001.

                                      F-16


<PAGE>

         Additionally, the settlement calls for an ongoing sale restriction on
the shares issued to the former Chairman and CEO.

         Effective August 8, 2000 the Company also entered into a severance
Agreement with its former Chief Operating Officer ("COO"). The agreement
required the Company to pay the former COO a severance amount of $120,000
payable in twelve equal monthly installments beginning August 10, 2000. During
fiscal 2000, the Company made payments in the amount of $10,000 in connection
with the severance liability. During fiscal 2001, the Company paid the remaining
amount of $110,000.

         In conjunction with these severance agreements, the former CEO and COO
executed irrevocable proxies for third parties to vote their shares.

Legal
-----
         The Company may from time to time be involved in various claims,
lawsuits, disputes with third parties, actions involving allegations or
discrimination, or breach of contract actions incidental to the normal
operations of its business. The Company is currently not involved in any such
litigation which management believes could have a material adverse effect on its
financial position or results of operations.

Accounts Payable
----------------
         During fiscal 2001 and 2000, the Company has been billed approximately
$5,557,199 from third parties for consultation services and related computer
components in connection with the implementation of certain software programs.
The Company evaluated a proposal for implementation of various software products
and decided not to enter into any formal agreement. The Company has expensed
$2,469,317 of the amount related to consultation services in general and
administrative expense in the accompanying statement of operations for the year
ended August 31, 2000 and has offset the remaining $3,087,832 against the
related property and equipment which the Company has returned to the vendor. The
Company has retained the services of an outside consultant to examine the
appropriateness of such services and related charges. As of August 31, 2001, the
Company has not made any payments related to these charges with the net amount
of $2,469,317 being recorded under accounts payable in the accompanying Balance
Sheet as of August 31, 2001.

         During fiscal 2000, the Company entered into an agreement with a third
party for software licenses and promotional support for approximately
$1,260,718, with the intent to resell the related licenses to customers. As of
August 31, 2001 and 2000, the Company had not yet received the promotional
support services portion of the agreement and has determined that the related
asset does not provide any future benefit to the Company. As a result, the
Company has recognized an impairment loss of approximately $1,260,718 which is
included in the accompanying statement of operations for the year ended August
31, 2000 (see Note 2). In addition, the Company has not made any payments
pursuant to this agreement and has accrued approximately $1,260,718 in accounts
payable in the accompanying balance sheet at August 31, 2001. The Company is
currently in the process of trying to renegotiate the amount due with the third
party.

         During fiscal 2001, the Company entered into an agreement with a third
party supplier which provides DSL communication access with an outstanding
balance of approximately $6,733,000 recorded under accounts payable in the
accompanying Balance Sheet as of August 31, 2001. The agreement calls for the
sale of existing lines and a repayment plan for the remaining debt after
applying the sale proceeds to offset debt and accrued interest with potential
debt forgiveness in future years if certain payments are made according to the
agreement, as defined.

Accrued Payroll Taxes
---------------------
         The Company has recorded an accrual for past due payroll taxes as of
August 31, 2001 due to the under-payment of the Company's payroll tax liability.
As a result, the Company has accrued approximately $1,303,000 including
penalties and interest of $171,000 related to payroll taxes under accrued
payroll and related liabilities in the accompanying balance sheet at August 31,
2001. The Company anticipates having this matter settled by August 31, 2002.

                                      F-17


<PAGE>

NOTE 7.  INCOME TAXES

         A reconciliation of income taxes computed at the federal statutory rate
of 34% to the provision for income taxes is as follows for the years ended
August 31:

                                                      2001             2000
                                                  ------------     ------------

         Tax benefit at statutory rates           $(2,771,800)     $(6,886,600)
         Differences resulting from:
            State taxes                              (439,400)           2,400
            Non-deductible and other
               beneficial items                         5,600        2,347,200
            Changes in allowance for
               deferred tax assets                  3,208,000        4,539,400
                                                  ------------     ------------
         Provision for income taxes               $     2,400      $     2,400
                                                  ============     ============

         The valuation allowance increased by approximately $3,208,000 and
$4,539,400 during the years ended August 31, 2001 and 2000, respectively. No
current provision for income taxes is required for the years ended August 31,
2001 and 2000 since the Company incurred taxable losses during such years.

