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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
     Act of 1934

                     For fiscal year ended December 31, 2000

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

                         Commission file number 0-18410

                                NETCURRENTS, INC.
                 (Name of Small Business Issuer In Its Charter)

                  DELAWARE                                 95-4233050
      (State or Other Jurisdiction of                   (I.R.S. Employer
       Incorporation or Organization)                   Identification  No.)

                         9720 WILSHIRE BLVD., SUITE 700
                          LOS ANGELES, CALIFORNIA           90212
               (Address of Principal Executive Offices)   (Zip Code)

                                 (310) 860-0200
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                                   NAME OF EACH EXCHANGE
          TITLE OF EACH CLASS                       ON WHICH REGISTERED


         Securities registered under Section 12(g) of the Exchange Act:

                      SERIES A CONVERTIBLE PREFERRED STOCK
                          COMMON STOCK, PAR VALUE $.001
                               REDEEMABLE WARRANTS
                                CLASS B WARRANTS

     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.

                                  Yes X No ____

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant'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 [ ]

     The issuer's revenues for the fiscal year ended December 31, 2000 were
$1,665,225.

     As of March 1, 2001, the aggregate market value of the voting stock held by
non-affiliates of the issuer based upon the average of the closing bid and asked
prices of such stock as reported on the Nasdaq SmallCap Market was $17,407,531.

     As of March 1, 2001, the issuer had 31,706,729 shares of common stock,
$.001 par value, issued and outstanding.

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

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<PAGE>


                                NETCURRENTS, INC.
                              INDEX TO FORM 10-KSB

                                                                            PAGE
PART I

Item 1.    Description of Business.............................................2

Item 2.    Description of Property.............................................7

Item 3.    Legal Proceedings...................................................7

Item 4.    Submission of Matters to a Vote of Security
           Holders.............................................................8

PART II

Item 5.    Market for Common Equity and Related
           Stockholder Matters.................................................8

Item 6.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations......................10

Item 7.    Consolidated Financial Statements:.................................22

Item 8.    Changes in and Disagreements With Accountants
           on Accounting and Financial Disclosure.............................22

PART III

Item 9.    Directors, Executive Officers, Promoters and
           Control Persons; Compliance With Section 16(a)
           of the Exchange Act................................................22

Item 10.   Executive Compensation.............................................24

Item 11.   Security Ownership of Certain Beneficial
           Owners and Management..............................................27

Item 12.   Certain Relationships and Related Transactions.....................28

Item 13.   Exhibits, List and Reports on Form 8-K.............................29


                                     Page i
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                           FORWARD-LOOKING STATEMENTS

This report contains statements that constitute "forward-looking statements"
within the meaning of section 21e of the Securities Exchange Act of 1934 and
Section 27(a) of the Securities Act of 1933 with respect to the Company and its
operations that are subject to certain risks and factors which could cause the
Company's future actual results of operations and future financial condition to
differ materially from those described herein. The words "expect," "estimate,"
"anticipate," "predict, "believe" "project" and similar expressions and
variations thereof are intended to identify forward-looking statements. These
statements appear in a number of places in this filing and include statements
regarding the intent, belief or current expectations of the Company with respect
to, among other things: integration of NetCurrents Services Corporation ("NSC")
into NetCurrents, Inc., execution of business plans, completion of strategic
alliances, the ability to work effectively with our alliance partners:
Burrelle's Information Services, Inc., Thomson Financial Carson, Kroll Risk
Consulting Services, Bowdens Media Monitoring Limited, Webmind, Datalink.net,
and demand for Netdetect, Agencyfacts, Cybertalk, Cyberwatch, CyberPerceptions,
PR Manager and the other products and services, the ability to continue to
develop new products and services, the ability to attract sufficient skilled
personnel to meet our targets in the business plans, expected capital
expenditures, anticipated business and economic conditions and trends affecting
our financial condition and our business and strategies. Readers are cautioned
not to put undue reliance on such forward-looking statements. With respect to
the NSC business, such forward-looking statements involve risks and
uncertainties, including the intensity of competition from other technology
companies, the ability of NSC to meet its staffing requirements, the ability of
NSC to execute its business plans and the status of our future liquidity.
Readers are further cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in this filing,
including, without limitation, those risks and uncertainties discussed under the
headings "Factors That Could Impact Future Results" and "Management's Discussion
And Analysis Of Financial Condition And Results Of Operations" in this report on
Form 10-KSB. We do not ordinarily make projections of our future operating
results and we undertake no obligation to publicly update or revise any forward
looking statements, whether as a result of new information, future events or
otherwise.


                                     Page 1
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                                     PART I


ITEM 1.    DESCRIPTION OF BUSINESS


HISTORY

        NetCurrents, Inc. ("NetCurrents" or the "Company," or "we") was founded
as a television production and distribution company under the name Ventura
Motion Picture Group Ltd. and, in 1989, changed its name to The Producers
Entertainment Group Ltd. ("TPEG"). In 1990, we became publicly traded on the
Nasdaq Stock Market. Over a nine-year period, we were a significant independent
producer and distributor of television series. In 1998, we changed our name to
IAT Resources Corporation ("IATR").

        IATR made several minority investments in early stage technology
companies. In November 1999, IATR entered into a revised definitive merger
agreement to merge with Infolocity and make it the Company's core business. In
December 1999, IATR merged with Infolocity and IATR's name was changed to
NetCurrents, Inc. ("NTCS"). At the time of the merger, Infolocity became known
as NetCurrents Services Corporation ("NSC"), a wholly-owned subsidiary of
NetCurrents.


THE BUSINESS

        NetCurrents, through NSC assists corporations and individuals in the
achievement of their strategic business goals through the management of
Internet-based information. Using FIRST (Fast Internet Real Time Search
Technology), NSC's proprietary, patent pending, real-time search technology,
NetCurrents monitors sources of information ranging from thousands of
e-publications, Internet sites and message boards, from an extensive universe of
targeted Internet locations which are monitored in real-time, 24 hours a day,
seven days a week. NSC monitors the Internet and uses either artificial
intelligence or Internet Strategists to rate, evaluate or report to clients,
depending on the product purchased. The Internet Strategists offer clients
comprehensive intelligence, qualitative analysis, and strategic counsel, based
on this information, thereby providing timely, extensive Internet information
analysis and professional support.

        NSC provides its clients with critical information and strategic counsel
in a broad range of areas which assist, among other things, in improving
corporate performance, protecting and enhancing their corporate and personal
images, measuring a wide range of perceptions, providing competitive
intelligence, countering misinformation and fraud on the Internet, providing due
diligence support, and optimizing shareholder value.

        NSC monitors and delivers this targeted Internet information based on
specific criteria pre-determined by clients. NSC's broad range of services
include: real-time web clipping, real-time monitoring and notification, analysis
and reporting, competitive intelligence, dissemination of strategic information,
due diligence support, merger/acquisition support, forensic accounting support,
pre and post IPO support, asset tracking, crisis intervention, and a variety of
customized services.

POST MERGER - FIRST YEAR PLAN EXECUTION

        Following the merger of NSC, we continued the development and execution
of the NSC business plan. One of the first steps was to begin building the
management team, the technology group, an international sales force, and a
product development team. As of March 2001, we have augmented the senior
management team for NCS by hiring: a Chief Financial Officer, a Vice-President
of Channel Sales, a Vice President of Product Strategy, a Director of
Engineering, and a Director of Product Development. In addition, we expanded our
international sales force from 3 to 5 persons and our technology group from 2 to
11 persons and established our product development team with 6 people.


                                     Page 2
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        We also have completed the installation of Oracle Financials, Order
Entry, and Sales Force Automation, allowing us to generate extensive management,
sales, and financial reports thereby further enhancing our financial management
capabilities. With the anticipated volume of customers as we launch our
strategic alliances and new channel products, these Linux based Oracle
applications will be integrated to interface with the Oracle 8i database and
provide us with the necessary financial and customer relationship management
information to more effectively manage our expanding business.

        As part of our marketing and sales strategy, we have continued to search
out alliances with nationally and internationally recognized "channel partners."
We believe that these alliances will increase our brand-name recognition and
generate sales through the utilization of our partners' sales force. As well, we
anticipate that these relationships will stimulate product development efforts
through joint development and marketing of products designed specifically for
the needs of our partners' clients. We established a set of criteria for the
selection of these channel partners, including: each partner should be a leader
in its market, have established a national or international brand in their
market segment, have a broad sales force in major cities across the United
States, and in some cases major international cities, and must support its sales
force with strategically structured marketing programs. To date, we have entered
into four sales based strategic alliances predicated on these criteria.

        We also have determined that our product development strategy will
include strategic technology alliances to add incremental value to our product
offerings and enhance our time to market. To date, we have entered into three
strategic technology alliances and are evaluating a number of other such
alliances as well as potential acquisitions.

        We also were granted an acceleration of a portion of our first real-time
search technology patent application on November 6, 2000.

        PRODUCT LAUNCHES

        During fiscal 2000, we launched several new products and continued to
enhance our existing products. In August 2000, we released a new product
designed for the public and investor relations markets called AgencyFacts.
AgencyFacts provides real-time online analysis of financially-oriented message
board activity to help investor relations agency clients develop better business
strategies, stronger competitive positioning, and greater understanding of
investor perceptions about their clients' companies, products, and services.
AgencyFacts has been utilized as the core technology in certain of our strategic
sales alliances.

        In September 2000, we announced the introduction of our Internet news
clipping service, WebClipper 2.0, providing an effective, time-efficient and
economical tool to help keep track of what is being said about companies on the
Internet daily. Until the launch of this product, most Internet clipping
services provided dated material that is "dumped" on the end user in
time-consuming voluminous reports containing targeted, non-targeted, and/or
duplicative information. WebClipper 2.0 was designed with numerous features for
its users including coverage of more than 2,500 online publications, selected
web site pages, COMTEX news feed integration to capture press releases upon
distribution, elimination of duplicate articles, advanced archive search
capability, daily client reporting and an e-mail alert capability, all in an
easy-to-use interface. Following its release, we encountered a number of
technical problems with this product. In the last quarter, we began and we
continue to redesign this product. We have not yet scheduled a release date.

        In late March or early April 2001, we plan to release a new product
designed specifically for the public relations agency market called PR Manager.
PR Manager is a product designed to enhance the client management capabilities
of public relations firms. PR Manager allows account managers of public
relations firms to review NSC generated data for multiple clients at one time.
It searches the Agency Facts universe, USENET and multiple industry specific
universes for company and product perceptions and provides an overall sentiment
summary. It also provides online activity volume, message board volume,


                                     Page 3
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top poster identification and a historical message search capability. PR Manager
also incorporates WebClipper 2.0 and allows the public relations firm to update
each client's search criteria.

        We also have launched a wireless application that is integrated into our
premium service offerings. This product is an upgraded feature to our baseline
product allowing end users to receive their detailed statistics to the Palm VII.
In addition, end users may receive alerts based on pre-determined criteria
delivered to other wireless devices such as pagers, cell phones, Personal
Digital Assistance, or PDAs, and other similar electronic devices. The service
has been made available at no additional charge to our premium clients.

        SALES BASED STRATEGIC ALLIANCES

        In May 2000, we announced a strategic alliance with Burrelle's
Information Services, Inc. of Livingston, New Jersey, one of the world's leading
providers of media monitoring services under which we agreed to develop and
design a co-branded product for Burrelle's. We are finalizing this product and
anticipate the launch of Burrelle's "CyberTalk" in March 2001. CyberTalk, based
on AgencyFacts, will appear on Burrelle's NewsAlert client web portals along
with the "Powered by NetCurrents" logo. Burrelle's national sales organization
will market this customized product to its thousands of clients as part of the
Burrelle's NewsAlert service. Burrelle's also will market our premium products.
The launch date for this product was extended because Burrelle's elected to wait
for the release of PR Manager. The Burrelle's alliance is a revenue share
agreement under which Burrelle's and NetCurrents will apportion the revenue
generated by Burrelle's based upon a predetermined formula.

        In June 2000, we entered into a strategic alliance with Thomson
Financial Investor Relations, one of the world's leading providers of investor
relations solutions and strategic advisory services. Under the terms of the
alliance, we were to co-develop and market new Internet monitoring services for
the investor relations market. We customized our AgencyFacts product for the
specific needs of Thomson clients with NetDetect, the customized co-branded
product, to be offered as an integral part of Thomson's IR Universe platform. We
planned to launch this product to Thomson's more than 3,500 clients in August
2000 with the roll out planned to take place at the rate of 500 clients per
month. In September 2000, Thomson acquired the Carson Group and placed the
senior management of the Carson Group in charge of the new Thomson Financial
Carson organization. Because of various management changes following the
acquisition, we agreed on a revised approach to the sale of NetDetect, which
involves a stepped program rather than a mass rollout of NetDetect to 500
clients per month. In October, we received a list of 185 clients to be placed on
NetDetect. As of February 2001, we had received the balance of the first 500
clients and are now planning the launch of NetDetect for March 2001.

        On October 18, 2000, we entered into a strategic alliance with
Toronto-based Bowdens Media Monitoring Limited, the largest media monitoring
firm in Canada. Bowdens will sell CyberWatch, a new co-branded version of
AgencyFacts, to their client base of thousands of public and private companies
throughout Canada. Bowdens has hired a manager to oversee the sales and
marketing of CyberWatch. NSC has trained Bowdens' sales personnel and Bowdens
has commenced selling efforts of CyberWatch through a national sales and
marketing program.

        On October 23, 2000, we signed a definitive agreement establishing a
three-year exclusive global strategic alliance with Kroll Risk Consulting
Services, Inc. Kroll is a leading worldwide investigations and intelligence
firm, providing a full range of risk mitigation and asset protection services to
over 25,000 clients. Kroll has a global network of 60 offices in 19 countries.
Under the terms of our alliance, we expect to share Kroll offices throughout the
world and provide enhanced Internet intelligence services to corporations,
individuals and governments using our proprietary technology. We also plan to
jointly develop an exclusive Internet based product line designed specifically
for the security market using the NetCurrents/Kroll brand name and integrating
our FIRST technology. Supported by a co-funded marketing campaign, we expect to
utilize a joint sales force of approximately 165 case managers and salespeople
to sell products to the worldwide security and intelligence market. Kroll has
provided cases


                                     Page 4
<PAGE>


to NSC under the terms of the agreement, although Kroll has been using NCS on
some of their cases since January 2000. We have appointed two senior sales
personnel to manage the Kroll relationship in conjunction with Kroll's appointed
project leader and the planning and procedural integration was completed in
December 2000. Kroll and NSC completed a road show in January 2001 to 15 major
Kroll offices, effectively launching our joint sales efforts.

        We hope that these four strategic sales alliances will create channel
sales for NSC in the investor relations, media monitoring, and security market
segments. As well, we anticipate we will derive benefits from the marketing
campaigns and web site traffic of Burrelle's, Bowdens, Thompson Financial and
Kroll. We also expect these alliances to provide us with the opportunity to
generate new clients through a combined sales force of over 200 sales personnel.

        STRATEGIC TECHNOLOGY ALLIANCES

        In April 2000, we entered into a co-location agreement with AboveNet
Communications in San Jose, California, under which we have co-located our
servers with AboveNet. We did this to acquire enhanced security and to gain
access to one of the largest aggregated bandwidth suppliers in the world (up to
multi-terabit per second capacity) that can scale as required. This also reduced
the amount of funds we would be required to invest in equipment.

        In June 2000, we announced a strategic alliance with Intelligenesis
Corporation (now known as Webmind Corporation). Webmind, which has over 100
employees dedicated to the field of artificial intelligence, has developed and
markets sophisticated artificial intelligence technology that balances semantic
understanding with computational efficiency. We utilize this advanced technology
in the delivery of our AgencyFacts and PR Manager products. Webmind's technology
allows us to enhance our AgencyFacts and PR Manager products and deliver
expanded monitoring and analysis capacity without substantially increasing
Internet Strategist staffing.

        In August 2000, we entered into an agreement with Datalink.net to
develop a wireless solution, enabling users of NetCurrents' premium real-time
Internet monitoring and analysis services to remotely receive "alert" messages
and updates to their detailed statistics page via the Palm VII. We are providing
our premium clients, at no charge, a Palm VII so they can access the information
being provided by this new service. By implementing Datalink.net's Wireless
Gateway technology, we are providing our premium clients with remote access to
specific information on their secured portals, allowing for the immediate
delivery of critical information through a number of hand held devices such as
pagers, cell phones, and PDA's, beginning with the Palm VII. The new service
will allow our clients to receive, in real-time, urgent "alert" messages that
may require immediate action, as well as up-to-the-minute detailed statistics
graphs providing them with overall online message board sentiment. We launched
this service in early December 2000 under the name Mobile Perceptions.

THE FUTURE

        In fiscal 2000, we believe we created the critical components necessary
for long-term success and profitability: a strong management team, an
international sales organization, a product development and technology group
comprised of experienced personnel, key leveraged sales channel relationships
and technology alliances.

        We also found that over the course of fiscal 2000, the focus of our
clients shifted as the stock market turned downward sharply. Where previously
our clients were keenly interested in financial message board information, the
massive downward shift in stock prices resulted in a return to business basics
where profitability and performance were the ultimate goals. While we continue
to provide financial message board information as part of our CyberPerceptions
modules and more specifically as part of our security based services with Kroll,
we also have focused on providing a broad range of business intelligence,
competitive intelligence, perception, and demographic data across a vast
universe of


                                     Page 5
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sites. Over the course of fiscal 2001, we plan to release a number of new
products that we expect will become critical tools for all of our target
clients. PR Manager is the first of these new products and we anticipate its
release for beta testing with our users in early March with a full launch
planned for late March 2001 or early April 2001.

        In an effort to reduce costs and focus on completing our technology
upgrades and releases, achieve greater efficiencies and to position us more
effectively for meeting our 2001 targets, we reduced the size of our sales force
and targeted the remaining sales personnel on the sale of both direct and
channel sales until we have completed the CyberPerceptions upgrades planned by
June 2001. We also have made and continue to make significant additions to our
technology department and plan to significantly increase its size over the
balance of 2001. We also are evaluating a number of strategic technology
acquisitions for 2001 that we expect to further enhance our technology and
development capabilities.

        On February 28, 2001, we entered into a letter of intent to acquire
MindfulEye.com, Inc., a subscription-based Internet monitoring company that
automatically alerts investors in real time to online news, rumors, information
and changes in public sentiment about companies in which they have interests.
The closing of the acquisition is subject to, among other customary closing
conditions, reciprocal due diligence, applicable corporate and regulatory
approvals and the negotiation and execution of a definitive merger agreement.
Founded in 1999, Vancouver-based MindfulEye has created a new class of
artificial intelligence (AI) technology that can read and understand language in
real time on the Internet. Called LEXANT(TM), this patent-pending technology
utilizes natural language processing, neural networks and a lexicon of thousands
of rules of grammar to determine the true meaning of words in context. The
filing in July 2000 with the United States Patent Office covers MindfulEye's
artificial intelligence-based technology that uses advanced ranking algorithms
and natural language processing to analyze textual content in real-time as it
occurs on the Internet. MindfulEye has applied LEXANT(TM) to develop a suite of
products that monitor, analyze and rank Internet content in real time according
to sentiment, then further gauge the "mood" score to interpret the qualitative
aspects of what's being said online. Currently, MindfulEye monitors all major
financial discussions on the Internet, and processes more than half a million
individual mentions each day.

COMPETITION

        We believe our existing combination of patent pending, real-time search
technology, search universe, proprietary database of historical data, profiling
capabilities, coupled with our analysis and strategic counsel set us apart from
our competition. Most of the companies providing search services deliver delayed
and dated information and lack the flexibility and scalability of our
proprietary technology. More fundamentally, these companies offer limited
analysis of Internet communications, limited ability to disseminate information
to the online discussion communities, and few possess a special team created to
handle emergencies, crises, merger/acquisition support or other critical
situations. In addition, a combination with MindfulEye.com will add a real-time
patent pending artificial intelligence technology that monitors, analyzes and
ranks Internet content, thereby further strengthening our proprietary
advantages.