         Net deferred income taxes are as follows as of August 31, 2001:

         Deferred tax liabilities:
          Depreciation and amortization                           $  (123,000)
                                                                  ------------

         Deferred tax assets:
          Net operating losses                                      7,471,000
          State taxes                                                   1,000
          Reserves and accruals                                     1,439,000
                                                                  ------------
         Total deferred tax assets                                  8,911,000
         Less:  Allowance for deferred tax assets                  (8,788,000)
                                                                  ------------
         Net deferred income taxes                                $      -
                                                                  ============

         The Company has approximately $19,500,000 and $9,700,000 in Federal and
California State net operating loss carry forwards as of August 31, 2001, which,
if not utilized, expire through 2021 and 2006, respectively.

         The utilization of the net operating loss carry-forwards might be
limited due to restrictions imposed under federal and state laws upon a change
in ownership. The amount of the limitation, if any, has not been determined at
this time. A valuation allowance is provided when it is more likely than not
that some portion or all of the deferred tax assets will not be realized. As a
result of the Company's continued losses and uncertainties surrounding the
realization of the net operating loss carry forwards, management has determined
that the realization of the deferred tax assets is questionable. Accordingly,
the Company has recorded a valuation allowance equal to the net deferred tax
asset balance as of August 31, 2001.

                                      F-18



<PAGE>

NOTE 8.  STOCKHOLDERS' EQUITY

Preferred Stock
---------------
         The Company's articles of incorporation authorize the issuance up to
10,000,000 shares of $.001 par value preferred stock. Shares of preferred stock
may be issued in one or more classes or series at such time and in such
quantities the board of directors may determine. All shares of any one series
shall be equal in rank and identical in all respects. As of November 23, 1999,
the board of directors had designated 5,000 shares as Series A 6% Convertible
Preferred Stock ("Preferred A"). Each Preferred A share had a liquidation
preference of $1,000 per share plus accrued dividends and was convertible at
anytime into such number of fully paid and non-assessable shares of common stock
as was determined by dividing $1,000 plus the amount of any accrued and unpaid
dividends by the conversion price in effect at the time of conversion, as
defined.

         In November 1999, the Company sold 2,500 shares of Preferred A to an
accredited investor for proceeds of $2,278,200 (net of commissions paid of
$221,900). Since the Preferred A was immediately convertible at the option of
the shareholder, the Company has recorded a beneficial conversion of $1,560,000
as a preferred stock dividend in the accompanying statements of stockholders'
deficit for the year ended August 31, 2000. In connection with this transaction,
the Company issued to this investor warrants to purchase 250,000 shares of
common stock at $4.25 per share. The warrants expire in November 2004. In
addition, the Company issued conditional warrants to the investor to purchase up
to 2,500 shares of Preferred A at $1,000 per share and committed to issue
reserve warrants to purchase 50,000 shares of the Company's common stock at
$4.25 per share for each 500 shares of Preferred A purchased under the
conditional warrants. The conditional warrants expire in November 2004.

         During February 2000, the Company issued 1,500 shares of Preferred A in
connection with the above investor exercising certain conditional warrants for
$1,380,000 (net of commission paid of $120,000) and issued reserve warrants to
purchase 150,000 shares of common stock at $4.25 per share that are exercisable
through February 2005. Since the Preferred A was immediately convertible at the
option of the shareholder at a price lower than the closing bid price on the
date of conversion in accordance with the terms of the preferred stock, the
Company recorded a beneficial conversion of $1,500,000 as a preferred stock
dividend in the accompanying statement of stockholders' deficit for the year
ended August 31, 2000. In addition, the Company issued warrants to purchase an
additional 25,000 shares of the Company's common stock at $6.625 per share that
vested on the date of grant and are exercisable through May 2005.