        Although management believes NSC is the leader in its field, some of our
competitors have greater financial resources than NSC and others have larger
technology development departments. In this section we briefly outline a few of
the companies providing different levels of monitoring services.

    o   CyVeillance provides business intelligence. This company helps major
        corporations, organizations and select government agencies manage their
        business strategies by providing critical market feedback and metrics
        from the Internet. They also provide what they call "Image Services"
        which include rumor management and libel/defamation control. While
        CyVeillance has begun offering services that are similar to ours, we
        believe the CyVeillance services are not as extensive as ours and it
        does not have a real-time technology or analytical capabilities.


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    o   eWatch, which was recently acquired by Business Wire, offers a limited
        search of news groups and three Internet message boards for up to three
        predetermined words or phrases that are supplied by the client. eWatch
        does not have a product that competes with CyberPerceptions, AgencyFacts
        or PR Manager. The eWatch products do not provide analysis, or the
        ability to respond to rumors or potentially damaging postings. In
        addition, eWatch does not maintain a proprietary database of any sort to
        track anonymous users or name aliases. Finally, eWatch does not offer
        competitive intelligence or strategic information dissemination.


EMPLOYEES

As of March 1, 2001, we had 62 full time employees and no part time employees.

ITEM 2.    DESCRIPTION OF PROPERTY

        We lease approximately 2,700 square feet located at 9720 Wilshire
Boulevard, Los Angeles, California for our corporate offices pursuant to a lease
that expires on December 14, 2004. Our current annual rent expense is $94,368.
We currently sublease to a third party approximately 4,429 square feet located
at 767 3rd Avenue in New York City pursuant to a lease that expires on June 30,
2002. The current annual rent expense is approximately $167,928, which is fully
covered by the terms of the sublease.

        Our NSC subsidiary's offices are located at 1350 Old Bayshore Highway,
Suites 30 and 50, Burlingame, California 94010. Suite 30 is approximately 3,600
square feet and the lease expires on January 31, 2002. The current annual rent
expense is $90,972. Suite 50 is approximately 2,600 square feet and the lease
expires on May 31, 2005. The current annual rent expense is $104,544. We believe
that our current facilities are sufficient for our current needs. The Company is
currently evaluating its space requirements for the future.

        Our Canadian subsidiary, NetCurrents Canada, Inc., has offices located
at 69 Yonge Street, Suite 1404, Toronto, Ontario, Canada M5E 1K3. Suite 1404 is
approximately 1,800 square feet and the current annual rent is approximately
$38,000. The lease expires on June 30, 2002.

ITEM 3.    LEGAL PROCEEDINGS

        On November 13, 2000, NetCurrents, Inc. and NetCurrents Services Corp.
(collectively "NetCurrents") initiated a lawsuit entitled NETCURRENTS, INC., ET
AL. V. HOLTORF ET AL., Los Angeles Superior Court, Case No. BC 240089 (the
"Lawsuit"). A First Amended Complaint was filed on December 18, 2000, alleging
claims against Victor Holtorf ("Holtorf") for defamation, unfair competition and
conversion. In addition, NetCurrents also filed a Demand for Arbitration against
Holtorf with the American Arbitration Association on December 18, 2000,
Reference No. 72 160 01297 00 RSR (the "Arbitration"), alleging claims for
breach of contract, breach of fiduciary duty and breach of the implied covenant
of good faith and fair dealing. The claims alleged against Holtorf by
NetCurrents in both the Lawsuit and the Arbitration arise out of alleged
wrongful conduct by Holtorf following the termination of his employment with
NetCurrents in late August 2000, including the public dissemination of
defamatory and disparaging statements about NetCurrents.

        Holtorf has not responded to the First Amended Complaint in the Lawsuit
but has responded to the Demand for Arbitration with a general denial. In
addition, Holtorf has filed counter-claims against NetCurrents for the
following: breach of contract, breach of covenant of good faith and fair
dealing, fraud in the inducement and negligent misrepresentation relating to his
previous Employment Agreement with NetCurrents; breach of contract, breach of
covenant of good faith and fair dealing, fraud in the inducement and negligent
misrepresentation relating to the Consulting Agreement he entered into with
NetCurrents as part of his termination of employment in August 2000; defamation;
false light; and


                                     Page 7
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constructive termination of his previous employment with NetCurrents.
NetCurrents has not responded to Holtorf's Counter-Claims in the Arbitration.

        There has been no discovery initiated in either the Lawsuit or the
Arbitration. Both proceedings are currently at a standstill and the parties have
agreed to grant each other an extension of time to further respond to their
respective claims so that they may attempt to resolve their disputes amicably. A
mediation session was held on February 23, 2001, and NetCurrents and Holtorf are
presently continuing to discuss the possibilities of a settlement of all claims
between them.

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

        None.

                                     PART II


ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.


COMMON STOCK

        Our common stock is currently traded on the Nasdaq SmallCap Market
("Nasdaq") under the symbol "NTCS." The following table sets forth the high and
low bid prices on Nasdaq for the periods indicated, as reported by Nasdaq. The
quotations are inter-dealer prices without adjustment for retail mark-ups,
mark-downs or commissions, and do not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                                     COMMON STOCK
                                                 ---------------------
                                                 HIGH BID     LOW BID
                                                 --------     --------
        <S>                                      <C>          <C>
        PERIOD
            March 31, 1999...................      $4.25        $0.22
            June 30, 1999....................       3.88         1.00
            September 30, 1999...............       2.50         0.72
            December 31, 1999................       2.56         1.34

            March 31, 2000...................     $11.94        $1.88
            June 30, 2000....................       9.63         2.20
            September 30, 2000...............       3.50         1.38
            December 31, 2000................       1.41         0.16
</TABLE>

        On March 1, 2001, the prices of the common stock as reported by Nasdaq
were $.53 bid and $.59 asked. On such date there were approximately 250 holders
of record of our common stock. The number of stockholders does not take into
account stockholders for whom shares are being held in the name of brokerage
firms or clearing agencies.

DIVIDENDS

        As of March 1, 2001, we have outstanding 1,000,000 shares of Series A
Preferred Stock that are entitled to annual dividends aggregating $425,000. We
have outstanding 400,000 shares of Series C Preferred Stock. Holders of our
Series C Preferred Stock are entitled to dividends of 8% annually, so long as we
have net profits in excess of $1,000,000 in the applicable fiscal year. No
dividends are currently due on the Series C Preferred Stock. No dividends may be
paid on the common stock unless all dividends on the Series A Preferred Stock
and Series C Preferred Stock have been paid or provision has been made for such
payment. Pursuant to the terms of our outstanding Series A Preferred Stock,
which we issued in a public offering consummated in December 1994, and pursuant
to the terms of our outstanding Series C


                                     Page 8
<PAGE>


Preferred Stock, at our option, we may pay dividends on the preferred stock in
cash or in shares of our common stock.

        We have never paid a cash dividend on our common stock and presently
intend to retain any future earnings for investment and use in our business
operations. We cannot assure you that our operations will generate the revenues
and cash flow required to declare cash dividends on our outstanding common stock
in future fiscal periods or that we will have legally available funds to pay
dividends on our common stock. Consequently, we do not expect to pay cash
dividends in the foreseeable future except to the extent required to satisfy our
obligations with respect to our outstanding Series A Preferred Stock and Series
C Preferred Stock. We have not yet paid the dividends on the Series A and Series
C Preferred Stock for the periods ended September 30, 2000, and December 31,
2000.

RECENT SALES OF UNREGISTERED SECURITIES

        During the fiscal year ended December 31, 2000, we sold the following
securities which were not registered under the Securities Act. The Company did
not employ any form of general solicitation or general advertising in connection
with the offer and sale of the securities and warrants to purchase common stock
described below. In addition, the placement agent and the purchasers of the
securities are "accredited investors" for the purposes of Rule 501 of the
Securities Act of 1933, as amended, unless otherwise specified. For these
reasons, among others, the offer and sale of the following securities were
exempt from registration pursuant to Rule 506 of Regulation D of the Securities
Act of 1933, as amended:

    o   On March 3, 2000, we issued and issued and sold 1,700,000 shares of
        common stock, at a price of $5.00 per share, to Brown Simpson Strategic
        Growth Fund, Ltd. and Brown Simpson Strategic Growth Fund, L.P. In
        connection with the offer and sale of the common stock, we also granted
        Brown Simpson Strategic Growth Fund, Ltd. and Brown Simpson Strategic
        Growth Fund, L.P. warrants to purchase an aggregate of 3,498,000 shares
        of common stock on the terms described below. We granted "Series A"
        stock purchase warrants for the purchase of 1,166,000 shares of common
        stock. The Series A warrants are currently exercisable at a price of
        $6.00 per share, and provide for mandatory exercise if the closing bid
        price per share of the common stock equals or exceeds $8.00 for twenty
        consecutive trading days after a registration statement covering the
        underlying common stock has been declared effective. We granted "Series
        B" stock purchase warrants for the purchase of 1,166,000 shares of
        common stock. The Series B warrants become exercisable at a price of
        $7.00 per share if the closing bid price per share of the common stock
        equals or exceeds $8.00 for twenty consecutive trading days after a
        registration statement covering the underlying common stock is declared
        effective, and provide for mandatory exercise if the closing bid price
        per share of the common stock equals or exceeds $10.00 for 20
        consecutive trading days after a registration statement covering the
        underlying common stock has been declared effective. We granted "Series
        C" stock purchase warrants for the purchase of 1,166,000 shares of
        common stock. The Series C warrants become exercisable for $9.00 per
        share if the closing bid price per share of the common stock equals or
        exceeds $10.00 for twenty consecutive trading days after a registration
        statement covering the underlying common stock is declared effective,
        and provide for mandatory exercise if the closing bid price per share of
        the common stock equals or exceeds $14.00 for twenty consecutive trading
        days after a registration statement covering the underlying common stock
        has been declared effective.

    o   On March 3, 2000, we granted common stock purchase warrants for the
        purchase of an aggregate of 500,000 shares of common stock, at an
        exercise price of $4.50 per share, to the placement agent involved with
        the offer and sale of common stock and common stock purchase warrants to
        Brown Simpson Strategic Growth Fund, Ltd. and Brown Simpson Strategic
        Growth Fund, L.P. These warrants are currently exercisable for 250,000
        shares of common stock. These warrants become exercisable with respect
        to an additional 83,333 shares of common stock if the closing bid price
        per share of the common stock equals or exceeds $8.00 for any period of
        twenty


                                     Page 9
<PAGE>


        consecutive trading days. These warrants become exercisable with respect
        to an another 83,333 shares of common stock if the closing bid price per
        share of the common stock equals or exceeds $10.00 for any period of
        twenty consecutive trading days. These warrants become exercisable with
        respect to the remaining 83,334 shares of common stock if the closing
        bid price per share of the common stock equals or exceeds $14.00 for any
        period of twenty consecutive trading days.

    o   On December 27, 2000, we amended our original agreement with Brown
        Simpson Strategic Growth Fund, Ltd. and Brown Simpson Strategic Growth
        Fund, L.P. and repriced the warrants to an exercise price of $1. If, at
        any time after the effective date of the registration statement
        registering the resale of the shares of common stock underlying the
        warrants the per share market value of our common stock equals or
        exceeds prices ranging from $2.125 to $3, for any period of 10
        consecutive trading days, then the warrant holder will be required to
        exercise the warrant. The warrant will be exercised no later than the
        third business day following such mandatory exercise requirement.

    o   On March 27, 2000, we issued an aggregate of 200,000 shares of our
        common stock to Salvatore Grosso and Lawrence Jacobson pursuant to their
        options granted on January 14, 1999. The remaining 300,000 options are
        exercisable and outstanding.

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

OVERVIEW

        The following discussion and analysis should be read in conjunction with
our Financial Statements and notes included elsewhere in this Form 10-KSB.

        The Notes to the Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" set forth herein
contain forward-looking statements with respect to us and our operations that
are subject to certain risks and factors which could cause our future actual
results of operations and future financial condition to differ materially from
that described herein. These risk factors include, but are not limited to, our
potential inability to realize the business plan, the intensity of competition
from other companies which focus on enabling innovations for the Internet and
business-to-business e-commerce, the status of our liquidity in future fiscal
periods, factors that affect the Internet technology and online commerce
industries such as network performance, reliability, speed of access, ease of
use and bandwidth availability, and factors that generally affect Internet
commerce, such as economic, political, regulatory, technological, and public
taste environments, as well as the factors discussed below in "Factors That
Could Impact Future Results."

        Our revenues currently are derived from NSC and MediaWorks. The amount
of revenue recognized during the periods discussed herein is not necessarily
indicative of revenues to be recognized in future periods.

REVENUE RECOGNITION

        Revenues derived from NSC are recognized on an accrual basis as earned.

        Revenues derived from MediaWorks and received from license fees for
distribution rights to projects-in-process constitute deferred income until the
project becomes available for broadcast in accordance with the terms of its
licensing agreements and are recognized as revenue at such time. Revenues from
licensing fees, distribution fees or profit participations are recognized as
earned in accordance with the terms of the related agreements.


                                    Page 10
<PAGE>


        On October 20, 1997, we acquired 100% of the capital stock of the
Grosso-Jacobson Companies for 2,222,222 shares of our common stock. The
acquisition was accounted for as a pooling of interests and, consequently, the
accompanying historical financial information for all periods presented has been
restated to reflect the effects of the combination.

        On July 15, 1998, we acquired 100% of the capital stock of MWI
Distribution, Inc., (doing business as MediaWorks International). The
acquisition was accounted for using the purchase accounting method and,
consequently, our historical financial statements will not reflect the results
of operations of MediaWorks International prior to the date of acquisition.

        On December 27, 1999, we acquired Infolocity, Inc. The terms of the
merger included a tax-free exchange of NetCurrents, Inc. common stock for 100%
of the issued and outstanding stock of Infolocity, Inc. The acquisition was
accounted for as a pooling of interests and, consequently, the accompanying
historical financial information for all periods presented has been restated to
reflect the effects of the combination. In connection with the merger, we issued
7,375,001 shares of common stock.

RESULTS OF OPERATIONS

BECAUSE OF THE COMPLETE CHANGE IN OUR BUSINESS COMMENCING IN LATE DECEMBER 1999
WITH THE ACQUISITION OF NC SERVICES, COMPARISONS OF RESULTS FROM PERIODS IN 1999
AND PRIOR TO 2000 ARE NOT MEANINGFUL.

YEAR ENDED DECEMBER 31, 2000 ("FISCAL 2000") COMPARED WITH THE YEAR ENDED JUNE
30, 1999 ("FISCAL 1999")

        Revenues for Fiscal 2000 were $1,665,225 compared to $2,991,953 for
Fiscal 1999, a decrease of $1,326,728, or 44%. Revenues for Fiscal 2000
consisted primarily of revenues from our Internet business while Fiscal 1999
revenues consisted of fees from the production and distribution of
made-for-television movies and international distribution fees.

        Write-offs of projects in development were $224,988 for Fiscal 2000 and
$301,037 for fiscal 1999.

        Cost of sales for Fiscal 2000 was nil as compared to $926,295 for Fiscal
1999. Cost of sales as a percentage of total revenues decreased to zero from
31.5% for Fiscal 1999. The difference results from the transition to the
Internet business in Fiscal 2000, a business that has no cost of sales.

        General and administrative expenses increased to $9,747,586 in Fiscal
2000 from $4,066,590 in Fiscal 1999, an increase of $5,680,996 or 140%. This
increase stems primarily from the infrastructure costs associated with our
Internet business including the cost of our international sales force,
technology, product development and client operations departments none of which
existed in the entertainment business in Fiscal 1999.

        Interest income during Fiscal 2000 was $482,993 compared to $3,096 for
Fiscal 1999. Interest income primarily is generated from the investment of
excess cash in short term investments. During Fiscal 2000, we raised
approximately $8.5 million, with all excess cash being invested in short term
investments.

        Interest and financing expense in Fiscal 2000 was $8,354 as compared to
$12,447 in Fiscal 1999. The interest and financing expense in Fiscal 1999
primarily consisted of deferred financing charges which were expensed upon
termination of certain promissory notes.

        During Fiscal 2000, we wrote off $138,124 of notes and accounts
receivable as compared to $166,965 for Fiscal 1999. The decrease stems from
the write-off of receivables in Fiscal 1999 in connection with previous
production deals.


                                    Page 11
<PAGE>


        On November 4, 1996, we settled our litigation with a former officer and
director in a negotiated stipulated settlement filed with the Los Angeles County
Superior Court that required us to make aggregate payments of $575,000 in
exchange for an agreement by this individual not to compete with us through
December 31, 1998. Accordingly, amortization of the covenant not to compete was
$115,000 in Fiscal 1999, the year in which the final amortization was
calculated. There was no amortization of the covenant not to compete for Fiscal
2000.

        The net loss applicable to common shareholders was $9,897,975 for Fiscal
2000 as compared to $3,213,489 for Fiscal 1999.

PERIOD FROM JULY 1, 1999 THROUGH DECEMBER 31, 1999 ("1999 INTERIM PERIOD")
COMPARED WITH THE PERIOD FROM JULY 1, 1998 THROUGH DECEMBER 31, 1998 ("1998
INTERIM PERIOD")

        Our aggregate revenues for the 1999 Interim Period decreased $70,080 or
17% compared to the 1998 Interim Period. Revenues for the 1999 Interim Period
consisted of sales of $155,466 generated by our NC Services subsidiary and
$187,519 generated by our MediaWorks subsidiary. Revenues for the 1998 Interim
Period primarily consisted of fees from the production and distribution of one
made-for-television movie for a broadcast network and four additional
made-for-television movies which were exhibited on The Family Channel and
Showtime Network, and currently are being distributed internationally.

        Cost of sales for the 1999 Interim Period was $96,997 as compared to
$90,171 for the 1998 Interim Period. These costs relate to MediaWorks revenues
and with the difference being due to increased distribution costs for the 1999
Interim Period.

        General and administrative expenses increased to $2,895,211 in the 1999
Interim Period from $2,621,725 in the 1998 Interim Period or an increase of
$273,486. However, our ongoing general and administrative expense actually
decreased for the 1999 Interim Period, as approximately $510,000 of the expenses
was incurred as a result of the cost of the Infolocity, Inc. merger. The
decrease in the general and administrative expenses primarily is attributable to
the closure of our operations in New York and Toronto in January 1999 which
carried contractual obligations through approximately August 1999.

        Interest income during the 1999 Interim Period was $10,325, and
primarily consisted of short-term investment interest income.

        Interest and financing expense in the 1999 Interim Period was $37,189 as
compared to nil in the 1998 Interim Period. The interest and financing expense
for the 1999 Interim Period primarily consisted of interest paid to convertible
debenture holders.

        On November 4, 1996, we settled our litigation with a former officer and
director in a negotiated stipulated settlement filed with the Los Angeles County
Superior Court that required us to make aggregate payments of $575,000 in
exchange for an agreement by this individual not to compete with us through
December 31, 1998. Accordingly, amortization of the covenant not to compete was
nil in the 1999 Interim Period and $115,000 in the 1998 Interim Period. The
covenant not to compete was fully amortized in June 30, 1999 and thus there is
no related cost for the 1999 Interim Period.

        The comprehensive net loss applicable to common shareholders was
$5,670,345 for the 1999 Interim Period as compared to a net loss of $2,719,417
for the 1998 Interim Period. Of this amount for the 1999 Interim Period,
$957,000 represents a beneficial conversion feature on Series G Preferred Stock
as a dividend, an unrealized gain on investment of $225,050, and $213,813
represents the dividend paid in Common Stock to the holders of the Series A
Preferred Stock and Series G Preferred Stock. Of the amount for the 1998 Interim
Period, there were no non-recurring expenses and $212,500 represented the
dividend paid in Common Stock to the holders of the Series A Preferred Stock.


                                    Page 12
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

        At December 31, 2000, having spent a year building client relationships,
alliances and NSC infrastructure, we require additional resources to roll out
our new products, complete the enhancements to our existing products, continue
development of future products and continue to execute our business plan, reach
profitability and increase our presence in the Internet industry.

        Net cash provided by (used in) operating activities of our company for
the twelve month period ended December 31, 2000 was ($7,681,345), in the six
month period ended December 31, 1999 was ($2,959,478), in the twelve month
period ended June 30, 1999 was ($1,320,028), and in the six month period ended
December 31, 1998 was ($527,949). Net cash provided by (used in) investing
activities during the twelve month period ended December 31, 2000 was
($734,678), in the six month period ended December 31, 1999 was $33,562, in the
the twelve month period ended June 30, 1999 was ($826,894), and in the six month
period ended December 31, 1998 was ($845,689). Net cash provided by financing
activities during the twelve month period ended December 31, 2000 was
$10,371,655, in the six month period ended December 31, 1999 was $3,357,389, in
the twelve month period ended June 30, 1999 was $2,440,553, and in the six month
period ending December 31, 1998 was $857,242.

        Our total cash and cash equivalent balance at December 31, 2000 was
$2,754,487 as compared to December 31, 1999 which was $798,855.

        On March 3, 2000, we entered into an equity securities purchase
agreement with the Brown Simpson Strategic Growth Fund Ltd. and the Brown
Simpson Strategic Growth Fund L.P. to purchase up to $34,000,000 of common stock
directly and through warrants. If Brown Simpson exercises its warrants, Brown
Simpson could own 5,698,000 shares of our common stock. In March 2000, we
received $8,500,000 of this financing for the purchase of the initial 1.7
million shares of common stock. The balance is due through the exercise of
warrants to purchase 3,998,000 shares of our common stock initially at exercise
prices ranging from $6 to $9 per share. On December 27, 2000, we amended our
original agreement with Brown Simpson Strategic Growth Fund, Ltd. and Brown
Simpson Strategic Growth Fund, L.P. and repriced these warrants to an exercise
price of $1. If, at any time after the effective date of the registration
statement registering the resale of the shares of common stock underlying the
warrants, the per share market value of our common stock equals or exceeds
prices ranging from $2.125 to $3, for any period of 10 consecutive trading days,
then the warrant holder will be required to exercise the warrant.

        On February 28, 2001, we entered into a financing agreement for a loan
of $2 million, which we can draw down as needed. The loan will be available for
one year with annualized interest at 10%. The financing company will receive 5%
of the amount of the loan in warrants to purchase our common stock at an
exercise price equal to 110% of the closing bid price on the date we receive the
funds. The loan will have a convertible feature allowing the finance company to
convert the debt into our common stock at 80% of the average of the five trading
days prior to conversion if the loan is not repaid on or before December 31,
2001. We are required to pay 50% of any proceeds we receive from the sale of our
common stock to the financing company or any third party to reduce the loan
amount. The loan also will be secured by certain of our assets. The financing
company will receive an origination fee of 5% for arranging the financing.

        We believe that cash flow from operations, cash on hand as well as the
financing commitment we received on February 28, 2001, should be sufficient to
fund our operations and service our debt through fiscal 2001. However, there are
a number of factors that could change our anticipated needs, and could require
that we raise additional financing.


                                    Page 13
<PAGE>


NEW ACCOUNTING PRONOUNCEMENTS

        In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition," to provide
guidance on the recognition, presentation, and disclosure of revenue in
financial statements. Changes in accounting to apply the guidance in SAB No. 101
may be accounted for as a change in accounting principle effective January 1,
2000. Management has not yet determined the complete impact of SAB No. 101 on
the Company; however, management does expect that application of SAB No. 101
will have a material effect on the Company's revenue recognition and results of
operations.

        In March 2000, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation," (an Interpretation of Accounting Principles Bulletin Opinion No.
25 ("APB 25")) ("FIN 44"). FIN 44 provides guidance on the application of APB
25, particularly as it relates to options. The effective date of FIN 44 is July
1, 2000, and the Company has adopted FIN 44 as of that date.

        In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Instruments and Certain Hedging Activities." This statement is not applicable to
the Company.

        In June 2000, the FASB issued SFAS No. 139, "Rescission of FASB
Statement No. 53 and Amendments to Statements No. 63, 89, and 121." This
statement is not applicable to the Company.

        In September 2000, the FASB issued SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
a replacement of FASB Statement No. 125." This statement is not applicable to
the Company.

                    FACTORS THAT COULD IMPACT FUTURE RESULTS

RISKS RELATED TO OUR BUSINESS

WE ACQUIRED NSC IN DECEMBER 1999. IF WE FAIL TO GROW THE NSC BUSINESS, OUR
BUSINESS AND FINANCIAL CONDITION COULD SUFFER.

        On December 27, 1999, we completed the acquisition of NSC. We merged
with NSC with the expectation that this merger would help us execute our plan to
expand our core business into the Internet industry and provide us with further
opportunities to promote synergistic business relationships among other Internet
companies. However, we cannot be certain that our acquisition of NSC will enable
our business to realize a higher rate of growth. In order to achieve the
anticipated benefits from the merger, we must be able to achieve efficient,
effective and time integration of NSC's operations into ours. The combination of
these businesses requires, among other things:

    o   integration of management staffs and necessary support staffing to meet
        the combined entity's business growth opportunities;

    o   coordination of operations and marketing efforts; and

    o   location of adequate sources of additional funding.

        Full integration of these operations requires considerable effort on the
part of our management, who will need to dedicate considerable time toward
integrating the financial and information systems, management staffs and
organizational cultures of the separate businesses. We could experience problems
associated with the integration, and the integration itself may not proceed
efficiently or be successful. Any delay in completing the integration may
negatively impact the combined entity's ability to provide ongoing quality
products and services, which in turn may negatively impact the future revenues,
net


                                    Page 14
<PAGE>


income and earnings per share of the combined entity. Additionally, unexpected
costs incurred in connection with the integration could decrease operating
margins and negatively impact net income and earnings per share of the combined
entity. In addition, we cannot assure you that the operations, management and
personnel of the businesses will be compatible or that NSC will not experience
the loss of key personnel, notwithstanding the fact that we have employment
agreements with a number of these key employees. Furthermore, even if we
successfully integrate NSC's operations into ours, the combination may
nevertheless adversely affect our business and results of operations by
interrupting or interfering with our pre-existing business operations, diverting
management's attention and resulting in additional management expenses.

OUR PROSPECTS IN THE INTERNET SECTOR ARE DIFFICULT TO FORECAST BECAUSE WE HAVE
ONLY TRANSITIONED INTO THE INTERNET AND ONLINE COMMERCE INDUSTRIES SINCE
FEBRUARY 1999 AND ACQUIRED NSC AS OF DECEMBER 1999.

        We announced our intention to expand our business in the Internet and
electronic commerce industries in February 1999, and we have changed our core
television production business to Internet technology services, primarily
through our acquisition of NSC. These industries are new, highly speculative and
involve a substantial degree of risk. Since we are in an early stage of
development in these rapidly evolving industries, our prospects are difficult to
predict and could change rapidly and without warning. You must consider our
prospects in light of the risks, expenses and difficulties frequently
encountered by companies in the early stages of developing and expanding their
business, particularly companies in the new and rapidly evolving Internet
technology and online commerce markets. These risks include, but are not limited
to, the inability to attract key personnel knowledgeable in the Internet
markets, the inability to respond promptly to changes in a rapidly evolving and
unpredictable business environment and the inability to manage potential growth.
To address these risks, we must, among other things:

    o   successfully implement new business and marketing strategies;

    o   respond to competitive developments;

    o   attract and retain qualified personnel.

WE MAY NOT BE SUCCESSFUL IN ENTERING THE INTERNET AND ONLINE COMMERCE FIELDS
SINCE THIS BUSINESS WILL ALSO REQUIRE SUBSTANTIAL WORKING CAPITAL.

        Our new business strategy, investment and acquisition activities will
require substantial working capital. We spent substantial funds to acquire NSC
and will continue to spend substantial funds to market and expand our new
business and to expand our existing management team with additional experienced
Internet personnel. We cannot assure you that we will be successful in any of
these areas.

FUTURE ACQUISITIONS INVOLVE RISKS FOR US.

        We intend to evaluate future acquisitions of complementary product lines
and businesses as part of our business strategy. Any future acquisitions may
result in potentially dilutive issuances of equity securities, the use of our
cash resources, the incurrence of additional debt and increased goodwill,
intangible assets and amortization expense, which could negatively impact our
profitability. In addition, acquisitions involve numerous risks, including
difficulties in the assimilation of the operations and products of the acquired
companies, the diversion of management's attention from other business concerns,
risks of entering markets in which we have no or limited direct prior
experience, and the potential loss of key employees of the acquired company.


                                    Page 15
<PAGE>


OUR GROWTH AND OPERATING RESULTS COULD BE IMPAIRED IF WE ARE UNABLE TO MEET OUR
CURRENT LIQUIDITY AND CAPITAL RESOURCES REQUIREMENTS.

        We estimate that, as of December 31, 2000, taking into account our
acquisition of NSC, our cash commitments for the next twelve months will be
approximately $1,346,000; a significant portion of this amount is allocated for
requirements associated with the business of NSC.

We incur expenses associated with other general and administrative costs such
as:

    o   staff salaries;

    o   employee benefits;

    o   employer taxes;

    o   premiums on insurance policies;

    o   advertising and marketing costs;

    o   office expenses;

    o   professional fees;

    o   consulting fees; and

    o   other expenses.

        In addition to general and administrative expenses, the required
dividends on the shares of Series A Preferred Stock are $425,000 annually. The
dividends on the Series A Preferred Stock may be paid either in shares of our
common stock or in cash.

        In addition, while we believe the cash generated from operations in
addition to our February 2001 financing will be sufficient to fund our business
for the next 12 months, we cannot anticipate all of our future requirements. We
may need to raise additional funding for the expansion of our business and
marketing efforts, for example. However, if we must raise additional funds by
issuing equity or convertible debt securities, the percentage ownership of our
stockholders will be diluted. Any new securities could have rights, preferences
and privileges senior to those of our common stock. Furthermore, we cannot be
certain that additional financing will be available when and to the extent
required or that, if available, it will be on acceptable terms. If adequate
funds are not available on acceptable terms, we may not be able to fund our
expansion of our business into the Internet and online commerce sectors.

WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.

        The Company has a history of revenues and losses as follows:

<TABLE>
<CAPTION>
                                                              Revenues           Losses
                                                            --------------    --------------
                <S>                                         <C>               <C>
                Year ended June 30, 1997                    $   5,521,441     $  4,592,145
                Year ended June 30, 1998                    $  22,369,511     $  1,411,916
                Year ended June 30, 1999                    $   2,991,953     $  2,722,239
                Six months ended December 31, 1999          $     342,985     $  4,724,582
                Year ended December 31, 2000                $   1,665,225     $  8,360,125
</TABLE>


                                    Page 16
<PAGE>


(without giving effect to the payment in 1997, 1998, 1999 and 2000 of dividends
of $425,000 annually, and $212,500 for the six months ended December 31, 1999 on
the Series A Preferred Stock and a payment in 1999 of dividends of $66,250 on
the Series E Preferred Stock). Because a substantial portion of our expenses are
fixed, achieving profitability depends upon our ability to generate and sustain
substantially higher revenues. We cannot assure you that we will be able to do
so and consequently may experience additional losses in fiscal 2001.

OUR FUTURE OPERATING RESULTS MAY FLUCTUATE AND ARE UNPREDICTABLE. IF WE FAIL TO
MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE MARKET PRICE
OF OUR COMMON STOCK AND REDEEMABLE WARRANTS MAY DECLINE SIGNIFICANTLY.

        Our limited operating history in the Internet and online commerce
industries makes it difficult to forecast accurately our revenues, operating
expenses and operating results. As a result, we may be unable to adjust our
spending in these areas in a timely manner to compensate for any unexpected
revenue shortfall. As a result, we may not satisfy the expectations of analysts
or investors which may cause our stock price to decline. Consequently, investors
may not be able to resell their shares of our common stock at or above the cost
of their purchase prices.

BECAUSE OF THE LIMITED BARRIERS TO ENTRY IN THE INTERNET COMPETITION IN THESE
MARKETS IS INTENSE. IF WE ARE UNABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND
FUTURE COMPETITORS THAT ENTER THESE MARKETS, OUR REVENUES AND OPERATING RESULTS
COULD BE IMPAIRED.

        The Internet markets are new, rapidly evolving and intensely
competitive, and we expect that competition could further intensify in the
future. Barriers to entry are limited, and current and new competitors can
launch web sites and other similar businesses at a relatively low cost. Many of
our current and potential competitors have longer operating histories and
significantly greater financial, marketing and other resources than us.
Increased competition may result in reduced operating margins and loss of market
share.

        We have not yet determined whether we will be able to compete
successfully against our current and future competitors. Further, as a strategic
response to changes in the competitive environment, we may from time to time
make marketing decisions or acquisitions that could adversely affect our
business, prospects, financial condition and results of operations.

OUR GROWTH AND OPERATING RESULTS WILL BE IMPAIRED IF THE INTERNET AND ONLINE
COMMERCE INDUSTRIES DO NOT CONTINUE TO GROW.

        Our growth and operating results depend in part on widespread acceptance
and use of the Internet as a point of convergence in the telecommunications,
entertainment and technology industries, as well as on continued consumer and
corporate acceptance of the Internet as a communications medium and for other
forms of communication. These practices are at an early stage of development,
and demand and market acceptance are uncertain.

        The Internet may not become a viable medium for telecommunications,
entertainment and technology convergence or a healthy commercial marketplace due
to inadequate development of network infrastructure and enabling technologies
that address the public's concerns about:

    o   network performance;

    o   reliability;

    o   speed of access;


                                    Page 17
<PAGE>


    o   ease of use; and

    o   bandwidth availability.

        In addition, the Internet's overall viability could be adversely
affected by increased government regulation. Changes in or insufficient
availability of telecommunications or other services to support the

Internet could also result in slower response times and adversely affect general
usage of the Internet. Also, negative publicity and consumer concern about the
security of transactions conducted on the Internet and the privacy of users may
also inhibit the growth of commerce on the Internet.

BURDENSOME GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD IMPAIR OUR
RESULTS OF OPERATIONS.

        It is possible that a number of laws and regulations may be adopted
concerning the Internet, relating to, among other things:

    o   user privacy;

    o   content;

    o   copyrights;

    o   distribution;

    o   telecommunications; and

    o   characteristics and quality of products and services.

        The adoption of any additional laws or regulations may decrease the
popularity or expansion of the Internet. A decline in the growth of the Internet
could decrease demand for our services and increase our cost of doing business.
The application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services could also harm our
business.

OUR OUTSTANDING OPTIONS AND WARRANTS MAY DILUTE OUR STOCKHOLDERS' INTERESTS AND
COULD HINDER US FROM OBTAINING ADDITIONAL FINANCING.

        As of March 1, 2001, we have granted options and warrants to purchase a
total of 11,255,747 shares of common stock that have not been exercised. To the
extent that these outstanding options and warrants are exercised, our
stockholders' interests will be diluted. Also, we may not be able to obtain
additional equity capital on acceptable terms, since the holders of the
outstanding options and warrants may exercise those securities at a time when we
may be able to obtain such capital on better terms than those in the options and
warrants.

THE CONVERSION OF OUR CONVERTIBLE PREFERRED STOCK MAY DILUTE OUR STOCKHOLDERS'
INTERESTS AND COULD HINDER US FROM OBTAINING ADDITIONAL FINANCING.

        As of March 1, 2001, we have issued and outstanding 1,000,000 shares of
our Series A Preferred Stock, 400,000 shares of our Series C Preferred Stock,
50,000 shares of our Series F Preferred Stock and no shares of our Series G
Preferred Stock. At our option, we can pay the dividends on our Series A
Preferred Stock in cash or in shares of common stock. We are not required to pay
dividends on the Series F Preferred Stock. We have not yet paid dividends on the
Series A and Series C Preferred Stock for the periods ended September 30, 2000,
and December 31, 2000.


                                    Page 18
<PAGE>


        Holders of our convertible preferred stock could convert their shares
into common stock at any time in the future. To the extent all of the shares of
our outstanding convertible preferred stock are converted into common stock, our
common stockholders' interests will be diluted. Since these shares of common
stock will be registered for sale in the marketplace, future offers to sell such
shares could potentially depress the price of our common stock. In the future,
this could make it difficult for us or our

stockholders to sell the common stock. Also, we may have problems obtaining
additional equity capital on acceptable terms, since we can expect the holders
of our convertible preferred stock to convert their shares into common stock at
a time when we would be able to obtain any needed capital on more favorable
terms than those of the convertible preferred stock.

STOCK PRICES OF INTERNET-RELATED COMPANIES HAVE FLUCTUATED WIDELY IN RECENT
MONTHS AND THE TRADING PRICE OF OUR COMMON STOCK AND REDEEMABLE WARRANTS IS
LIKELY TO BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES TO INVESTORS.

        As a result of our recent expansion into Internet and online commerce,
the trading price of our common stock and redeemable warrants could become more
volatile and could fluctuate widely in response to factors including the
following, some of which are beyond our control:

    o   variations in our operating results;

    o   announcements of technological innovations or new services by us or our
        competitors;

    o   changes in expectations of our future financial performance, including
        financial estimates by securities analysts and investors;

    o   changes in operating and stock price performance of other
        Internet-related companies similar to us;

    o   conditions or trends in the Internet and technology industries;

    o   additions or departures of key personnel;

    o   future sales of our common stock; and

    o   acceptance by the market of our acquisition of NSC.

        Domestic and international stock markets often experience significant
price and volume fluctuations. These fluctuations, as well as general economic
and political conditions unrelated to our performance, may adversely affect the
price of our common stock and redeemable warrants.

TAKEOVER EFFORTS COULD BE DETERRED AS A RESULT OF OUR RIGHT TO ISSUE PREFERRED
STOCK IN THE FUTURE AND CERTAIN PROVISIONS IN OUR CERTIFICATE OF INCORPORATION.

        Our Certificate of Incorporation permits our Board of Directors to issue
up to 20,000,000 shares of "blank check" Preferred Stock. Our Board of Directors
also has the authority to determine the price, rights, preferences, privileges
and restrictions of those shares without any further vote or action by our
stockholders. We have issued and outstanding 1,000,000 shares of Series A
Preferred Stock, 400,000 shares of Series C Preferred Stock and 50,000 shares of
Series F Preferred Stock. If we issue additional preferred stock with voting and
conversion rights, the rights of our common stockholders could be adversely
affected by, among other things, the loss of their voting control to others. Any
additional issuances could also delay, defer or prevent a change in our control,
even if these actions would benefit our stockholders.


                                    Page 19
<PAGE>


        Additionally, provisions of Delaware law and our Certificate of
Incorporation could make it more difficult for a third party to acquire us, even
if doing so would be beneficial to our stockholders.

WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK. WE PAY ANNUAL CASH OR STOCK
DIVIDENDS ON CERTAIN SERIES OF OUR PREFERRED STOCK.

        We have never paid cash dividends on our common stock and we do not
expect to pay these dividends in the foreseeable future. Holders of our Series A
Preferred Stock are entitled to annual dividends of 8 1/2% (aggregating $425,000
annually, in cash or stock at our option, assuming no conversion). Holders of
our Series C Preferred Stock are entitled to dividends of 8% annually, so long
as we have net income in excess of $1,000,000 in the applicable fiscal year. We
pay these dividends quarterly, in cash or in shares of our common stock. For the
foreseeable future, we anticipate that we will retain all of our cash resources
and earnings, if any, for the operation and expansion of our business, except to
the extent required to satisfy our obligations under the terms of the Series A
Preferred Stock and Series C Preferred Stock.

SALES OF ADDITIONAL SHARES OF OUR COMMON STOCK INTO THE PUBLIC MARKET MAY CAUSE
OUR STOCK PRICE TO FALL.