         During May 2000, the Company issued 1,000 shares of Preferred A in
connection with the above investor exercising its remaining conditional warrants
for $920,000 (net of commissions paid of $80,000) and issued reserve warrants to
purchase 100,000 shares of common stock at $4.25 per share that are exercisable
through May 2005. Since the Preferred A was immediately convertible at the
option of the shareholder at a price lower than the closing bid price on the
date of conversion in accordance with the terms of the preferred stock, the
Company recorded a beneficial conversion of $1,000,000 as a preferred stock
dividend in the accompanying statement of stockholders' deficit for the year
ended August 31, 2000.

         During fiscal 2001 and 2000, the Company accrued $106,459 and $167,500,
respectively of dividends in connection with the outstanding Preferred A shares.

         During fiscal 2000 and 2001, all of the shares of Preferred A and the
related accrued dividends were either converted into common stock or repurchased
(see below). As a result, no shares of Preferred A or related accrued dividends
were outstanding as of August 31, 2001.

Common Stock
------------
         The Company issued 75,000 shares of common stock valued at $600,000
(based on the closing bid price of the Company's common stock on the date of
grant) in connection with its acquisition of Color Networks (see Note 3).

         In January 2000, the Company issued 3,900 shares of common stock (net
of 5,000 shares inadvertently issued and subsequently cancelled during fiscal
2000) valued at $29,794 (based on the closing bid price of the Company's common
stock on the date of grant) to employees for compensation.

                                      F-19


<PAGE>

         In May 2000, the Company issued 3,000 shares of common stock valued at
$11,904 (based on the closing bid price of the Company's common stock on the
date of grant) to outside consultants. Subsequent to the issuance, the stock was
returned to the Company and the related expense was reversed due to the contract
being renegotiated with the Company.

         In June 2000, the Company issued 11,800 shares of common stock valued
at $46,445 (based on the closing bid price of the Company's common stock on the
date of grant) to an outside consultant for services rendered.

         In July 2000, the Company issued 343,539 shares of common stock in
connection with the conversion of 1,000 shares of Preferred A plus accrued
dividends in the amount of $36,345, at the conversion price of $3.02 per share,
in accordance with the terms of the preferred stock.

         In August 2000, the Company issued 738,462 shares of common stock for
$600,000 in cash. In addition, the Company issued to the investor, warrants to
purchase 36,923 shares of common stock at an exercise price of $1.37 per share
and exercisable through August 2003. The warrants vested on the date of grant.

         In August 2000, the Company issued 5,000,000 shares of common stock in
connection with the exercise of options for $71,000, of which $15,500 was
received during fiscal 2001.

         In November 2000, it was discovered that the former CFO and beneficial
owner (as defined by the Securities Exchange Act of 1934), had profited from
purchases and subsequent sales of the Company's common stock held for less than
six (6) months (a "short-swing" profit). Pursuant to Section 16(b) of thee
Securities Exchange Act of 1934, the Company acted to recover these profits from
the former CFO. As a result, the Company received $16,380, which has been
credited to additional paid-in capital as a contribution to shareholders'
deficit.

         During fiscal 2001, the Company issued 698,710 shares of common stock
in connection with the conversion of 350 shares of Preferred A plus accrued
dividends of $18,285, at conversion prices ranging from $0.25 to $0.917 per
share in accordance with the conversion terms of Preferred A shares.

         During fiscal 2001, the Company reached an agreement with Mesora, the
holder of its Preferred A shares for the retirement of the remaining 3,650
Preferred A shares. As of March 8, 2001, Mesora converted 2,450 Preferred Series
A shares, with a liquidation value of $2,450,000, plus the remaining accrued
dividends of $219,329, at a price of $0.91 per share, into 2,952,794 shares of
Myrient's common stock. Mesora converted 700 Preferred Series A shares, with a
liquidation value of $700,000, at a price of $0.90 per share into 777,777 shares
of Myrient's common stock as collateral against a note payable of $700,000 (see
Note 6). As Mesora has the right to foreclose on the shares of common stock, the
Company has reflected the shares as outstanding as of August 31, 2001. On May
17, 2001, the Company agreed to repurchase the shares of common stock at
Mesora's cost of $700,000, personally guaranteed by Myrient's then Vice Chairman
and CEO and secured by the 777,777 shares of common stock repurchased by the
Company. As the Company sold to the Company the 500 remaining Preferred A shares
at its cost of $500,000 which the Company financed with its line of credit (see
Note 6).