        If our stockholders or we sell substantial amounts of our common stock
(including shares issued upon the exercise of outstanding options and warrants
or upon the conversion of shares of our convertible preferred stock) in the
public market, the market price of our common stock could fall. As of March 1,
2001, we had outstanding 31,706,729 shares of our common stock. The unregistered
shares of common stock and the shares of common stock held by our officers and
directors are "restricted" securities, as that term is defined by Rule 144 under
the Securities Act. In the future, these restricted securities may be sold only
in compliance with Rule 144 or if they are registered under the Securities Act
or under an exemption. Generally, under Rule 144, each person who holds
restricted securities for a period of one year may, every three months, sell in
ordinary brokerage transactions an amount of shares which does not exceed the
greater of 1% of our then-outstanding shares of common stock, or the average
weekly volume of trading of our common stock as reported during the preceding
four calendar weeks. A person who has not been an affiliate of ours for at least
the three months immediately preceding the sale and who has beneficially owned
shares of common stock for at least two years can sell such shares under Rule
144 without regard to any of the limitations described above. Sales of
substantial amounts of common stock in the public market, or the perception that
such sales could occur, may adversely affect the prevailing market price for our
common stock and could impair our ability to raise capital through a public
offering of equity securities.

        In addition, as of March 1, 2001, holders of options and warrants may
acquire approximately 11,255,747 shares of common stock and holders of shares of
our Series A Preferred Stock, Series C Preferred Stock and Series F Preferred
Stock may acquire shares of common stock at various conversion rates.

WE MAY BE EXPOSED TO CONTINGENT LIABILITY ARISING FROM OUR FAILURE TO MAINTAIN
AN EFFECTIVE REGISTRATION STATEMENT COVERING THE REDEEMABLE WARRANTS AND
UNDERLYING COMMON STOCK.

        We initially registered the issuance of the redeemable warrants and the
offer to purchase the shares of common stock issuable upon exercise of the
redeemable warrants with the SEC though the filing of a registration statement
in 1996. We did not update the registration statement with current information
until August 30, 2000. A warrant holder may claim that our failure to maintain
an effective registration statement covering the exercise of the redeemable
warrants for the period of time that the price of our common stock exceeded the
cost associated with the exercise of the warrants constituted a breach of their
Warrant Agreement. If all warrant holders made this assertion, which we believe
has no legal basis based on federal case law, the amount of damages they could
allege, may aggregate up to $9.5 million, which


                                    Page 20
<PAGE>


represents the difference between the highest closing trading price of the
common stock ($11.06) which occurred on March 27, 2000, and the cash exercise
price ($5.25), multiplied by the number of outstanding warrants divided by three
- as three warrants need to be tendered in addition to the cash exercise price
in order to receive one share of common stock. However, a warrant holder who was
unable to realize $5.81 by tendering three warrants and $5.25 in cash to the
Company, could have on March 27, 2000, sold those three warrants and realized
$6.27, thereby eliminating any lost opportunity, since the warrants publicly
trade on the Nasdaq Small Capital Market.

        Accordingly, we also believe that this opportunity to mitigate any
damages incurred by a warrant holder resulting from an inability to exercise his
or her warrants further diminishes the likelihood of a successful claim for any
damages by a warrant holder.

        The Company does not believe that the warrant holders, or any warrant
holder, would be successful in this claim in light of the fact that no warrant
holder complied with the contractual obligations to exercise their redeemable
warrants and no warrant holder ever indicated to us or our transfer agent a
desire to exercise his or her warrants.

        Our failure to maintain an effective registration statement covering the
exercise of the warrants also may constitute a violation of Section 5 of the
Securities Act of 1933, as amended. A violation of Section 5 of the Securities
Act may give a warrant holder who exercised warrants the right for some period
of time up to one year, to demand rescission of that exercise in which event the
warrant holder would be required to return to us the shares of common stock
acquired upon exercise and we would return to the warrant holder the warrants
tendered and the cash exercise price previously paid. Rescission would result in
no proceeds to the Company from the warrant offering and no damages to the
Company except for minimal transactional costs associated with the rescission.

        As of the date of this report, we are not aware of any claims for damage
or rescission.

WE MAY BE DELISTED FROM THE NASDAQ SMALL CAPITAL MARKET IF WE DO NOT MEET THE
CONTINUED LISTING REQUIREMENTS ON OR BEFORE MARCH 27, 2001.

        On December 27, 2000, we were notified by The Nasdaq Stock Market that
we did not meet the minimum bid price requirement of the continued listing
requirements of the Nasdaq Small Capital Market. If we do not meet the minimum
bid price requirement on or before March 27, 2001, we may be delisted from The
Nasdaq Small Capital Market, in which case we anticipate that we would apply for
our common stock to trade on the Over The Counter Bulletin Board. In addition,
in order to continue to be listed on Nasdaq, we must meet the following
requirements:

    o   net tangible assets of at least $2,000,000, or a market capitalization
        of $35,000,000 or $500,000 in net income for two of the last three
        years;

    o   two market makers;

    o   300 stockholders;

    o   at least 500,000 shares in the public float or a minimum market value
        for the public float of $1,000,000; and

    o   compliance with certain corporate governance standards.

        If we are delisted from The Nasdaq Small Capital Market, it may be more
difficult to raise additional debt or equity financing and an investor likely
would find it more difficult to sell or obtain quotations as to the price of our
common stock and/or redeemable warrants.


                                    Page 21
<PAGE>


ITEM 7.   FINANCIAL STATEMENTS

        The Report of Independent Certified Public Accountants, Financial
Statements and Notes to the Financial Statements appear in a separate section
of this Form 10-KSB following Part III. The Index to Financial Statements
appears on page F-1.


ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

        None.

                                    PART III


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

        The directors and executive officers of our company and their ages as of
March 1, 2001, are as follows:

<TABLE>
<CAPTION>
    NAME                          AGE      POSITION
    ----                          ---      --------
    <S>                           <C>      <C>
    Irwin Meyer                   65       Chief Executive Officer, Chairman of
                                           the Board of Directors
    Arthur H. Bernstein           38       Executive Vice President, Secretary,
                                           and Director
    Michael Iscove (1)(2)         49       Chief Financial Officer, Director
    Thomas A. Daniels             46       Director
    Ivan Berkowitz (1)(2)         54       Director
    Stanley Graham(1)(2)          55       Director
-----------------------
<FN>
(1)  Audit Committee Member

(2)  Compensation Committee Member
</FN>
</TABLE>

Directors are elected to an annual term that expires at our Company's annual
meeting of stockholders.

IRWIN MEYER has been a director of our Company since its inception in 1989 and
has served as our Chief Executive Officer since February 1995. Since October
1997, Mr. Meyer has been Chairman of the Board of Directors. At various times
prior to October 1997, Mr. Meyer has served as our Chairman of the Board (April
1996-October 1997; January 1991-June 1992); Co-Chairman of the Board (February
1990-December 1990) and President (February 1995-October 1997). From 1988 to
July 1994, Mr. Meyer was a director of Ventura Entertainment Group Ltd., our
former parent company ("Ventura"), and from May 1988 to December 1990, Mr. Meyer
was President of Ventura. Mr. Meyer was an executive producer of seven of our
made-for-television movies. In 1995, he was nominated for Producer of the Year
by the Producers Guild of America. Mr. Meyer received the Antoinette Perry
("Tony") Award, the New York Drama Critics Circle Award, the Drama Desk Award,
the Outer Critics Circle Award and the Cue Magazine Golden Apple Award for his
1977 production of the musical "Annie." Mr. Meyer is a member of the Academy of
Motion Picture Arts and Sciences and the Academy of Television Arts and
Sciences. He holds a B.S. from New York University.


                                    Page 22
<PAGE>


ARTHUR H. BERNSTEIN has been a director of our Company since February 1995 and
has served as the Executive Vice President of our Company since October 1997 as
well as our Secretary since March 1995. Between June 1992 and October 1997, Mr.
Bernstein served as a Senior Vice President of our Company and was our Vice
President-Business and Legal Affairs from September 1991 to June 1992. Prior to
this, Mr. Bernstein was a Director of Legal and Business Affairs for New World
Entertainment Ltd. from July 1989 to August 1991. From 1987 to June 1989, he was
Assistant General Counsel of Four Star International, Inc. Mr. Bernstein
received a B.S. in finance and marketing from Philadelphia College of Textiles
and Sciences in 1984 and his law degree from Temple University in 1987.

MICHAEL ISCOVE has been a director of our Company since October 1997 and our
Chief Financial Officer since March 1, 2000. From June 1995 to date, Mr. Iscove
has served as the Chairman, President and Chief Executive Officer of Sirius
Corporate Finance Inc. Prior to that, Mr. Iscove was the President of Creative
Fusion Limited from April 1989 to June 1995. In 1978, Mr. Iscove received a
Chartered Accountants designation in accounting from The Canadian Institute of
Chartered Accountants. In 1972, Mr. Iscove received a B.A. degree in English
from York University, Toronto, Canada.

THOMAS A. DANIELS has been a director of our Company since July 1998. Since our
acquisition of MediaWorks in July 1998, Mr. Daniels has served as President of
MediaWorks. Mr. Daniels co-founded MediaWorks in 1996. Prior to that time, Mr.
Daniels was, at various times, a senior production and distribution executive
with Blake Edward's Television, Paramount Pictures Television and Columbia
Pictures Television.

IVAN BERKOWITZ has been a director of our Company since February 1999. Since
1993, Mr. Berkowitz has served as managing General Partner of Steib & Company, a
privately held New York based investment company. Between 1995 and 1997, Mr.
Berkowitz served as Chief Executive Officer of PolyVision Corporation. Between
1990 and 1994, Mr. Berkowitz served as Chairman of the Board of Directors of
Migdalei Shekel. Currently, Mr. Berkowitz serves on the Board of Directors of
the following public companies: Propierre, a real estate fund, HMG WorldWide, a
manufacturer of point of purchase displays, PolyVision Corporation, a
manufacturer of school products and displays, and Migdalei Shekel, a real estate
company based in Tel Aviv, Israel. Since 1989, Mr. Berkowitz has served as
President of Great Court Holdings Corporation, a privately held New York based
investment company. Mr. Berkowitz holds a B.A. (cum laude) from Brooklyn
College, an MBA in Finance from Baruch College, City University of New York, and
a Ph.D. in International Law from Cambridge University, England.

STANLEY GRAHAM was recently appointed a director of our Company in April 2000.
Prior to being appointed an outside director, Mr. Graham worked closely with the
Company as an operations consultant and was integrally involved in the
establishment of our Burlingame office. Mr. Graham also was recently appointed
Vice President, Corporate Development at Digimarc, the worldwide leader in
digital watermark technology. Previously, he was Vice President of the New
Enterprises division of Supra Products, a subsidiary of SLC Technologies,
manufacturers of electronic security and access control products. Prior to
Supra, Mr. Graham served as President and COO of Sunflex L.P. and Managing
Director of Sunflex, Ireland, which he developed into one of the world's leading
suppliers of computer glare screens and other computer accessories with
operations in the United States, Ireland, and Germany. Before Sunflex, Mr.
Graham spent 10 years at Xidex, a manufacturer of data storage products, where
he served in numerous executive positions. As Vice President of New Enterprises
he played a significant role in increasing revenues from $50 million to over
$600 million through marketing programs, acquisitions, equity investments, joint
ventures, licenses, technology partnerships and internal start-ups. In addition
to his corporate responsibilities, Mr. Graham was President or General Manager
of several Xidex subsidiaries, Sunflex, Xidex Data Disk and Oktel. Mr. Graham
holds an MBA degree from Samford University Graduate School and a B.S. in
chemistry from the University of Alabama.


                                    Page 23
<PAGE>



COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

        Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who own more than ten percent of a
registered class of our equity securities, to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of our Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulations to furnish us with copies of Section 16(a) forms they file.

         To our 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 fiscal year ended December 31, 2000, the Company believes that,
during the year ended December 31, 2000, all of the Company's executive
officers, directors and greater-than-ten percent stockholders complied with all
Section 16(a) filing requirements other than one late report on Form 5 filed by
Arthur Bernstein with respect to the exercise of options and sale of common
stock that occurred in fiscal 2000.

ITEM 10.   EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

        The following table sets forth information concerning the annual and
long-term compensation for services in all capacities rendered to us for the
fiscal years ended June 30, 1998 and 1999, the six months ended December 31,
1999, and the fiscal year ended December 31, 2000 of those persons who were (i)
at December 31, 2000, the Chief Executive Officer and (ii) each other executive
officer of our Company whose annual compensation exceeded $100,000 (the "Named
Executive Officers") in such fiscal periods:

<TABLE>
<CAPTION>
                                                                    LONG TERM
                                                                   COMPENSATION
                                                                    NUMBER OF
                                FISCAL      ANNUAL COMPENSATION     SECURITIES      ALL OTHER
                              YEAR ENDED    -------------------     UNDERLYING      COMPENSA-
                               JUNE 30       SALARY       BONUS      OPTIONS           TION
                              -----------   ----------  ---------  -------------    ---------
<S>                           <C>           <C>         <C>        <C>              <C>
Irwin Meyer................      2000   **  $ 312,000          0              0       18,000(2)
  Chief Executive Officer     Stub 1999 *     156,000          0              0        9,000
  (1)                            1999         312,000          0      3,000,000(6)    18,000(2)
                                 1998         312,000          0              0       18,000(2)
                                                                                      68,016(3)

Arthur H. Bernstein........      2000   **  $ 175,000          0              0       12,000(2)
  Executive Vice President    Stub 1999 *      87,500          0        300,000        6,000
  And Secretary                  1999         175,000          0        600,000       12,000(2)
                                 1998         175,000          0              0       12,000(2)

Thomas A. Daniels..........      2000   **  $ 188,482          0              0        9,000(2)
  Director and President      Stub 1999 *      93,000          0              0        4,500
  of MediaWorks, a wholly        1999         188,482          0        500,000       11,500(2)
  Owned subsidiary of the        1998               0          0              0            0
  Company (4)

Michael Iscove.............      2000   **  $ 135,000          0        230,000            0
  Chief Financial Officer     Stub 1999 *           0          0         50,000            0
  (5)                            1999               0          0        325,000            0
                                 1998               0          0              0            0


                                    Page 24
<PAGE>


<FN>
(1) Includes amounts paid to Mountaingate which provides us with the service of
    Mr. Meyer and others.

(2) Automobile reimbursement.

(3) Forgiveness of note receivable due from Mountaingate.

(4) Mr. Daniels began employment with us on July 15, 1998.

(5) Includes amounts paid to Sirius Corporate Finance Inc. that provides us with
    the services of Mr. Iscove and others.

(6) Includes 1,300,000 of Convertible Series C stock and options to purchase
    1,700,000 shares of common stock.

*   Stub 1999 refers to the six month period July 1, 1999 through December 31,
    1999.

**  As of February 2, 2000, the Company changed its fiscal year to December 31.
    Accordingly, Fiscal 2000 represents the period from January 1, 2000 through
    December 31, 2000.
</FN>
</TABLE>

OPTION GRANTS IN FISCAL 2000

        The following table sets forth certain information regarding the grant
of stock options made during fiscal 2000 to the Named Executive Officers.

<TABLE>
<CAPTION>
                             NUMBER OF         PERCENT OF
                             SECURITIES       TOTAL OPTIONS
                         UNDERLYING GRANTED    TO EXERCISE
                              OPTIONS          EMPLOYEES IN     OR BASE    EXPIRATION
 NAME                         GRANTED          FISCAL YEAR       PRICE        DATE
 --------------------    ----------------     --------------    --------   -----------
 <S>                     <C>                  <C>               <C>        <C>
 Irwin Meyer                           -                   -           -            -
 Arthur H. Bernstein                   -                   -           -            -
 Thomas A. Daniels               400,000               15.4%       $0.82       1/4/04
 Michael Iscove                  230,000                8.9%       $7.29       3/1/04
</TABLE>

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

        The following table sets forth, for each of the Named Executive
Officers, certain information regarding the exercise of stock options during
fiscal 2000, the number of shares of common stock underlying stock options held
at fiscal year-end and the value of options held at fiscal year-end based upon
the last reported sales price of the common stock on the Nasdaq Stock Market's
SmallCap Market on December 31, 2000 ($0.31 per share).

<TABLE>
<CAPTION>
                                                 NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                                                UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS
                        SHARES                        OPTIONS AT                        AT
                       ACQUIRED                    DECEMBER 31, 2000             DECEMBER 31, 2000
                          ON        VALUE      ---------------------------   --------------------------
 NAME                  EXERCISE    REALIZED    EXERCISABLE   UNEXERCISABLE   EXERCISABLE  UNEXERCISABLE
 -------------------  -----------  ----------  -----------   -------------   -----------  -------------
 <S>                  <C>          <C>         <C>           <C>             <C>          <C>
 Irwin Meyer                   -           -            -              -              -              -
 Arthur H. Bernstein      40,000   $ 147,200      200,000              -              -              -
 Thomas A. Daniels             -           -      800,000              -              -              -
 Michael Iscove                -           -      535,000         70,000              -              -
</TABLE>


                                    Page 25
<PAGE>


EMPLOYMENT AGREEMENTS

        We have entered into an employment agreement with Irwin Meyer for his
services as Chief Executive Officer of our Company and a production agreement
with Mountaingate Productions LLC ("Mountaingate") for the services of Mr. Meyer
and others to perform corporate duties as specified by the Board of Directors.
Mountaingate is a California limited liability company of which Alison Meyer and
Patricia Meyer, the adult children of Mr. Meyer, are the sole members. The
production agreement with Mountaingate provides for annual compensation of
$262,000, plus a $1,500 monthly automobile reimbursement. The employment
agreement with Mr. Meyer provides for annual compensation of $50,000. Both of
these agreements have been extended to February 28, 2003. Both agreements are
terminable by us in the event of Mr. Meyer's death or disability. In such event,
we shall pay Mountaingate a guaranteed fee of $262,000 for one year. We may also
terminate these agreements "for cause" (as defined in the agreements).
Mountaingate and Mr. Meyer may terminate their respective agreements in the
event of a material breach thereof by us or for "good reason" (as defined in the
agreements). In such event, we shall be obligated to pay all amounts due
thereunder for the balance of their respective terms. In the event that we
materially breach either agreement after a "change in control" (as defined in
the agreements), Mountaingate and Mr. Meyer, respectively, shall be entitled to
a lump sum payment equal to three times their then current total annual
compensation.

        Arthur Bernstein is employed as Executive Vice President of our Company
pursuant to an employment agreement, as amended, which has been extended to
February 28, 2003. Mr. Bernstein's annual compensation is $175,000 plus a $1,000
monthly automobile reimbursement. The employment agreement is terminable by us
in the event of Mr. Bernstein's death or disability. In such event, we are
obligated to pay Mr. Bernstein's compensation for one year. We may also
terminate the employment agreement "for cause" (as defined in the agreement).
Mr. Bernstein may terminate this Employment Agreement in the event of a material
breach by us or for "good reason" (as defined in the agreement). In such event,
we will be obligated to pay him all amounts due thereunder for the balance of
its term and all unvested stock options held by him shall vest. In the event of
a "change in control" (as defined in this agreement) of our Company, all stock
options issued to Mr. Bernstein shall vest and we shall, at Mr. Bernstein's
option, purchase shares of common stock owned by him at the then market price
and shall acquire all of his stock options for the difference between the
exercise price of such options and the greater of the price at which the new
controlling entity acquired its interest in our Company or the then market price
of the common stock.

        Thomas Daniels is employed as Chief Executive Officer of our subsidiary,
MWI Distribution, Inc. d/b/a MediaWorks International pursuant to an employment
agreement, as amended, which will terminate on June 30, 2001. Mr. Daniel's
annual compensation is $186,000. The employment agreement is terminable by us in
the event of Mr. Daniel's death or disability. We may also terminate the
employment agreement "for cause" (as defined in the agreement). Mr. Daniels may
terminate this Employment Agreement in the event of a material breach by us or
for "good reason" (as defined in the agreement). In such event, we will be
obligated to pay him all amounts due thereunder for the balance of its term.

        We have entered into an employment agreement with Michael Iscove for his
services as Chief Financial Officer of our Company and a consulting agreement
with Sirius Corporate Finance Inc. ("Sirius") for the services of Mr. Iscove and
others to perform corporate duties as specified by the Board of Directors. The
consulting agreement provides for $130,000 per annum. The employment agreement
with Mr. Iscove provides for compensation of $50,000 per year for the first year
of the agreement and $70,000 per annum thereafter. These employment agreements
will terminate on February 28, 2003. Both agreements are terminable by us in the
event of Mr. Iscove's death or disability. In such event, all Accrued
Obligations (as defined in the agreement) shall be payable by the Company. We
may also terminate the employment agreement "for cause" (as defined in the
agreement). Mr. Iscove may terminate this Employment Agreement in the event of a
material breach by us or for "good reason" (as defined in the agreement). In
such event, we will be obligated to pay him all amounts due thereunder for


                                    Page 26
<PAGE>


the balance of its term and all unvested stock options held by him shall vest.
In the event of a "change in control" (as defined in this agreement) of our
Company, all stock options issued to Mr. Iscove shall vest and we shall, at Mr.
Iscove's option, purchase shares of common stock owned by him at the then market
price and shall acquire all of his stock options for the difference between the
exercise price of such options and the greater of the price at which the new
controlling entity acquired its interest in our Company or the then market price
of the common stock.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The following table sets forth information as of March 1, 2001, relating
to the ownership of our common stock or Series C Preferred Stock by (i) each
person known by us to be the beneficial owner of more than five percent of the
outstanding shares of our common stock or Series C Preferred Stock, (ii) each of
our directors, (iii) each of the Named Executive Officers, and (iv) all of our
executive officers and directors as a group. Except as may be indicated in the
footnotes to the table and subject to applicable community property laws, each
such person has the sole voting and investment power with respect to the shares
owned. The address of each person listed is in care of us, 9720 Wilshire
Boulevard, Suite 700, Los Angeles, California 90212, unless otherwise set forth
below.

<TABLE>
<CAPTION>
                                       Number of                 Number of
                                       Shares of                 Shares of
                                        common                   Series C
                                         stock                   Preferred    Percent
                                      Beneficially    Percent      Stock        of
                                         Owned       of Class   Beneficially   Class
Name and Address                          (1)           (1)       Owned (1)     (1)
-----------------------------------   ------------   ---------  ------------  -------
<S>                                   <C>            <C>        <C>           <C>
Alison Meyer (2)...................     1,925,000       6.1%
Patricia Meyer (2).................
Mountaingate Productions LLC (2)...
Arthur H. Bernstein (3)............       200,000       0.6%
Salvatore Grosso (4)...............       400,000       1.3%
Lawrence S. Jacobson (4)...........       400,000       1.3%
Irwin Meyer........................             0       0.0%
Ivan Berkowitz (5).................       356,250       1.1%
Strategic Capital Consultants(6)...       400,000       1.2%       400,000     100%
Michael Iscove (7).................       535,000       1.7%
Thomas A. Daniels (8)..............     1,421,852       4.4%
Victor A. Holtorf..................     2,397,433       7.6%
Stanley Graham (9).................        45,000       0.1%
Joseph Stephens & Company,
Inc. (10)..........................       400,266       4.0%
Directors and Executive Officers
as a Group (6 persons) (11)........     2,558,102       7.6%
<FN>
(1)     Under Rule 13d-3 under the Exchange Act, certain shares may be deemed to
        be beneficially owned by more than one person (if, for example, persons
        share the power to vote or the power to dispose of the shares). In
        addition, shares are deemed to be beneficially owned by a person if the
        person has the right to acquire the shares (for example, upon exercise
        of an option) within 60 days of the date as of which the information is
        provided. In computing the percentage ownership of any person, the
        amount of shares outstanding is deemed to include the amount of shares
        beneficially owned by such person (and only such person) by reason of
        these acquisition rights. As a result, the percentage of outstanding
        shares of any person as shown in this table does not necessarily reflect
        the person's actual ownership or voting power with respect to the number
        of shares of common stock actually outstanding at March 1, 2001.


                                    Page 27
<PAGE>


(2)     Includes options to purchase 750,000 shares of common stock by
        Mountaingate. Alison Meyer and Patricia Meyer, the adult children of
        Irwin Meyer, our Chief Executive Officer, beneficially own the options
        to purchase the 750,000 shares of common stock by virtue of being the
        sole members of Mountaingate.

(3)     Represents shares that have been or may be acquired upon exercise of
        options.

(4)     Represents shares that may be acquired upon exercise of options by each
        of Mr. Grosso and Mr. Jacobson.

(5)     Represents shares that may be acquired upon exercise of options.

(6)     Represents shares of common stock which may be acquired upon conversion
        of 400,000 shares of Series C Preferred Stock.

(7)     Represents options to purchase 535,000 shares of common stock held by
        Mr. Iscove.

(8)     Includes 800,000 shares which may be acquired upon exercise of options.

(9)     Represents shares which may be acquired upon exercise of options.

(10)    According to a Schedule 13G filed by Joseph Stevens & Company, Joseph
        Sobara and Steven Markowitz on February 14, 2000, Joseph Stevens &
        Company, Inc. owned as of December 31, 1999, warrants ("JSC Warrants")
        to purchase 200,000 units, each unit consisting of one and one-third
        shares of common stock and two-thirds of a redeemable common stock
        purchase warrant ("Redeemable Warrants"). Each Redeemable Warrant
        entitles the holder to purchase an additional share of common stock. The
        JSC Warrants were exercisable commencing on September 12, 1997.
        Additionally, Joseph Stevens & Company, Inc. held as of December 31,
        1999, 266 shares of common stock in its market making account.

        As of December 31, 2000, Mr. Joseph Sorbara owned 24,000 Redeemable
        Warrants held with his spouse as joint tenants. Each Redeemable Warrant
        entitled the holder to purchase an additional share of common stock.
        Additionally, Mr. Sorbara was a controlling shareholder, director and
        officer of Joseph Stevens & Company, Inc. as of December 31, 1999. Based
        upon the foregoing, as of December 31, 2000, Mr. Sorbara beneficially
        owned 424,266 shares of common stock within the meaning of Rule 13d-3 of
        the Act.

        As of December 31, 2000, Mr. Steven Markowitz owned 10,000 Redeemable
        Warrants. Each Redeemable Warrant entitled the holder to purchase an
        additional share of common stock. Additionally, Mr. Markowitz was a
        controlling shareholder, director and officer of Joseph Stevens &
        Company, Inc. as of December 31, 1999. Based upon the foregoing, as of
        December 31, 1999, Mr. Markowitz beneficially owned 410,266 shares of
        common stock within the meaning of Rule13d-3 of the Act.

(11)    Includes options to purchase 1,936,250 shares of common stock. There are
        no issued and outstanding shares of Series B Preferred Stock, Series D
        Preferred Stock or Series E Preferred Stock. There are no 5% beneficial
        owners of Series A Preferred Stock.
</FN>
</TABLE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         During the fiscal year ended June 30, 1999, we entered into a
Securities Purchase Agreement with Mountaingate pursuant to which Mountaingate
purchased 1,300,000 shares of the Series C Convertible Preferred Stock in
exchange for $1,300,000.00. Mountaingate transferred the 1,300,000 shares of
Series C Preferred Stock to Alison Meyer and Patricia Meyer. On January 7, 2000,
Alison


                                    Page 28
<PAGE>


Meyer and Patricia Meyer each converted 650,000 shares of Series C Preferred
Stock to common stock at a price of $0.50 per share and each exercised 750,000
options at $1.20 per share and executed two Promissory Notes (which have been
subsequently amended), each in the amount of $1,225,000. As of December 31,
2000, the balance of each of the Promissory Notes are $1,286,427, including
accrued interest.

        During the year ended December 31, 2000, Arthur Bernstein executed a
Promissory Note in favor of the Company in the amount of $161,500. As of
December 31, 2000, the balance of the Promissory Note was $104,957.

        During the year ended December 31, 2000, we purchased approximately
$599,000 of marketing communications services from Strategic/Ampersand Inc., a
company owned partially by Mr. Iscove's wife.

        For more information concerning transactions between us and related
parties, see Note 13 of the Notes to the Financial Statements.

ITEM 13.   EXHIBITS, LIST AND REPORTS ON FORM 8-K.

        (a) The following documents are filed as part of this Transition Report
on Form 10-KSB for the fiscal year ended December 31, 2000.

        1.  Financial Statements:

            Financial Statements are listed in the "Index to Financial
            Statements" at page F-1.

        2.  Schedules:

            Financial Statements schedules are listed in the "Index to
            Financial Statements" at page F-1 herein.

        3.  Exhibits: (numbered in accordance with Item 601 of Regulation S-B)

            (a)    The Exhibits listed below are filed or incorporated by
                   reference as part of this Report.

EXHIBIT
NUMBER  EXHIBIT DESCRIPTION

2.1     Agreement and Plan of Merger, dated September 15, 1997, by and among The
        Producers Entertainment Group Ltd., TPEG Acquisition I Corp., The
        Grosso-Jacobson Entertainment Corporation, Salvatore Grosso and Lawrence
        S. Jacobson.(3)

2.2     Agreement and Plan of Merger, dated September 15, 1997, by and among The
        Producers Entertainment Group Ltd., TPEG Acquisition II Corp., The
        Grosso-Jacobson Productions, Inc., Salvatore Grosso and Lawrence S.
        Jacobson. (3)

2.3     Agreement and Plan of Merger, dated September 15, 1997, by and among The
        Producers Entertainment Group Ltd., TPEG Acquisition III Corp.,
        Grosso-Jacobson Music Company, Inc., Salvatore Grosso and Lawrence S.
        Jacobson. (3)

2.4     Agreement of Merger dated as of July 15, 1998, by and among The
        Producers Entertainment Group Ltd., TPEG Merger Company, MWI
        Distribution, Inc. and Tom Daniels and Craig Sussman.(4)


                                    Page 29
<PAGE>


2.5     Amended and Restated Agreement and Plan of Merger, dated November 1,
        1999, by and among IAT Resources Corporation, Infolocity Merger Sub,
        Inc. and Infolocity, Inc., Infolocity Merger Sub, Inc., Victor A.
        Holtorf and James J. Cerna, Jr. (9)

3.1     Restated Certificate of Incorporation, dated June 24, 1993.(1)

3.2     Amendment to Certificate of Incorporation, dated April 28, 1998.(2)

3.3     Amendment to Certificate of Incorporation, dated December 22, 1999.

3.4     Bylaws.

3.5     Amendment No. 1 to Bylaws.

4.1     Certificate of Designations for Series A Preferred Stock dated December
        13, 1994.(1)

4.2     Certificate of Designations for Series B Preferred Stock dated July 15 ,
        1998.(7)

4.3     Certificate of Designations for Series C Preferred Stock dated May 20,
        1999.(7)

4.4     Certificate of Designations for Series D Preferred Stock, dated July 31,
        1998.(2)

4.5     Certificate of Designations for Series E Preferred Stock, dated July 31,
        1998.(2)

4.6     Certificate of Designations for Series F Preferred Stock, dated July 31,
        1998.(2)

4.7     Certificate of Designations for Series G Preferred Stock, dated November
        15, 1999.(3)

4.8     Securities Purchase Agreement, dated July 31, 1998 between The Producers
        Entertainment Group Ltd. and the Augustine Fund, L.P.(2)

4.9     Registration Rights Agreement, dated July 31, 1998 between The Producers
        Entertainment Group Ltd. and the Augustine Fund, L.P. (2)

4.10    Escrow Agreement dated as of July 31, 1998 among the Augustine Fund,
        L.P., The Producers Entertainment Group Ltd. and H. Glenn Bagwell, Jr.,
        as Escrow Agent.(2)

4.11    Securities Purchase Agreement, dated as of March 3, 2000, between the
        Company, Brown Simpson Strategic Growth Fund, Ltd. And Brown Simpson
        Strategic Growth Fund, L.P. (10)

4.12    Registration Rights Agreement, dated as of March 3, 2000, between the
        Company, Brown Simpson Strategic Growth Fund, Ltd. And Brown Simpson
        Strategic Growth Fund, L.P. (10)

4.13    Form of Warrant to Purchase Common Stock (Series A), dated March 3,
        2000. (10)

4.14    Form of Warrant to Purchase Common Stock (Series B), dated March 3,
        2000. (10)

4.15    Form of Warrant to Purchase Common Stock (Series C), dated March 3,
        2000. (10)

10.1    1998 Stock Incentive Plan.(5)

10.2    Executive Extension Agreement, dated September 12, 1997, between The
        Producers Entertainment Group Ltd. and Irwin Meyer.(3) +

10.3    Executive Extension Agreement, dated September 12, 1997, between The
        Producers Entertainment Group Ltd. and Arthur Bernstein. (3) +


                                    Page 30
<PAGE>


10.4    Mountaingate Extension Agreement, dated September 12, 1997, between The
        Producers Entertainment Group Ltd. And Mountaingate Productions, LLC.
        (3)

10.5    Employment Agreement dated as of July 15, 1998, by and among TPEG Merger
        Company and Thomas Daniels. (4) +

10.6    Registration Rights Agreement dated as of July 15, 1998, by and among
        The Producers Entertainment Group Ltd., Tom Daniels and Craig Sussman.
        (4)

10.7    Securities Purchase Agreement with Strategic Capital Consultants, dated
        as of January 14, 1999. (6)

10.8    Securities Purchase Agreement with Mountaingate Productions LLC, dated
        as of January 14, 1999. (6)

21.1    Subsidiaries of the Company.(8)

23.1    Consent of Singer Lewak Greenbaum & Goldstein LLP.
-----------------------------

(1)     Incorporated by reference to Registrant's Report on Form 8-K dated June
        18, 1996.

(2)     Incorporated by reference to Registrant's Registration Statement on Form
        S-3 filed September 1, 1998.

(3)     Incorporated by reference to Registrant's Registration Statement on Form
        S-3 filed November 17, 1999.

(3)     Incorporated by reference to Registrant's Report on Form 8-K filed
        November 4, 1997 (as amended on December 29, 1997).

(4)     Incorporated by reference to Registrant's Report on Form 8-K filed July
        31, 1998.

(5)     Incorporated by reference to Registrant's Proxy Statement filed April 1,
        1998.

(6)     Incorporated by reference to Registrant's Report on Form 10-QSB filed on
        May 24, 1999.

(7)     Incorporated by reference to Registrant's Report on Form 10-KSB, as
        filed on October 13, 1999.

(8)     Incorporated by reference to Registrant's Report on Form 10-KSB, as
        filed on May 17, 2000.

(9)     Incorporated by reference to our Definitive Proxy Statement filed
        November 17, 1999.

(10)    Incorporated by reference to our Report on Form 8-K filed March 9, 2000.

+       Denotes employment contract.

       (b)     Reports on Form 8-K:

               No Current Reports on Form 8-K were filed by the Company during
the quarter ended December 31, 2000.


                                    Page 31
<PAGE>


                                   SIGNATURES

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

                                            NETCURRENTS, INC.

Dated: March 6, 2001                        By     /S/ IRWIN MEYER
                                                -------------------------------
                                                Irwin Meyer
                                                Chief Executive Officer


                                    Page 32
<PAGE>


                                POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Irwin Meyer and Arthur Bernstein and each
of them, his attorneys-in-fact, each with the power of substitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments to this Annual Report on Form 10KSB, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

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

<TABLE>
<CAPTION>
                Name                        Position                        Date
-----------------------------   ----------------------------------   -------------------
<S>                             <C>                                  <C>
                                President, Chief Executive           March 6, 2001
                                Officer, and Chairman of the
/s/ Irwin Meyer                 Board of Directors
-----------------------------
Irwin Meyer

                                Executive Vice President,            March 6, 2001
/s/ Arthur H. Bernstein         Secretary and Director
-----------------------------
Arthur H. Bernstein

                                Chief Financial Officer and          March 6, 2001
/s/ Michael Iscove              Director
-----------------------------
Michael Iscove

                                Director and Chief Executive         March 6, 2001
/s/ Thomas A. Daniels           Officer of MediaWorks
-----------------------------
Thomas A. Daniels


/s/ Ivan Berkowitz              Director                             March 6, 2001
-----------------------------
Ivan Berkowitz


/s/ Stanley Graham              Director                             March 6, 2001
-----------------------------
Stanley Graham
</TABLE>


                                    Page 33
<PAGE>


                                             NETCURRENTS, INC. AND SUBSIDIARIES
                                                                       CONTENTS
                                                              DECEMBER 31, 2000
-------------------------------------------------------------------------------

                                                                          Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                          F-2

CONSOLIDATED FINANCIAL STATEMENTS

   Consolidated Balance Sheets                                          F-3 - 4

   Consolidated Statements of Operations and Comprehensive
     Income (Loss)                                                      F-5 - 6

   Consolidated Statements of Shareholders' Equity                     F-7 - 11

   Consolidated Statements of Cash Flows                              F-12 - 15

   Notes to Consolidated Financial Statements                         F-16 - 39



                                    Page F-1
<PAGE>


                   REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholders
NetCurrents, Inc. and subsidiaries


We have audited the accompanying consolidated balance sheets of NetCurrents,
Inc. and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations and comprehensive income (loss),
shareholders' equity, and cash flows for the year and six months then ended, and
for the year ended June 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of NetCurrents, Inc.
and subsidiaries as of December 31, 2000 and 1999, and the results of their
consolidated operations and their consolidated cash flows for the year and six
months then ended, and for the year ended June 30, 1999 in conformity with
generally accepted accounting principles.