         During November 2001, the Company negotiated with the former Chairman
and CEO to retire his holdings of 15,000,000 shares of his common stock valued
at $1,000,000 which was added to the note payable owed to him (see Note 6).

         During fiscal 2001, pursuant to a settlement agreement with the former
Chairman and CEO, the Company issued 5,000,000 shares of common stock to the
current President and 370,000 shares of common stock to the former Chairman and
CEO for certain legal fees incurred (see Note 6).

         During fiscal 2001, the Company issued 2,124,409 shares of common stock
valued at $345,118 (includes the 370,000 shares issued in connection with the
settlement agreement with the former Chairman and CEO) (based on the closing bid
price of the Company's common stock on the dates of grant) for services and
compensation.

                                      F-20


<PAGE>

         During fiscal 2001, the Company issued 2,000,000 shares of common stock
to the CEO valued at $270,000 (based on the closing bid price of the Company's
common stock on the date of grant) as compensation. The shares were to vest over
a one-year period. Subsequent to the issuance, the CEO resigned. The Company and
the then CEO agreed to cancel 1,000,000 of the original shares issued, resulting
in the Company recognizing compensation expense of $135,000 in the accompanying
statement of operations for the year ended August 31, 2001.

         During fiscal 2001, the Company issued 5,032,739 shares of common stock
valued pursuant to the conversion of $672,759 of notes payable (see Note 6).

Stock Options
-------------
         In November 1999, the Company's board of directors and majority
shareholders approved the Myrient, Inc. Amended and Restated 1999 Stock Option
Plan ("the 1999 plan"), effective April 13, 2000. An aggregate of 5,000,000
shares of common stock are reserved for issuance under the 1999 plan. The
exercise price for each option shall be equal to 85% to 110% of the fair market
value of the common stock on the date of grant, as defined, and shall vest over
no more than a five-year period. The plan shall terminate ten years after its
adoption by the board of directors and may be terminated by the board of
directors on any earlier date, as defined.

         During fiscal 2000, the board of directors granted to various
employees, pursuant to the 1999 plan, an aggregate of 1,276,560 options (net of
643,800 options that were issued and cancelled during fiscal year 2000) at
exercise prices ranging from $4.531 to $15.00 (based on the closing bid price of
the Company's common stock on the date of each grant). During fiscal year 2001,
917,560 of these options were cancelled. The options vest through January 2003
and are exercisable through January 2005. In addition, during fiscal 2000 the
board of directors granted to various employees, pursuant to the 1999 plan, an
aggregate of 103,600 options (net of 13,000 issued and cancelled during fiscal
year 2000) at an exercise price of $4.00 resulting in $26,000 (net of cancelled
options) of compensation expense to be charged to the Company over the two year
vesting period under APB 25, of which, $12,028 and $0 was charged to operations
during fiscal 2001 and 2000, respectively.

         In February 2000, the Company's board of directors and majority
shareholders approved the Myrient, Inc. 2000 Stock Option Plan ("the 2000
plan"), effective March 1, 2000. An aggregate of 5,000,000 shares of common
stock are reserved for issuance under the 2000 plan. The exercise price for each
option shall be equal to 85% to 110% of the fair market value of the common
stock on the date of grant, as defined, and shall vest over no more than a
five-year period. The plan shall terminate ten years after its adoption by the
board of directors and may be terminated by the board of directors on any
earlier date, as defined.

         During fiscal 2000, the board of directors granted to various
employees, pursuant to the 2000 plan, an aggregate of 1,101,300 options (net of
107,570 options that were issued and cancelled during fiscal year 2000) at
exercise prices ranging from $1.30 to $10.875 (based on the closing bid price of
the Company's common stock on the date of each grant). During fiscal year 2001,
560,960 of these options were cancelled. The options vest through August 2003
and are exercisable through August 2005.