/S/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
February 28, 2001



                                    Page F-2
<PAGE>


<TABLE>
<CAPTION>
                                                            NETCURRENTS, INC. AND SUBSIDIARIES
                                                                   CONSOLIDATED BALANCE SHEETS
                                                                                  DECEMBER 31,
----------------------------------------------------------------------------------------------
                                     ASSETS
                                                                       2000            1999
                                                                 -------------   -------------
<S>                                                              <C>             <C>
CURRENT ASSETS
    Cash and cash equivalents                                    $   2,754,487   $     798,855
    Accounts receivable                                                544,869         555,667
    Prepaid advertising expenses                                             -         583,392
    Prepaid assets                                                     158,356          40,342
    Subscription receivable                                                  -         200,000
                                                                 -------------   -------------

        Total current assets                                         3,457,712       2,178,256

FILM COSTS                                                       -               224,988
FIXED ASSETS, at cost, net                                             913,876         131,559
GOODWILL, less accumulated amortization and write-off
    of $324,282 and $144,282                                           500,000         841,913
INVESTMENTS                                                             43,500         725,050
OTHER ASSETS                                                            54,538          38,043
                                                                 -------------   -------------

TOTAL ASSETS                                                     $   4,969,626   $   4,139,809
                                                                 =============   =============
</TABLE>


   The accompanying notes are an integral part of these financial statements


                                    Page F-3
<PAGE>


<TABLE>
<CAPTION>
                                                            NETCURRENTS, INC. AND SUBSIDIARIES
                                                                   CONSOLIDATED BALANCE SHEETS
                                                                                  DECEMBER 31,
----------------------------------------------------------------------------------------------
                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                                       2000            1999
                                                                 -------------   -------------
<S>                                                              <C>             <C>
CURRENT LIABILITIES
    Accounts payable and accrued expenses                        $   1,030,934   $   1,202,141
    Dividends payable                                                  237,413         108,313
    Due to related parties                                                   -          44,046
    Capital lease obligation                                                 -           4,320
    Convertible debentures                                                   -         619,824
    Deferred revenue                                                         -          63,025
                                                                 -------------   -------------

        Total current liabilities                                    1,268,347       2,041,669
                                                                 -------------   -------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
    Preferred stock, Series A, C, D, E, and F, $0.001 par value
        Series A liquidation preference $5 per share Series E
        liquidation preference $10 per share
           5,400,000 shares authorized
           1,500,000 and 2,625,000 shares issued and outstanding         1,500           2,625
    Preferred stock, Series G, $1,000 par value
        4,000 shares authorized
        no and 1,875 shares issued and outstanding                           -       1,875,000
    Common stock, $0.001 par value
        50,000,000 shares authorized
        32,998,073 and 23,070,869 shares issued and outstanding         32,998          23,071
    Treasury stock, at cost
        93,536 and 93,536 shares                                    (1,010,192)     (1,010,192)
    Subscription receivable                                         (4,223,284)       (398,800)
    Additional paid-in capital                                      48,532,031      30,704,372
    Accumulated other comprehensive income (loss)                     (410,813)        225,050
    Accumulated deficit                                            (39,220,961)    (29,322,986)
                                                                 -------------   -------------

               Total shareholders' equity                            3,701,279       2,098,140
                                                                 -------------   -------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                       $   4,969,626   $   4,139,809
                                                                 =============   =============
</TABLE>


   The accompanying notes are an integral part of these financial statements


                                    Page F-4
<PAGE>


<TABLE>
<CAPTION>
                                                       NETCURRENTS, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                                                    FOR THE YEAR ENDED DECEMBER 31, 2000,
                                              FOR THE SIX MONTHS ENDED DECEMBER 31, 1999,
                                                    FOR THE YEAR ENDED JUNE 30, 1999, AND
                                   FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
-----------------------------------------------------------------------------------------
                                                       For the                      For the
                                         For the      Six Months      For the      Six Months
                                        Year Ended      Ended       Year Ended       Ended
                                       December 31,   December 31,    June 30,     December 31,
                                          2000           1999           1999          1998
                                      -------------  ------------  -------------  -------------
                                                                                  (unaudited)
<S>                                   <C>            <C>           <C>            <C>
REVENUES                              $   1,665,225  $    342,985  $   2,991,953  $    413,065

COST OF SALES                                     -        96,997        926,295        90,171
                                      -------------  ------------  -------------  ------------

NET REVENUES                              1,665,225       245,988      2,065,658       322,894

WRITE-OFF OF
  Projects in development                   224,988       246,774        301,037             -
  Notes and accounts receivable             138,124     1,429,926        166,965             -
  Investment                                      -       300,000              -             -
GENERAL AND ADMINISTRATIVE
  EXPENSES                                9,747,586     2,895,211      4,066,590     2,621,725
                                      -------------  ------------  -------------  ------------

LOSS FROM OPERATIONS                     (8,445,473)   (4,625,923)    (2,468,934)   (2,298,831)
                                      -------------  ------------  -------------  ------------
OTHER INCOME (EXPENSE)
  Merger expenses                                 -             -         (6,696)       (6,696)
  Realized gain on investment               168,250             -              -             -
  Settlements                              (191,214)            -              -             -
  Interest and dividend income              482,993        10,325          3,096             -
  Interest and financing expense             (8,354)      (37,189)       (12,447)            -
  Amortization of related party
    covenant not to compete                       -             -       (115,000)     (115,000)
  Amortization of goodwill                  (90,000)      (45,000)       (99,282)      (75,000)
  Impairment of goodwill                   (251,913)            -              -             -
  Other expense                             (24,414)      (26,795)       (22,176)      (11,390)
                                      -------------  ------------  -------------  ------------

      Total other income (expense)           85,348       (98,659)      (252,505)     (208,086)
                                      -------------  ------------  -------------  ------------
LOSS BEFORE PROVISION FOR INCOME
  TAXES                                  (8,360,125)   (4,724,582)    (2,721,439)   (2,506,917)

PROVISION FOR INCOME TAXES                        -             -            800             -
                                      -------------  ------------  -------------  ------------
</TABLE>


   The accompanying notes are an integral part of these financial statements


                                    Page F-5
<PAGE>


<TABLE>
<CAPTION>
                                                             NETCURRENTS, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                                                          FOR THE YEAR ENDED DECEMBER 31, 2000,
                                                    FOR THE SIX MONTHS ENDED DECEMBER 31, 1999,
                                                          FOR THE YEAR ENDED JUNE 30, 1999, AND
                                         FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
-----------------------------------------------------------------------------------------------
                                                       For the                      For the
                                         For the      Six Months      For the      Six Months
                                        Year Ended      Ended       Year Ended       Ended
                                       December 31,   December 31,    June 30,     December 31,
                                          2000           1999           1999          1998
                                      -------------  ------------  -------------  -------------
                                                                                  (unaudited)
<S>                                   <C>            <C>           <C>            <C>
NET LOSS                              $  (8,360,125) $ (4,724,582) $  (2,722,239) $ (2,506,917)

DIVIDEND REQUIREMENT OF SERIES A
  PREFERRED STOCK                          (425,000)     (212,500)      (425,000)     (212,500)

DIVIDEND REQUIREMENT OF SERIES E
  PREFERRED STOCK                                 -             -        (66,250)            -

BENEFICIAL CONVERSION ON SERIES G
  PREFERRED STOCK                        (1,090,000)     (957,000)             -             -

DIVIDEND REQUIREMENT OF SERIES G
  PREFERRED STOCK                           (22,850)       (1,313)             -             -
                                      -------------  ------------  -------------  ------------

LOSS APPLICABLE TO COMMON
  SHAREHOLDERS                           (9,897,975)   (5,895,395)    (3,213,489)   (2,719,417)

OTHER COMPREHENSIVE INCOME (LOSS)
    Unrealized gain (loss) on
      investment, net                      (635,863)      225,050              -             -
                                      -------------  ------------  -------------  ------------
COMPREHENSIVE LOSS APPLICABLE
  TO COMMON SHAREHOLDERS              $ (10,533,838) $ (5,670,345) $  (3,213,489) $ (2,719,417)
                                      =============  ============  =============  ============
BASIC AND DILUTED LOSS PER
  COMMON SHARE                        $       (0.33) $      (0.37) $       (0.33)$       (0.37)
                                      =============  ============  ============= =============
WEIGHTED-AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING
  USED TO COMPUTE BASIS AND
  DILUTED LOSS PER SHARE                 31,594,660    15,227,839      9,688,012     7,274,036
                                      =============  ============  ============= =============
</TABLE>


   The accompanying notes are an integral part of these financial statements


                                    Page F-6
<PAGE>


<TABLE>
<CAPTION>
                                                       NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                    FOR THE YEAR ENDED DECEMBER 31, 2000,
                                          FOR THE SIX MONTHS ENDED DECEMBER 31, 1999, AND
                                                         FOR THE YEAR ENDED JUNE 30, 1999
-----------------------------------------------------------------------------------------
                                          PREFERRED STOCK
                            --------------------------------------------------
                            SERIES A, C, D, E, AND F           SERIES G             COMMON STOCK
                            ------------------------   -----------------------  -----------------------   TREASURY     SUBSCRIPTION
                              SHARES       AMOUNT        SHARES       AMOUNT       SHARES      AMOUNT      STOCK        RECEIVABLE
                            ----------- ------------   -----------  ----------  -----------  ----------  -----------   ------------
<S>                         <C>         <C>            <C>          <C>         <C>          <C>         <C>           <C>
BALANCE, JUNE 30, 1998       1,000,000   $   1,000              -   $        -   6,672,943   $   6,673   $(1,010,192)  $         -
ISSUANCE OF COMMON
 STOCK
  for acquisition of
   NetCurrents
   Services Corp.                                                                7,375,001       7,375
  for payment of
   dividends on Series
   A preferred stock                                                               343,932         344
  in connection with
   the acquisition of
   MWI Distributions, Inc.                                                       1,203,704       1,204
  for the exercise of
   options                                                                         600,000         600
  for the exercise of
   options-Strategic                                                               500,000         500
  from the preferred
   Series D conversion -
   Augustine Fund                                                                2,005,185       2,005
  for consulting
   services                                                                        650,000         650
ISSUANCE OF SERIES C
 PREFERRED STOCK             3,000,000       3,000
ISSUANCE OF SERIES D
 PREFERRED STOCK                50,000          50
OFFERING COSTS
ISSUANCE OF SERIES E
 PREFERRED STOCK               225,000         225
OFFERING COSTS
ISSUANCE OF SERIES F
 PREFERRED STOCK               275,000         275
FILM TRANSFER FOR STOCK
 NOT YET ISSUED AT
 JUNE 30, 1999 -
 GROSSO-JACOBSON
</TABLE>

<TABLE>
<CAPTION>
                                                ACCUMULATED
                                                  OTHER
                                 ADDITIONAL       COMPRE-
                                  PAID-IN         HENSIVE       ACCUMULATED
                                  CAPITAL          INCOME         DEFICIT          TOTAL
                                ------------    ------------   -------------   ------------
<S>                             <C>             <C>            <C>             <C>
BALANCE, JUNE 30, 1998          $ 23,411,349    $         -    $(20,280,352)   $  2,128,478
ISSUANCE OF COMMON
 STOCK
  for acquisition of
   NetCurrents
   Services Corp.                    411,705                                        419,080
  for payment of
   dividends on Series
   A preferred stock                 318,406                                        318,750
  in connection with
   the acquisition of
   MWI Distributions, Inc.           525,416                                        526,620
  for the exercise of
   options                           427,400                                        428,000
  for the exercise of
   options-Strategic                 249,500                                        250,000
  from the preferred
   Series D conversion -
   Augustine Fund                  1,245,800                                      1,247,805
  for consulting
   services                          279,350                                        280,000
ISSUANCE OF SERIES C
 PREFERRED STOCK                                                                      3,000
ISSUANCE OF SERIES D
 PREFERRED STOCK                     499,950                                        500,000
OFFERING COSTS                       (35,000)                                       (35,000)
ISSUANCE OF SERIES E
 PREFERRED STOCK                   1,001,744                                      1,001,969
OFFERING COSTS                      (157,500)                                      (157,500)
ISSUANCE OF SERIES F
 PREFERRED STOCK                                                                        275
FILM TRANSFER FOR STOCK
 NOT YET ISSUED AT
 JUNE 30, 1999 -
 GROSSO-JACOBSON                    (694,981)                                      (694,981)
</TABLE>



   The accompanying notes are an integral part of these financial statements


                                    Page F-7
<PAGE>


<TABLE>
<CAPTION>
                                                       NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                    FOR THE YEAR ENDED DECEMBER 31, 2000,
                                          FOR THE SIX MONTHS ENDED DECEMBER 31, 1999, AND
                                                         FOR THE YEAR ENDED JUNE 30, 1999
-----------------------------------------------------------------------------------------
                                          PREFERRED STOCK
                            --------------------------------------------------
                            SERIES A, C, D, E, AND F           SERIES G             COMMON STOCK
                            ------------------------   -----------------------  -----------------------   TREASURY     SUBSCRIPTION
                              SHARES       AMOUNT        SHARES       AMOUNT       SHARES      AMOUNT      STOCK        RECEIVABLE
                            ----------- ------------   -----------  ----------  -----------  ----------  -----------   ------------
<S>                         <C>         <C>            <C>          <C>         <C>          <C>         <C>           <C>
DIVIDENDS PAID ON SERIES A
 PREFERRED  STOCK                       $                           $                        $           $             $
DIVIDENDS PAID ON SERIES E
 PREFERRED STOCK
NET LOSS
                            ----------- ------------   -----------  ----------  -----------  ----------  -----------   ------------
BALANCE, JUNE 30, 1999       4,550,000       4,550              -            -  19,350,765      19,351    (1,010,192)            -
ISSUANCE OF COMMON
 STOCK
  to former employee                                                               512,500         513
  in payment of
   dividends on Series
   A preferred stock                                                               151,387         151
  for exercise of options                                                          370,000         370
  from the preferred
   Series E conversion        (225,000)       (225)                              2,155,416       2,155
  for conversion of
   Series C preferred
   stock for exercise
   of options               (1,700,000)     (1,700)                              1,700,000       1,700                    (398,800)
  for financing services
   rendered                                                                         70,000          70
  for conversion
   debentures                                                                      310,446         310
  for consulting services
   rendered                                                                        128,709         129
RETIREMENT OF
 COMMON STOCK
  Augustine fund                                                                  (409,836)       (410)
  Former employee
   settlement                                                                     (601,852)       (602)
  Grosso-Jacobson                                                                 (666,666)       (666)
</TABLE>


<TABLE>
<CAPTION>
                                              ACCUMULATED
                                                 OTHER
                               ADDITIONAL       COMPRE-
                                PAID-IN         HENSIVE       ACCUMULATED
                                CAPITAL          INCOME         DEFICIT          TOTAL
                              ------------    ------------   -------------   ------------
<S>                           <C>             <C>            <C>             <C>
DIVIDENDS PAID ON SERIES A
 PREFERRED  STOCK             $               $              $  (425,000)    $   (425,000)
DIVIDENDS PAID ON SERIES E
 PREFERRED STOCK                                                 (66,250)         (66,250)
NET LOSS                                                       (2,722,239)     (2,722,239)
                              ------------    ------------   -------------   ------------
BALANCE, JUNE 30, 1999          27,483,139              -     (23,493,841)      3,003,007
ISSUANCE OF COMMON
 STOCK
  to former employee                  (513)                                             -
  in payment of
   dividends on Series
   A preferred stock               318,599                                        318,750
  for exercise of options          313,130                                        313,500
  from the preferred
   Series E conversion              (1,930)                                             -
  for conversion of
   Series C preferred
   stock for exercise
   of options                      848,800                                        450,000
  for financing services
   rendered                        133,630                                        133,700
  for conversion
   debentures                      389,690                                        390,000
  for consulting services
   rendered                        261,149                                        261,278
RETIREMENT OF
 COMMON STOCK
  Augustine fund                       410                                              -
  Former employee
   settlement                          602                                              -
  Grosso-Jacobson                      666                                              -
</TABLE>


   The accompanying notes are an integral part of these financial statements


                                    Page F-8
<PAGE>


<TABLE>
<CAPTION>
                                                       NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                    FOR THE YEAR ENDED DECEMBER 31, 2000,
                                          FOR THE SIX MONTHS ENDED DECEMBER 31, 1999, AND
                                                         FOR THE YEAR ENDED JUNE 30, 1999

-----------------------------------------------------------------------------------------
                                          PREFERRED STOCK
                            --------------------------------------------------
                            SERIES A, C, D, E, AND F           SERIES G             COMMON STOCK
                            ------------------------   -----------------------  -----------------------   TREASURY     SUBSCRIPTION
                              SHARES       AMOUNT        SHARES       AMOUNT       SHARES      AMOUNT      STOCK        RECEIVABLE
                            ----------- ------------   -----------  ----------  -----------  ----------  -----------   ------------
<S>                         <C>         <C>            <C>          <C>         <C>          <C>         <C>           <C>
REVERSAL OF DIVIDEND
 SERIES E PREFERRED
 STOCK                                  $                           $                        $           $             $
ISSUANCE OF SERIES G
 PREFERRED STOCK                                            1,875    1,875,000
DIVIDENDS PAID ON
 SERIES A PREFERRED
 STOCK
DIVIDENDS PAID ON
 SERIES G PREFERRED
 STOCK
UNREALIZED GAIN ON
 INVESTMENT
BENEFICIAL CONVERSION,
 SERIES G PREFERRED STOCK
NET LOSS
                            ----------- ------------   -----------  ----------  -----------  ----------  -----------   ------------
BALANCE, DECEMBER 31, 1999   2,625,000       2,625          1,875    1,875,000  23,070,869      23,071    (1,010,192)     (398,800)
ISSUANCE OF COMMON STOCK
  for the exercise of
   options                                                                       1,497,160       1,497                  (1,205,277)
  for the conversion of
   warrants                                                                        151,583         152
  for conversion
   debentures                                                                      513,346         513
  for settlement with
   financing company                                                                30,000          30
  for settlement with
   investing company                                                                50,000          50
  conversion of Series
   C preferred stock
   and exercise of
   options                  (1,300,000)     (1,300)                              2,800,000       2,800                  (2,572,854)
</TABLE>


<TABLE>
<CAPTION>
                                               ACCUMULATED
                                                 OTHER
                                ADDITIONAL       COMPRE-
                                 PAID-IN         HENSIVE       ACCUMULATED
                                 CAPITAL          INCOME         DEFICIT          TOTAL
                               ------------    ------------   -------------   ------------
<S>                            <C>             <C>            <C>             <C>
REVERSAL OF DIVIDEND
 SERIES E PREFERRED
 STOCK                         $               $              $     66,250    $     66,250
ISSUANCE OF SERIES G
 PREFERRED STOCK                                                                 1,875,000
DIVIDENDS PAID ON
 SERIES A PREFERRED
 STOCK                                                            (212,500)       (212,500)
DIVIDENDS PAID ON
 SERIES G PREFERRED
 STOCK                                                              (1,313)         (1,313)
UNREALIZED GAIN ON
 INVESTMENT                                        225,050                         225,050
BENEFICIAL CONVERSION,
 SERIES G PREFERRED STOCK           957,000                       (957,000)              -
NET LOSS                                                        (4,724,582)     (4,724,582)
                               ------------    ------------   -------------   ------------
BALANCE, DECEMBER 31, 1999       30,704,372        225,050     (29,322,986)      2,098,140
ISSUANCE OF COMMON STOCK
  for the exercise of
   options                        2,094,629                                        890,849
  for the conversion of
   warrants                         212,308                                        212,460
  for conversion
   debentures                       644,487                                        645,000
  for settlement with
   financing company                 71,370                                         71,400
  for settlement with
   investing company                 24,950                                         25,000
  conversion of Series
   C preferred stock
   and exercise of
   options                        2,448,500                                      (122,854)
</TABLE>


   The accompanying notes are an integral part of these financial statements


                                   Page F-9
<PAGE>


<TABLE>
<CAPTION>
                                                       NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                    FOR THE YEAR ENDED DECEMBER 31, 2000,
                                          FOR THE SIX MONTHS ENDED DECEMBER 31, 1999, AND
                                                         FOR THE YEAR ENDED JUNE 30, 1999

-----------------------------------------------------------------------------------------
                                          PREFERRED STOCK
                            --------------------------------------------------
                            SERIES A, C, D, E, AND F           SERIES G             COMMON STOCK
                            ------------------------   -----------------------  -----------------------   TREASURY     SUBSCRIPTION
                              SHARES       AMOUNT        SHARES       AMOUNT       SHARES      AMOUNT      STOCK        RECEIVABLE
                            ----------- ------------   -----------  ----------  -----------  ----------  -----------   ------------
<S>                         <C>         <C>            <C>          <C>         <C>          <C>         <C>           <C>
  in private placement                  $                           $            1,700,000   $   1,700   $             $
OFFERING COSTS
ISSUANCE OF COMMON
 STOCK
  for conversion of
   Series F preferred
   stock                      (225,000)       (225)                                225,000         225
  for conversion of
   Series G preferred
   stock                                                   (2,965)  (2,965,000)  2,383,388       2,383
  in payment of dividends
   on Series A preferred
   stock                                                                           105,013         105
RETIREMENT OF COMMON
 STOCK
   Grosso-Jacobson                                                                (328,286)       (328)
ISSUANCE OF SERIES G
 PREFERRED STOCK FOR
 CONVERSION
 DEBENTURES                                                   700     700,000
ISSUANCE OF SERIES G
 PREFERRED STOCK                                              390     390,000
DIVIDENDS PAID ON
 Series A preferred
  stock
 Series G preferred
  stock
UNREALIZED LOSS ON
 INVESTMENT
RECLASSIFICATION OF
 UNREALIZED LOSS
 INCLUDED IN GAIN ON
 SALE OF INVESTMENT
</TABLE>


<TABLE>
<CAPTION>
                                                 ACCUMULATED
                                                   OTHER
                                  ADDITIONAL       COMPRE-
                                   PAID-IN         HENSIVE       ACCUMULATED
                                   CAPITAL          INCOME         DEFICIT          TOTAL
                                 ------------    ------------   -------------   ------------
<S>                              <C>             <C>            <C>             <C>
  in private placement           $  8,498,300    $              $               $  8,500,000
OFFERING COSTS                       (850,000)                                      (850,000)
ISSUANCE OF COMMON
 STOCK
  for conversion of
   Series F preferred
   stock                              311,525                                        311,525
  for conversion of
   Series G preferred
   stock                            2,962,617                                              -
  in payment of dividends
   on Series A preferred
   stock                              318,645                                        318,750
RETIREMENT OF COMMON
 STOCK
   Grosso-Jacobson                        328                                              -
ISSUANCE OF SERIES G
 PREFERRED STOCK FOR
 CONVERSION
 DEBENTURES                                                                          700,000
ISSUANCE OF SERIES G
 PREFERRED STOCK                                                                     390,000
DIVIDENDS PAID ON
 Series A preferred
  stock                                                             (425,000)       (425,000)
 Series G preferred
  stock                                                              (22,850)        (22,850)
UNREALIZED LOSS ON
 INVESTMENT                                         (804,113)                       (804,113)
RECLASSIFICATION OF
 UNREALIZED LOSS
 INCLUDED IN GAIN ON
 SALE OF INVESTMENT                                  168,250                         168,250
</TABLE>


   The accompanying notes are an integral part of these financial statements


                                   Page F-10
<PAGE>


<TABLE>
<CAPTION>
                                                       NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                    FOR THE YEAR ENDED DECEMBER 31, 2000,
                                          FOR THE SIX MONTHS ENDED DECEMBER 31, 1999, AND
                                                         FOR THE YEAR ENDED JUNE 30, 1999

-----------------------------------------------------------------------------------------
                                          PREFERRED STOCK
                            --------------------------------------------------
                            SERIES A, C, D, E, AND F           SERIES G             COMMON STOCK
                            ------------------------   -----------------------  -----------------------   TREASURY     SUBSCRIPTION
                              SHARES       AMOUNT        SHARES       AMOUNT       SHARES      AMOUNT      STOCK        RECEIVABLE
                            ----------- ------------   -----------  ----------  -----------  ----------  -----------   ------------
<S>                         <C>         <C>            <C>          <C>         <C>          <C>         <C>           <C>
INTEREST ON SUBSCRIPTION
 RECEIVABLE                             $                           $                        $           $             $   (46,353)
BENEFICIAL CONVERSION,
 SERIES G PREFERRED
 STOCK
ISSUANCE OF SERIES C
 PREFERRED STOCK             1,200,000       1,200
CONVERSION OF SERIES
 C PREFERRED STOCK
 INTO COMMON STOCK -
 STRATEGIC                    (800,000)       (800)                                800,000         800
NET LOSS
                            ----------- ------------   -----------  ----------  -----------  ----------  -----------   ------------
BALANCE, DECEMBER 31, 2000   1,500,000  $    1,500               -  $       -   32,998,073   $  32,998   $(1,010,192)  $(4,223,284)
                            =========== ===========    ===========  ==========  ===========  ==========  ===========   ============
</TABLE>


<TABLE>
<CAPTION>
                                              ACCUMULATED
                                                OTHER
                               ADDITIONAL       COMPRE-
                                PAID-IN         HENSIVE       ACCUMULATED
                                CAPITAL          INCOME         DEFICIT          TOTAL
                              ------------    ------------   -------------   ------------
<S>                           <C>             <C>            <C>             <C>
INTEREST ON SUBSCRIPTION
 RECEIVABLE                   $               $              $               $    (46,353)
BENEFICIAL CONVERSION,
 SERIES G PREFERRED
 STOCK                           1,090,000                     (1,090,000)              -
ISSUANCE OF SERIES C
 PREFERRED STOCK                                                                    1,200
CONVERSION OF SERIES
 C PREFERRED STOCK
 INTO COMMON STOCK -
 STRATEGIC                                                                              -
NET LOSS                                                       (8,360,125)     (8,360,125)
                              ------------    ------------   -------------   ------------
BALANCE, DECEMBER 31, 2000    $ 48,532,031    $  (410,813)   $(39,220,961)   $  3,701,279
                              ============    ============   =============   ============
</TABLE>


   The accompanying notes are an integral part of these financial statements


                                   Page F-11
<PAGE>


<TABLE>
<CAPTION>
                                                                 NETCURRENTS, INC. AND SUBSIDIARIES
                                                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                              FOR THE YEAR ENDED DECEMBER 31, 2000,
                                                        FOR THE SIX MONTHS ENDED DECEMBER 31, 1999,
                                                              FOR THE YEAR ENDED JUNE 30, 1999, AND
                                             FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
---------------------------------------------------------------------------------------------------
                                                           For the                      For the
                                               For the    Six Months      For the      Six Months
                                              Year Ended    Ended        Year Ended      Ended
                                            December 31,  December 31,     June 30,    December 31,
                                                2000         1999            1999         1998
                                            ------------  ------------   ------------  ------------
                                                                                        (unaudited)
<S>                                         <C>           <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                  $(8,360,125)  $(4,724,582)   $(2,722,239)  $(2,506,917)
  Adjustments to reconcile net loss to
    net cash used in operating activities
      Depreciation and amortization of
        fixed assets                            166,173        48,881        103,981        28,579
      Write-off of film projects in
        development                             224,988       246,774        301,037             -
      Amortization of related party
        covenant not to compete                       -             -        115,000       115,000
      Amortization of goodwill                   90,000        45,000         99,282        75,000
      Impairment of goodwill                    251,913             -              -             -
      Write-off of notes receivable and
        other assets                            138,124     1,429,926        654,428             -
      Write off of investment                         -       300,000              -             -
      Issuance of common stock for
        services rendered                             -       395,513        285,840       129,500
      Issuance of common stock for
        settlements                              96,400             -              -             -
      Interest on subscriptions
        receivable                             (223,184)            -              -             -
      Gain on sale of investment               (168,250)            -              -             -
  (Increase) decrease in
    Accounts receivable                         (98,922)     (303,874)      (475,649)   (1,644,222)
    Other assets and prepaid
      expenses                                 (147,622)      (45,543)       (86,644)      (33,041)
    Prepaid advertising expenses                583,392      (583,392)             -             -
  Increase (decrease) in
    Accounts payable and accrued
      expenses                                 (171,207)      168,794        544,062     3,176,609
    Deferred revenue                            (63,025)       63,025       (139,126)      131,543
                                            ------------  ------------   ------------  ------------

Net cash used in operating activities        (7,681,345)   (2,959,478)    (1,320,028)     (527,949)
                                            ------------  ------------   ------------  ------------
</TABLE>


   The accompanying notes are an integral part of these financial statements


                                   Page F-12
<PAGE>


<TABLE>
<CAPTION>
                                                                NETCURRENTS, INC. AND SUBSIDIARIES
                                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                             FOR THE YEAR ENDED DECEMBER 31, 2000,
                                                       FOR THE SIX MONTHS ENDED DECEMBER 31, 1999,
                                                             FOR THE YEAR ENDED JUNE 30, 1999, AND
                                            FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
--------------------------------------------------------------------------------------------------
                                                           For the                      For the
                                               For the    Six Months      For the      Six Months
                                              Year Ended    Ended        Year Ended      Ended
                                            December 31,  December 31,     June 30,    December 31,
                                                2000         1999            1999         1998
                                            ------------  ------------   ------------  ------------
                                                                                        (unaudited)
<S>                                         <C>           <C>            <C>           <C>
CASH FLOWS FROM INVESTING ACTIVITIES
  Increase in short-term investments        $         -   $         -    $  (800,000)  $         -
  Additions to film costs                             -             -       (278,388)     (294,614)
  Capital expenditures on fixed assets         (948,490)      (68,594)       (28,643)            -
  (Increase) decrease in receivables
    from related parties                              -       102,156         43,015      (241,806)
  Additions to goodwill                               -             -        (15,000)            -
  Cash from purchase of business                      -             -        252,122             -
  Increase in note receivable                         -             -              -      (200,000)
  Increase in acquisition costs                       -             -              -      (109,269)
  Net proceeds from sale of investment          383,125             -              -             -
  Additions to investment                      (169,313)            -              -             -
                                            ------------  ------------   ------------  ------------
Net cash provided by (used in)
  investing activities                         (734,678)       33,562       (826,894)     (845,689)
                                            ------------  ------------   ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Borrowings from notes payable -
    related parties                                   -             -              -       349,260
  Payments on notes payable - related
    parties                                     (44,046)      (37,212)    (1,210,802)            -
  Payments on capital lease obligation           (4,320)      (28,938)       (37,647)      (28,247)
  Payments on subscription receivable           200,000             -              -             -
  Net borrowings from related parties                 -       (25,000)        37,212       (84,346)
  Proceeds from issuance of preferred
    stock                                     1,100,000     1,875,000      3,711,090           150
  Proceeds from issuance of common
    stock                                     9,970,021       953,715        133,200       620,425
  Offering costs                               (850,000)            -       (192,500)            -
  Proceeds from convertible
    debentures, net of offering costs                 -       619,824              -             -
                                            ------------  ------------   ------------  ------------
Net cash provided by financing
  activities                                 10,371,655     3,357,389      2,440,553       857,242
                                            ------------  ------------   ------------  ------------
</TABLE>


    The accompanying notes are an integral part of these financial statements


                                   Page F-13
<PAGE>


<TABLE>
<CAPTION>
                                                                NETCURRENTS, INC. AND SUBSIDIARIES
                                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                             FOR THE YEAR ENDED DECEMBER 31, 2000,
                                                       FOR THE SIX MONTHS ENDED DECEMBER 31, 1999,
                                                             FOR THE YEAR ENDED JUNE 30, 1999, AND
                                            FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
--------------------------------------------------------------------------------------------------
                                                           For the                      For the
                                               For the    Six Months      For the      Six Months
                                              Year Ended    Ended        Year Ended      Ended
                                            December 31,  December 31,     June 30,    December 31,
                                                2000         1999            1999         1998
                                            ------------  ------------   ------------  ------------
                                                                                        (unaudited)
<S>                                         <C>           <C>            <C>           <C>
Net increase (decrease) in cash and
  cash equivalents                          $ 1,955,632   $   431,473    $   293,631   $  (516,396)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF PERIOD                           798,855       367,382         73,751        73,751
                                            ------------  ------------   ------------  ------------
CASH AND CASH EQUIVALENTS, END
  OF PERIOD                                 $ 2,754,487   $   798,855    $   367,382   $   442,645
                                            ============  ============   ============  ============
SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION

    INTEREST PAID                           $     6,445   $    36,120    $    12,447   $     6,224
                                            ============  ============   ============  ============

    INCOME TAXES PAID                       $         -   $         -    $         -   $         -
                                            ============  ============   ============  ============
</TABLE>


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the year ended June 30, 1999, the Company exchanged capitalized film
costs of $694,981 for 1,666,667 shares of common stock. As of December 31, 2000,
666,666 shares of common stock were retired, and the remaining shares are being
held in escrow.

During the year ended June 30, 1999, the Company issued 1,203,704 shares of
common stock valued at $526,620 for the acquisition of a company. Cash from
investing, financing, and operating activities excludes the following:

        Accounts receivable                                   $   1,611,037
        Fixed assets, net                                     $       4,709
        Other assets                                          $      10,835
        Goodwill                                              $     961,913
        Accounts payable and accrued expenses                 $    (153,570)
        Deferred revenue                                      $    (139,126)
        Notes payable - related parties                       $  (1,884,172)


    The accompanying notes are an integral part of these financial statements


                                   Page F-14
<PAGE>


                                             NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          FOR THE YEAR ENDED DECEMBER 31, 2000,
                                    FOR THE SIX MONTHS ENDED DECEMBER 31, 1999,
                                          FOR THE YEAR ENDED JUNE 30, 1999, AND
                         FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
-------------------------------------------------------------------------------

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES (CONTINUED)
During the year ended June 30, 1999, the Company issued 650,000 shares of common
stock for consulting services valued at $280,000.

During the year ended June 30, 1999, the Company issued 343,932 shares of common
stock valued at $318,750 in payment of dividends on its Series A preferred
stock.

During the six months ended December 31, 1999, the Company issued 151,387 shares
of common stock valued at $318,750 as payment of dividends on its Series A
preferred stock.

During the six months ended December 31, 1999, the Company recorded an
unrealized gain on an investment of $225,050.

During the six months ended December 31, 1999, the Company recorded $957,000 as
a dividend on Series G preferred stock, representing a beneficial conversion
feature.

During the year ended December 31, 2000, the Company issued 1,090,000 shares of
Series G preferred stock upon the conversion of debentures.

During the year ended December 31, 2000, the Company recorded $1,090,000 as a
dividend on Series G preferred stock, representing a beneficial conversion
feature.

During the year ended December 31, 2000, the Company issued 2,065,670 shares of
common stock upon the conversion of Series G preferred stock.

During the year ended December 31, 2000, the Company recorded an unrealized loss
on an investment of $661,596.

During the year ended December 31, 2000, the Company issued 105,013 shares of
common stock valued at $318,750 in payment of dividends on its Series A
preferred stock.


    The accompanying notes are an integral part of these financial statements


                                   Page F-15
<PAGE>


                                             NETCURRENTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          FOR THE YEAR ENDED DECEMBER 31, 2000,
                                FOR THE SIX MONTHS ENDED DECEMBER 31, 1999, AND
                                               FOR THE YEAR ENDED JUNE 30, 1999
-------------------------------------------------------------------------------

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES (CONTINUED)
During the year ended December 31, 2000, the Company issued 2,800,000 shares of
common stock for a subscription receivable of $2,451,300, principal only, for
the conversion of preferred stock and the exercise of options.

During the year ended December 31, 2000, the Company issued 775,000 shares of
common stock for subscriptions receivable of $1,150,000, principal only, for the
exercise of options.


                                   Page F-16
<PAGE>


                                             NETCURRENTS, INC. AND SUBSIDIARIES
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              DECEMBER 31, 2000
-------------------------------------------------------------------------------

NOTE 1 - BUSINESS ACTIVITY

        NetCurrents, Inc. ("NC") was incorporated under its former name, The
        Producers Entertainment Group, Ltd. ("TPEG"), under the laws of the
        State of Delaware on August 10, 1989. Effective June 4, 1999, TPEG
        officially changed its name to IAT Resources Corporation ("IAT"),
        reflecting a significant change of TPEG's core business from
        entertainment production and distribution to Internet technology
        development and integration. Effective December 27, 1999, IAT officially
        changed its name to NetCurrents, Inc.

        For approximately eight years, IAT acquired, developed, produced, and
        distributed drama, comedy, documentary, and instructional television
        series, made-for-television movies, and theatrical motion pictures.
        Although IAT continues to engage in certain entertainment-related
        distribution activities, during the past year, it has reduced its
        network and cable television activities and has redirected its core
        business toward the Internet and technology industry.

        ACQUISITION
        On July 15, 1998, IAT acquired 100% of the capital stock of MWI
        Distributions, Inc., dba MediaWorks, International ("MWI"), a California
        corporation. MWI provides international television and video
        distribution, specializing in the licensing of children's and family
        programming and animation. MWI engaged in worldwide sales of
        direct-to-video series and specials. The transaction was accounted for
        as a purchase. The excess of purchase price over the net assets acquired
        was recorded as goodwill.

        On March 22, 1999, IAT entered into an agreement with the shareholders
        of MWI under which one of the shareholders cancelled 89,352 shares of
        common stock issued to him in connection with the acquisition.

        MERGER AGREEMENT
        On September 23, 1999, NC entered into a merger agreement with
        Infolocity, Inc., a privately-held Internet company incorporated in
        January 1999, which is now called NetCurrents Services Corp. ("NCS")
        effective December 27, 1999. Through its proprietary search technology,
        NCS assists publicly traded companies in minimizing the impact of
        negative or false information posted on the Internet. The terms of the
        merger include a tax-free exchange of NC's common stock for 100% of the
        issued and outstanding stock of NCS. As a result of the merger, NCS is a
        wholly-owned subsidiaries of NC. In connection with the merger, the
        Company issued 7,375,001 shares of common stock. The merger was
        accounted for as a pooling of interests.


                                   Page F-17
<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        PRINCIPLES OF CONSOLIDATION
        The accompanying financial statements include the accounts of NC, its
        wholly owned subsidiaries, MWI and NCS, and a Canadian branch
        (collectively, the "Company"). All significant intercompany accounts
        have been eliminated.

        FISCAL YEAR
        Effective February 3, 2000, the Company changed its fiscal year end from
        June 30 to December 31. The consolidated financial statements include
        the presentation of the transition period beginning July 1, 1999 and
        ending on December 31, 1999.

        INTERIM UNAUDITED FINANCIAL INFORMATION
        The unaudited financial information furnished herein reflects all
        adjustments, consisting only of normal recurring adjustments, which in
        the opinion of management, are necessary to fairly state the Company's
        financial position, the results of operations, and cash flows for the
        periods presented. The information with respect to the six months ended
        December 31, 1998 is unaudited.

        CASH AND CASH EQUIVALENTS
        For the purpose of reporting cash flows, the Company considers United
        States treasury bills, money market funds, and certificates of deposit
        purchased with an original maturity of three months or less to be cash
        equivalents.

        FILM COSTS AND AMORTIZATION
        Film costs include the costs expended on projects in development. Film
        costs are stated at the lower of amortized cost or estimated net
        realizable value.

        FIXED ASSETS
        Fixed assets are stated at cost. The Company provides for depreciation
        and amortization using the straight-line method over the estimated
        useful lives of the assets of three to seven years.

        RELATED PARTY COVENANT NOT TO COMPETE
        The covenant not to compete was the result of a litigation settlement
        with a former officer and has been amortized over the covenant period,
        which ended December 31, 1998.


                                   Page F-18
<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        STOCK OPTIONS
        SFAS No. 123, "Accounting for Stock-Based Compensation," establishes and
        encourages the use of the fair value based method of accounting for
        stock-based compensation arrangements under which compensation cost is
        determined using the fair value of stock-based compensation determined
        as of the date of grant and is recognized over the periods in which the
        related services are rendered. The statement also permits companies to
        elect to continue using the current implicit value accounting method
        specified in Accounting Principles Bulletin ("APB") Opinion No. 25,
        "Accounting for Stock Issued to Employees," to account for stock-based
        compensation. The Company has elected to use the implicit value based
        method and the disclosure provisions of SFAS No. 123.

        SEGMENT INFORMATION
        The Company adopted Statement of Financial Accounting Standards ("SFAS")
        No. 131, "Disclosures about Segments of an Enterprise and Related
        Information," as of December 31, 2000. This statement establishes
        standards for the reporting of information about operating segments in
        annual and interim financial statements and requires restatement of
        prior year information. Operating segments are defined as components of
        an enterprise for which separate financial information is available that
        is evaluated regularly by the chief operating decision markers in
        deciding how to allocate resources and in assessing performance. SFAS
        No. 131 also requires disclosures about products and services,
        geographic areas, and major customers. The adoption of SFAS No. 131 did
        not affect the results of operations or financial position, but did
        affect the disclosure of segment information as presented in Note 13.

        REVENUE RECOGNITION
        Amounts received as Internet monitoring fees are recognized as earned in
        accordance with the contract or deferred until the month of usage.
        Licensing and distribution fees are recognized as earned in accordance
        with the terms of the related agreements.

        COMPREHENSIVE INCOME
        The Company utilizes SFAS No. 130, "Reporting Comprehensive Income."
        This statement establishes standards for reporting comprehensive income
        and its components in a financial statement. Comprehensive income as
        defined includes all changes in equity (net assets) during a period from
        non-owner sources. Examples of items to be included in comprehensive
        income, which are excluded from net income, include foreign currency
        translation adjustments and unrealized gains and losses on
        available-for-sale securities and included as a component of
        shareholders' equity.

        ADVERTISING
        The Company expenses advertising costs as incurred. Advertising costs
        for the year ended December 31, 2000, the six months ended December 31,
        1999, and the year ended June 30, 1999 were $770,291, $13,653, and
        $10,595, respectively.


                                   Page F-19
<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        INCOME TAXES
        The Company accounts for income taxes under SFAS No. 109, "Accounting
        for Income Taxes." SFAS No. 109 requires a liability approach for
        measuring deferred tax assets and liabilities based on temporary
        differences existing at each balance sheet date using enacted tax rates
        in effect when those differences are expected to reverse. As of December
        31, 2000 and 1999, such differences arose principally from net operating
        loss carryforwards.

        Deferred tax assets, consisting primarily of the tax effect of net
        operating loss carryforwards, are offset with a valuation allowance
        because of the uncertainty of it being realizable.