         During fiscal 2001, the board of directors granted to various
employees, pursuant to the 2000 plan, an aggregate of 1,442,500 options, (net of
428,500 options that were issued and cancelled during the fiscal year 2001) at
exercise prices ranging from $0.14 to $10.69 (based on the closing bid price of
the Company's common stock on the date of each grant). The options vest on
various dates through December 2003 and are exercisable through August 2011.

         From time to time, the Company issues non-plan stock options pursuant
to various agreements and other compensatory agreements to employees and third
parties.

         In November 1999, the Company granted options to purchase 200,000
shares of common stock at an exercise price of $4.531 per share with a fair
market value of $868,000 (estimated by the Company based on the Black-Scholes
pricing model pursuant to SFAS 123) to a consultant. The options vest over a
one-year period from the date of grant and are exercisable through November
2001. During fiscal 2001 and 2000, the Company recognized consulting expense of
$217,000 and $651,000 in the accompanying statement of operations, respectively.

                                      F-21


<PAGE>

         In December 1999, the Company granted options to purchase 15,000 shares
of common stock, at an exercise price of $8.00 per share, with a fair market
value of $120,000 (estimated by the Company based on the Black-Scholes option
pricing model under SFAS 123) to certain officers of Color Networks related to
the acquisition of Color Networks. The options vested on the date of grant and
are exercisable through December 2004. The Company recorded the fair market
value of $120,000 as part of the purchase price of Color Networks (see Note 3).

         During fiscal 2000, the Company granted options to purchase 50,000
shares of common stock, at exercise prices ranging from $4.01 to $12.50 per
share, with a fair market value of $539,350 (estimated by the Company based on
the Black-Scholes option pricing model under SFAS 123) to consultants. The
options vested on the date of grant and are exercisable through May 2005. During
fiscal 2000, the Company recognized total consulting expense of $539,350 in the
accompanying statements of operations.

         In April 2000, the Company granted options to purchase 100,000 shares
of common stock pursuant to a public relations service agreement, at an exercise
price of $40.00 per share, with an estimated fair market value of $225,000
(estimated by the Company based on the Black-Scholes option pricing model under
SFAS 123) to a consultant. The options vested on the date of grant and are
exercisable through March 2005. During fiscal 2000, the Company recognized total
marketing expense of $225,000 in the accompanying statements of operations.
During fiscal 2001, the Company cancelled the related options when the contract
was terminated.

         In August 2000, the Company granted options to purchase 63,000 shares
of common stock at an exercise price of $1.437 per share, with an estimated fair
market value of $87,570 (estimated by the Company based on the Black-Scholes
option pricing model under SFAS 123) to a consultant. The options vest over a
six-month period and are exercisable through August 2005. The Company recognized
total consulting expense of $87,570 over the vesting period during fiscal year
2001.

         Following is a status of the stock options outstanding at August 31,
2001 and 2000 and the changes during the years then ended:

<TABLE>
<CAPTION>
                                                  2001                               2000
                                      ------------------------------    -------------------------------
                                                    Weighted Average                   Weighted Average
                                       Options      Exercise Price         Options     Exercise Price
                                      -----------   ----------------     -----------   ----------------
<S>                                   <C>                <C>              <C>               <C>
Outstanding, beginning of year         4,909,460         $3.71             8,000,000         $0.02
  Granted                              1,871,000          0.90             3,673,830          5.84
  Exercised                                  -              -             (5,000,000)         0.01
  Expired/Forfeited                   (4,007,020)         3.42            (1,764,370)         1.89
                                      -----------   ----------------      -----------  ----------------
Outstanding, end of year               2,773,440         $2.90             4,909,460         $3.71
                                      ===========   ================      ===========  ================
Exercisable, end of year               1,921,595         $3.47             2,970,360         $3.35
                                      ===========   ================      ===========  ================
Weighted average fair value
 of options granted                                      $0.16                               $4.66
                                                    ================                   ================
</TABLE>

         1,396,000 of the options outstanding at August 31, 2001 have an
exercise prices of between $0.14 and $0.45, with a weighted average exercise
price of $0.19 and a weighted average remaining contractual life of 8.7 years.
818,735 of these options are exercisable at August 31, 2001. 462,440 of the
options outstanding at August 31, 2001 have exercise prices between $1.30 and
$4.00, with a weighted average exercise price of $2.74 and a weighted average
remaining contractual life of 5.2 years. 374,030 of these options are
exercisable at August 31, 2001. 525,000 of the options outstanding at August
31, 2001 have exercise prices between $4.01 and $8.00, with a weighted average
exercise price of $4.80 and a weighted average remaining contractual life of
0.66 years. 468,744 of these options are exercisable at August 31, 2001. The
remaining 390,000 options have exercise prices between $9.56 and $15.00, with a
weighted average exercise price of $10.03 and a weighted average remaining
contractual life of 1.51 years. 260,086 of these options are exercisable at
August 31, 2001.

                                      F-22


<PAGE>

         The fair value of each option granted during 2001 and 2000 to
consultants and outside service providers is estimated using the Black-Scholes
option pricing model on the date of grant using the following assumptions: (i)
no dividend yield, (ii) average volatility of 168 percent and 390 percent,
respectively, (iii) weighted average risk free interest rate of approximately
6.27 percent and 6.25 percent, respectively, and (iv) average expected life of 5
years.

         Had compensation costs for the Company's 2001 and 2000 options granted
to employees been determined consistent with SFAS 123, the Company's net loss
and net loss per share for the years ended August 31, 2001 and 2000 would
approximate the pro forma amounts below:

<TABLE>
<CAPTION>
                                        2001                                 2000
                           ------------------------------       ------------------------------
                            As Reported       Pro forma          As Reported       Pro forma
                           -------------    -------------       -------------    -------------
<S>                        <C>              <C>                 <C>              <C>
Net loss                   $(8,152,247)     $(8,907,172)        $(20,481,888)    $(24,528,622)
                           =============    =============       =============    =============
Basic and diluted
 loss per common
 share                     $      (0.22)    $      (0.24)       $      (0.68)    $      (0.79)
                           =============    =============       =============    =============
</TABLE>

Stock Warrants
--------------
         From time to time, the Company issues warrants pursuant to various
consulting agreements.

         During fiscal 2000, pursuant to various brokerage service agreements
with outside consultants, the Company issued warrants to purchase 558,952 shares
of the Company's common stock. The exercise prices per share were initially
equal to the average closing bid price for the five days before each grant
ranging from $4.025 to $14.50. If the average closing bid price for the
Company's common stock for the five days before an investment agreement is
entered into is less than the initial price, then the exercise price shall be
reset to equal the market price of the closing date or if the date of exercise
is more than six months after the date of issuance, the exercise price shall be
reset to the lesser of the exercise price in effect or lowest reset price for
the five days ending on such anniversary date, as defined. As these warrants
were issued in connection with fund raising activities, no consulting expense
was recognized in the statement of operations. During fiscal 2001, the Company
cancelled 120,000 of these warrants (see Note 9).

         In June 2000, pursuant to marketing agreements with outside
consultants, the Company issued warrants to purchase 200,000 shares of the
Company's common stock, at exercise prices ranging from $6.00 to $8.00 per
share, with estimated fair market value of $755,000 (estimated by the Company
based on the Black-Scholes pricing model under SFAS 123). The warrants vested on
the date of grant and are exercisable through June 2002. During fiscal 2000, the
Company recognized total marketing expense of $755,000 in the accompanying
statements of operations.

         In May 2000, pursuant to a convertible note agreement with a financial
institution (see Note 6), the Company issued warrants to purchase 15,686 shares
of the Company's common stock, at an exercise price of $6.325, with an estimated
fair market value of $53,333 (estimated by the Company based on the
Black-Scholes pricing model under SFAS 123). The warrants vested on the date of
grant and are exercisable through May 2005. During fiscal 2000, the Company
recognized interest expense of $53,333 in the accompanying statements of
operations.

         During fiscal 2000, pursuant to various service agreements with outside
service providers, the Company issued warrants to purchase 58,243 shares of the
Company's common stock at exercise prices ranging from $6.00 to $18.44 per
share, with an estimated fair market value of $775,418 (estimated by the Company
based on the Black-Scholes pricing model under SFAS 123). The warrants vested
on the date of grant and are exercisable through June 2005. During fiscal 2000,
the Company recognized service expense of $775,418 in the accompanying
statements of operations. During fiscal 2001, the Company cancelled 26,641 of
these warrants.

                                      F-23


<PAGE>

         In August 2000, pursuant to stock purchase agreement with an investor,
the Company issued warrants to purchase 36,923 shares of the Company's common
stock, at exercise price of $1.37 per share (see Common Stock above). The
warrants vested on the date of grant and are exercisable through August 2003. As
these warrants were issued in connection with fundraising activities, no
consulting expense is to be recognized for these warrants in the statement of
operations.

         The following represents a summary of the warrants (including the
warrants discussed in the preferred stock section above) outstanding for the
years ended August 31, 2001 and 2000:

<TABLE>
<CAPTION>
                                            August 31, 2001                  August 31, 2000
                                     ------------------------------   ------------------------------
                                                   Weighted Average                 Weighted Average
                                      Warrants      Exercise Price     Warrants      Exercise Price
                                     -----------   ----------------   -----------   ----------------
<S>                                  <C>           <C>                <C>           <C>
Outstanding, beginning of year        1,394,804    $     4.99              -        $        -
     Granted                              -                -           1,394,804           4.99
     Exercised                            -                -               -                 -
     Expired/Forfeited               (  146,641)         5.77              -                 -
                                     -----------   ----------------   -----------   ----------------
Outstanding, end of year              1,248,163    $     4.91          1,394,804    $      4.99
                                     ===========   ================   ===========   ================
Exercisable, end of year              1,248,163    $     4.91          1,394,804    $      4.99
                                     ===========   ================   ===========   ================
Weighted average fair value
 of warrants granted                               $       -                        $      4.86
                                                   ================                 ================
</TABLE>

         406,923 of the warrants outstanding at August 31, 2001 have exercise
prices between $1.00 and $4.00, with a weighted average exercise price of $3.62
and a weighted average remaining contractual life of 3.1 years. 650,523 of the
warrants outstanding at August 31, 2001 have exercise prices between $4.00 and
$6.00, with a weighted average exercise price of $4.50 and a weighted average
contractual life of 2.7 years. 190,717 of the warrants outstanding at August 31,
2001 have exercise prices between $6.00 and $15.00, with a weighted average
exercise price of $9.67 and a weighted average remaining contractual life of 2.1
years.

         The fair value of each warrant granted during 2000 for services is
estimated using the Black-Scholes pricing model on the date of grant using the
following assumption: (i) no dividend yield, (ii) average volatility of 390
percent, (iii) weighted average risk free interest rate of approximately 6.25
percent, and (iv) average expected life of 3 years.

NOTE 9.  INVESTMENT AGREEMENT

         In October 1999, the Company entered into an Irrevocable Investment
Agreement for a "private equity line" of up to $35,000,000. Under the Investment
Agreement an investment banking company has made a firm commitment to purchase
the Company's common stock and resell the securities in an offering under
Regulation D of the United States Securities and Exchange Commission.

         Subject to an effective registration statement and ending 36 months
from the initial subscription date, the Company at its discretion may "Put"
common stock to the investment banking company. The purchase price per share
will equal 92% of the lowest closing bid price of the common stock during the 20
business days following each Put, subject to a minimum price specified by the
Company as defined in the Investment Agreement. The amount of each Put sold to
the investment banking company may be up to $2,000,000, but the number of shares
sold may generally not exceed 15% of the aggregate trading volume of the
Company's common stock during the 20 business days following each Put request.

                                      F-24


<PAGE>

         The investment banking company shall receive warrants to purchase 10%
of the number of shares of the Company it purchases under each Put. The warrants
are exercisable at a price equal to 110% of the market price for each Put.

         In consideration of the Investment Agreement, the Company granted the
investment banking company warrants to purchase 490,000 shares of its common
stock (see Note 8). The warrants are exercisable upon the successful completion
of certain tasks, as defined, and at a price equal to the lowest closing bid
price for the 5 days prior to the execution of the Investment Agreement of the 5
days following its execution, whichever price is lower. The Company has not
valued the warrants as they were issued in connection with fund raising
activities.

         Effective July 17, 2000, the Company advised the investment banking
company that it no longer intends to facilitate the use of this agreement. No
"Puts" were exercised pursuant to this agreement during the fiscal year 2000 or
2001. During fiscal 2001, the Company and the Investment Banking Company
negotiated a settlement whereby the Company cancelled 120,000 of the warrants.

NOTE 10.  RELATED-PARTY TRANSACTIONS

         During fiscal 2000, the then Chairman and CEO of the Company entered
into a verbal contract with Speedsl.com, Inc. which is owned and operated by
the son of the former Chairman and CEO, to be a reseller of access services.
During fiscal 2000, the Company invoiced Speedsl.com, Inc. approximately
$593,000 for access services fees and approximately $395,000 for routers, of
which $600,000 was offset against a note payable to the former Chairman and CEO
(see Item 9). Cost incurred by the Company for such services were approximately
$988,000, that are at customer locations.

         During fiscal 2001, the Company invoiced Speedsl.com, Inc.
approximately $191,000 for access service fees and $245,000 for disconnect fees.
Speedsl.com, Inc. made payments of approximately $103,000. During the fiscal
year the Company wrote off the remaining $721,000 due from Speedsl.com, Inc.

         During November 2001, the Company negotiated with the former Chairman
and CEO to retire his holdings of 15,000,000 shares of his common stock valued
at $1,000,000 which was added to the note payable owed to him (see Note 6).

         During fiscal 2001, pursuant to a settlement agreement with the former
Chairman and CEO, the Company issued 5,000,000 shares of common stock to the
current President and 370,000 shares of common stock to the former Chairman and
CEO for certain legal fees incurred.

         During fiscal 2001, the Company issued 2,000,000 shares of common stock
to the CEO valued at $270,000 (based on the closing bid price of the Company's
common stock on the date of grant) as compensation. The shares were to vest over
a one-year period. Subsequent to the issuance, the CEO resigned in which the
Company and the then CEO agreed to cancel 1,000,000 of the original shares
issued, resulting in the Company recognizing compensation expense of $135,000 in
the accompanying statement of operations as of August 31, 2001.

         See Note 6 for additional related party transactions during fiscal year
August 31, 2001.

                                      F-25


<PAGE>

NOTE 11.  EARNINGS PER SHARE

Basic and diluted loss per common share is computed as follows:

<TABLE>
<CAPTION>
                                                                     2001              2000
                                                                 -------------    -------------
Numerator for basic and diluted loss per common share:
     <S>                                                         <C>              <C>
     Net loss                                                     $(8,152,247)    $(20,481,888)
     Preferred dividends, including beneficial conversion
     of Preferred A stock                                            (106,459)      (4,227,500)
                                                                 -------------    -------------
     Net loss available to common stockholders                    $(8,258,706)    $(24,709,388)
                                                                 =============    =============

Denominator for basic and diluted loss per common share:
     Weighted average common shares outstanding                    37,793,222       36,524,870
                                                                 =============    =============

     Net loss per common share available to common
      Stockholders                                                $     (0.22)    $      (0.68)
                                                                 =============    =============
</TABLE>

NOTE 12. SUBSEQUENT EVENT

         Subsequent to August 2001, the Company issued 419,699 shares of common
stock valued at $53,811 (based on the closing bid price of the Company's common
stock on the date of grant) to employees in lieu of wages.

         Subsequent to August 2001, the board of directors granted to various
employees, pursuant to the 2000 plan, an aggregate of 1,830,000 options at
exercise price of $0.115 to $0.140 (based on the closing bid price of the
Company's common stock on the date of each grant). The options vest through
January 2003 and are exercisable through January 2011.

         Subsequent to August 2001, the Company and Speedsl.com, Inc. reached a
settlement agreement and mutual general release between the parties. This
agreement was intended to encompass and fully settle the claims against one
another, and was in the best interest to avoid further litigation costs.

                                      F-26