        LOSS PER COMMON SHARE
        Basic and diluted loss per common share have been computed after
        deducting the dividend requirement of the Company's Series A, E, and G
        preferred stock from net loss. Basic loss per share is based on the
        weighted-average number of common shares outstanding during the year
        ended December 31, 2000, the six months ended December 31, 1999, the
        year ended June 30, 1999, and the six months ended December 31, 1998.
        Diluted loss per share is equal to the basic loss per share because the
        assumed conversion of the Series A, E, and G preferred stock and the
        assumed exercise of outstanding stock purchase warrants and options have
        not been included as the effect would be anti-dilutive. Treasury stock
        has been excluded from the loss per common share calculation.

        ESTIMATES
        The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities
        and disclosures of contingent assets and liabilities at the date of the
        financial statements, as well as the reported amounts of revenues and
        expenses during the reporting period. Actual results could differ from
        those estimates.

        FAIR VALUE OF FINANCIAL INSTRUMENTS
        The Company measures its financial assets and liabilities in accordance
        with generally accepted accounting principles. For certain of the
        Company's financial instruments, including cash and cash equivalents,
        accounts receivable, and accounts payable and accrued expenses, the
        carrying amounts approximate fair value due to their short maturities.
        The amounts shown for notes payable - related parties also approximate
        fair value because current interest rates offered to the Company for
        debt of similar maturities are substantially the same.


                                   Page F-20
<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        FOREIGN CURRENCY TRANSACTION
        Assets and liabilities in foreign currencies are translated at the
        exchange rate prevailing at the balance sheet date. Revenues and
        expenses are translated at the exchange rate prevailing at the
        transaction date, and the resulting gains and losses are reflected in
        the statements of operations. Gains and losses arising from translation
        of a subsidiary's foreign currency financial statements are shown as a
        component of shareholders' equity as accumulated other comprehensive
        income (loss). At December 31, 2000, such gains and losses were
        immaterial.

        IMPAIRMENT OF LONG-LIVED ASSETS
        The Company reviews its long-lived assets for impairment whenever events
        or changes in circumstances indicate that the carrying amount of an
        asset may not be recoverable. Recoverability of assets to be held and
        used is measured by a comparison of the carrying amount of the assets to
        future net undiscounted cash flows expected to be generated by the
        assets. If the assets are considered to be impaired, the impairment to
        be recognized is measured by the amount by which the carrying amount
        exceeds the fair value of the assets. For the year ended December 31,
        2000, the Company incurred $251,913 for the impairment of goodwill.

        CONCENTRATION OF CREDIT RISK
        Financial instruments that potentially subject the Company to
        significant credit risks consist of cash and cash equivalents and
        accounts receivable. The Company places its cash with high-credit,
        quality financial institutions or in high-quality, short-term
        investments such as insured certificates of deposit. At times, the cash
        in any one bank may exceed the Federal Deposit Insurance Corporation's
        insured limit of $100,000. At December 31, 2000 and 1999, the Company
        had uninsured cash of $2,576,635 and $797,246, respectively. With
        respect to accounts receivable, the Company routinely assesses the
        financial strength of its customers and, as a consequence, believes that
        the receivable credit risk exposure is limited.

        RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
        In December 1999, the Securities and Exchange Commission staff released
        Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition," to
        provide guidance on the recognition, presentation, and disclosure of
        revenue in financial statements. Changes in accounting to apply the
        guidance in SAB No. 101 may be accounted for as a change in accounting
        principle effective January 1, 2000. Management has not yet determined
        the complete impact of SAB No. 101 on the Company; however, management
        does expect that application of SAB No. 101 will have a material effect
        on the Company's revenue recognition and results of operations.


                                   Page F-21
<PAGE>


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)
        In March 2000, the Financial Accounting Standards Board ("FASB") issued
        FASB Interpretation No. 44, "Accounting for Certain Transactions
        Involving Stock Compensation," (an Interpretation of Accounting
        Principles Bulletin Opinion No. 25 ("APB 25")) ("FIN 44"). FIN 44
        provides guidance on the application of APB 25, particularly as it
        relates to options. The effective date of FIN 44 is July 1, 2000, and
        the Company has adopted FIN 44 as of that date.

        In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
        Instruments and Certain Hedging Activities." This statement is not
        applicable to the Company.

        In June 2000, the FASB issued SFAS No. 139, "Rescission of FASB
        Statement No. 53 and Amendments to Statements No. 63, 89, and 121." This
        statement is not applicable to the Company.

        In September 2000, the FASB issued SFAS No. 140, "Accounting for
        Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities, a replacement of FASB Statement No. 125." This statement is
        not applicable to the Company.


NOTE 3 - ACQUISITION OF GROSSO-JACOBSON ENTERTAINMENT CORP.

        On January 19, 1999, the Company entered into an agreement to terminate
        all agreements and relationships between the Company and Grosso-Jacobson
        Entertainment Corporation, Grosso-Jacobson Productions, Inc., and
        Grosso-Jacobson Music Company, Inc. (collectively, the "G-J Companies"),
        except the Merger Agreement. In exchange for the Company investing
        $575,000 in a new company to be formed by the officers of the G-J
        Companies and the transfer of certain unproduced projects in development
        for a 15% profit participation, the officers agreed to terminate their
        employment agreement and return 1,666,667 shares of the Company's common
        stock. As of December 31, 2000, 994,952 shares of common stock were
        retired, and the remaining shares are being held in escrow.

        In accordance with paragraph 23 of Accounting Principles Bulletin
        ("APB") Opinion No. 29, "Accounting for Non-Monetary Transactions," this
        transaction has been recorded based on the recorded amount of the
        non-monetary assets distributed. Because the shares are held in escrow,
        outstanding shares have been reduced and shareholders' equity has been
        debited with the recorded amount of the assets distributed of $694,981.


                                   Page F-22
<PAGE>


NOTE 3 - ACQUISITION OF GROSSO-JACOBSON ENTERTAINMENT CORP. (CONTINUED)

        In addition, the Company issued 500,000 options to each of the two
        officers at an exercise price of $0.82 per share. In March 2000, 200,000
        options in the aggregate were exercised by both officers for total
        consideration of $164,000. The remaining 400,000 options to each officer
        were exercisable and outstanding at December 31, 2000.


NOTE 4 - FILM COSTS

        Film costs as of December 31, 2000 and 1999 consisted of projects in
        development of $0 and $224,988, respectively. Write-offs of projects in
        development for the year ended December 31, 2000, the six months ended
        December 31, 1999, and the year ended June 30, 1999 aggregated to
        $224,988, $246,774, and $301,037, respectively.


NOTE 5 - FIXED ASSETS

        Fixed assets as of December 31 consisted of the following:

<TABLE>
<CAPTION>
                                                                       2000          1999
                                                                 -------------   -------------
               <S>                                               <C>             <C>
               Furniture and equipment                           $     265,970   $     255,944
               Computer equipment                                      971,302          77,784
               Equipment held under capital leases                      92,594          92,594
               Leasehold improvements                                   49,566           4,620
                                                                 -------------   -------------
                                                                     1,379,432         430,942
               Less accumulated deprecation and amortization           465,556         299,383
                                                                 -------------   -------------
                  TOTAL                                          $     913,876   $     131,559
                                                                 =============   =============
</TABLE>

        Depreciation and amortization expense for the year ended December 31,
        2000, and the six months ended December 31, 1999, and the year ended
        June 30, 1999 were $166,173, $48,881, and $103,981, respectively.


                                   Page F-23
<PAGE>


NOTE 6 - INVESTMENTS

        On February 24, 1999, the Company entered into an agreement to invest in
        a publicly held company and agreed to purchase 100,000 shares of
        restricted shares of the Company's common stock for $500,000. For no
        additional consideration, the Company was issued 100,000 warrants at an
        exercise price of $6 per share. The warrants shall only be exercisable
        at any time prior to March 1, 2001. The Company has booked this
        investment at fair market value, and the investment represents less than
        a 5% ownership in the investee. During the year ended December 31, 2000,
        the Company sold 43,000 shares and recorded a realized gain of $168,250.
        The Company had recorded an unrealized loss of $661,596, net of a
        reclassification, related to this investment at December 31, 2000.

        This investment is stated at cost or fair market value, which
        approximates its fair value as of December 31, 2000, and is classified
        as available-for-sale.


NOTE 7 - CONVERTIBLE DEBENTURES

        In August 1999, the Company entered into a $4,000,000 private placement
        agreement of 6% convertible debentures on a best effort basis, which is
        convertible into common stock. In connection with the agreement, the
        Company will issue Series A and B warrants. The Series A warrants can be
        converted into a maximum of 400,000 shares of common stock at an
        exercise price of $1.25625 per share. The Series B warrants can be
        converted into a maximum of 300,000 shares of common stock at an
        exercise price of $1.361 per share. The warrants will be sold in units.
        Each unit will consist of $10,000 of principal, 750 Series A warrants,
        and 750 Series B warrants. The Board of Directors has authorized the
        issuance and has reserved a maximum of 3,650,000 shares of common stock
        for the conversion of the debentures and a maximum of 700,000 shares of
        common stock upon the exercise of the warrants. To date, the Company has
        received $3,970,000. There are a total of 281,557 warrants outstanding
        as of December 31, 2000.


NOTE 8 - COMMITMENTS AND CONTINGENCIES

        LEASES
        The Company's non-cancelable office leases provide for minimum annual
        base rents and payment of certain operating expenses. The leases expire
        through January 2005.


                                   Page F-24
<PAGE>


NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

        LEASES (Continued)
        At December 31, 2000, future minimum commitments under these obligations
        are as follows:

                Year Ending
               DECEMBER 31,
               ------------
                  2001                                  $     425,940
                  2002                                        421,440
                  2003                                        421,440
                  2004                                        421,440
                  2005                                        421,440
                                                        -------------
                      TOTAL                             $   2,111,700
                                                        =============

        Rent expense for the year ended December 31, 2000, the six months ended
        December 31, 1999, and the year ended June 30, 1999 was $299,424,
        $98,902, and $269,219, respectively.

        The Company is a party to various agreements relating to its properties
        that provide for payments to others upon the sale, production, and/or
        distribution of the property. Other agreements provide for participation
        by others in the net revenues and/or profits from completed projects.

        In October 1999, the Company entered into an irrevocable standby letter
        of credit with a financial institution for $75,000. The letter is as a
        result of a default of the Company's previous office lease. The amount
        of the letter of credit will be reduced by $15,000 each year until no
        credit is available and will expire in November 2004.

        EMPLOYMENT AGREEMENTS
        The Company has entered into agreements for the services of certain of
        its key executives. These agreements expire through February 28, 2003
        and provide for approximate aggregate annual payments of $677,000 and an
        annual auto allowance of $36,000. Certain of these agreements provide
        for payments by the Company in the event of death, disability,
        termination, or a change in control of the Company.

        CONSULTING AGREEMENT
        On January 14, 2000, the Company entered into a consulting agreement,
        which was later amended on March 16, 2000. The consultant will receive
        $280,000, payable in equal quarterly installments. The agreement expires
        on June 30, 2001. The Company also granted 75,000 options at an exercise
        price of $1.43, which vested immediately. No additional charge was
        recorded in connection with the issuance of the options.


                                   Page F-25
<PAGE>


NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

        ALLIANCE AGREEMENT
        On October 23, 2000, the Company signed a definitive agreement
        establishing a three-year exclusive global strategic alliance with Knoll
        Risk Consulting Services, Inc. ("Knoll Risk"). Knoll Risk is a leading
        worldwide investigations and intelligence firm providing a full range of
        risk mitigation and asset protection services to over 25,000 clients.
        Knoll Risk has a global network of 60 offices in 19 countries. Under the
        terms of this alliance, the Company expects to shall Knoll Risk's
        offices throughout the world and provide enhanced Internet intelligence
        services to corporations, individuals, and governments using the
        Company's proprietary technology. The Company also plans to jointly
        develop an exclusive Internet-based product line designed specifically
        for the security market using the Company/Knoll Risk's brand name and
        integrating the Company's FIRST technology. In connection with this
        alliance, the Company granted to Knoll Risk warrants to purchase
        1,750,000 shares of common stock at an exercise price ranging from $2.50
        to $3 per share, of which warrants to purchase 350,000 shares vested
        immediately, and the balance will vest when Knoll Risk meets certain
        performance criteria based on introductions to potential clients.

        LITIGATION SETTLEMENTS
        During the year ended June 30, 1999, the Company settled certain
        litigation for $46,725. The Company paid the settlement in August 1999,
        for which the amount has been accrued as of June 30, 1999.

        On March 22, 1999, the Company filed a request for arbitration against
        the former employee and Chief Executive Officer of MWI, alleging breach
        of contract. On June 29, 1999, the parties entered into a settlement
        agreement releasing each other from all present and future claims. The
        employee has agreed to return 89,352 shares of common stock received
        from the merger. In addition, the Company will pay to the employee 25%
        of the Company's net recovery from the Company's disputes with an
        entertainment company, after deduction for attorney's fees, contingent
        fees, and costs. Deduction for contingent fees is limited to 15% of the
        total recovery. The former employee was released from any obligation to
        comply with the non-competition clause as included in the employment
        agreement.

        On April 15, 1999, a suit was filed against the Company alleging breach
        of contract with a financing company. The claim indicates failure to
        deliver Class B preferred stock per a Finders Fee Agreement entered into
        in July 1998. On February 24, 2000, the Company entered into a
        settlement agreement and has issued 30,000 shares of common stock valued
        at $71,400.


                                   Page F-26
<PAGE>


NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

        LITIGATION SETTLEMENTS (Continued)
        In March 2000, the Company settled its litigation with an entertainment
        company. The Company believed that the entertainment company wrongfully
        terminated its contracts. The Company sought to recover commissions owed
        to MWI, and the Company received $300,000 in the final settlement.

        On January 19, 1999, a suit was filed by a former employee of MWI
        against the Company and the prior owners of MWI alleging part ownership
        of MWI prior to the merger with NC. On June 20, 2000, the Company
        entered into a settlement agreement and paid $240,000. The Company also
        reclaimed $37,500 from the owners.

        In February 2000, a suit was filed by a former lessor as default of the
        Company's previous lease. The Company entered into a settlement
        agreement and paid $45,000.

        In May 2000, a suit was filed against MWI for the default in payment of
        services rendered to the Company. On May 12, 2000, the Company entered
        into a settlement agreement and paid $40,784.

        In August 2000, a suit was filed against the Company alleging breach of
        contract with an investor. The claim states that the Company delayed a
        transfer of common stock issuance, which was financially harmful to the
        investor. In August 2000, the Company entered into a settlement
        agreement and issued 50,000 shares of common stock valued at $25,000.

        During the year ended December 31, 2000, the Company settled certain
        litigation for $33,920.

        OTHER LITIGATION
        In the normal course of its business, the Company is subject to various
        lawsuits and claims. The Company believes that the final outcomes of
        these matters, either individually or in the aggregate, will not have a
        material effect on its consolidated financial statements.


                                   Page F-27
<PAGE>


NOTE 9 - STOCKHOLDERS' DEFICIT

        On March 3, 2000, the Company entered into an equity securities purchase
        agreement with a financing company to purchase up to $34,000,000 of
        common stock directly and through warrants. Upon completion of the
        financing, the financing company would own 5,698,000 shares in the
        Company. In March 2000, the Company received $8,500,000 of this
        financing for the purchase of the initial 1,700,000 shares of common
        stock. The balance is due through the exercise of 3,498,000 warrants at
        exercise prices ranging from $6 to $9 per share for the Company's common
        stock, which expire in February 2005. As of December 31, 2000, 1,166,000
        warrants were issued and outstanding.

        On March 3, 2000, the Company also granted common stock purchase
        warrants for the purchase of an aggregate of 500,000 shares of common
        stock, at an exercise price of $4.50 per share, to the placement agent
        involved with the offer and sale of common stock and common stock
        purchase warrants to the financing company. Of the warrants issued,
        250,000 shares vest immediately, 83,333 shares become exercisable if the
        closing bid price per share of the Company's common stock equals or
        exceeds $8 for any period of 20 consecutive trading days, 83,333 shares
        become exercisable if the closing bid price per share of the common
        stock equals or exceeds $10 for any period of 20 consecutive trading
        days, and 83,334 shares become exercisable if the closing bid price per
        share of the common stock equals or exceeds $14 for any period of 20
        consecutive trading days.

        On December 27, 2000, the Company amended the original agreement and
        repriced the warrants to an exercise price of $1. If, at any time after
        the statement effective date the per shared market value equals or
        exceeds the mandatory exercise prices, ranging from $2.125 to $3, for
        any period of 10 consecutive trading days, then the warrant holder will
        be required to exercise the warrant. The warrant will be exercised
        pursuant to each mandatory exercise on no later than the third business
        day following such mandatory exercise period. No additional charge was
        recorded in connection with the repricing.


NOTE 10 - PREFERRED STOCK

        PREFERRED STOCK, SERIES A
        The Company's preferred stock, Series A has a par value of $0.001. There
        are 1,300,000 shares authorized and 1,000,000 shares issued and
        outstanding. The holders of the Series A preferred stock have no voting
        rights. The preferred stock has a liquidation preference of $5 per share
        and pays a dividend in cash or in common stock of 8.5% per annum. The
        Series A preferred is convertible into common stock. The number of
        shares issued upon conversion is determined by multiplying (i) the
        number of shares of Series A preferred to be converted by (ii) the sum
        of $5 plus all accrued but unpaid dividends in such shares being
        converted and dividing the result by $1.


                                   Page F-28
<PAGE>


NOTE 10 - PREFERRED STOCK (CONTINUED)

        PREFERRED STOCK, SERIES C
        The Company's preferred stock, Series C, has a par value of $0.001.
        There are 3,000,000 shares authorized and 400,000 shares issued and
        outstanding. The holders of the Series C preferred stock have no voting
        rights. Each share of Series C preferred is convertible at the option of
        its holders into one share of common stock at a price of $0.50 per
        share. The preferred stock is entitled to non-cumulative dividends of 8%
        per annum, but only after the Company has earnings in any fiscal year
        greater than $1,000,000. Since the earnings requirement has not been
        met, no dividends have been declared.

        During the year ended December 31, 2000, 2,100,000 shares of preferred
        Series C were converted into 2,100,000 shares of common stock.

        PREFERRED STOCK, SERIES D
        The Company's preferred stock, Series D has a par value of $0.001. There
        are 50,000 shares authorized and 50,000 shares issued and outstanding.
        The holders of the Series D preferred stock have no voting rights. The
        Series D preferred is convertible into common stock, fixed for the
        redemption of such shares, and in lieu of accumulated and unpaid
        dividends, that the number of shares of the Company's common stock which
        equals $10 per share of preferred stock which is to be converted, plus
        accumulated and unpaid dividends thereon, divided by the lesser of (a)
        100% of the average of the closing bid prices for five trading days
        preceding the date of purchase of the Series D preferred stock, (b) 80%
        of the average of the closing bid prices for five trading days preceding
        the conversion date, or (c) the post adjustment exercise price per share
        of the common stock.

        PREFERRED STOCK, SERIES E
        The Company's preferred stock, Series E has a par value of $0.001. There
        are 500,000 shares authorized and no shares issued and outstanding. The
        holders of the Series E preferred stock have no voting rights. The
        Series E preferred has a liquidation preference of $10 per share and
        cumulative dividends at the rate of 6% per annum, payable quarterly in
        arrears in cash or shares of common stock at the Company's option. The
        preferred stock is convertible into common stock at the option of the
        holders, fixed for the redemption of such shares into that number of
        shares of common stock which equals $10 per share of the preferred stock
        to be converted, plus accumulated and unpaid dividends thereon, divided
        by 82.5% of the average of the closing bid price per share of the common
        stock.

        On September 16 and November 22, 1999, the investor converted 225,000
        shares of Series E preferred stock into 2,155,416 shares of common
        stock.


                                   Page F-29
<PAGE>


NOTE 10 - PREFERRED STOCK (CONTINUED)

        PREFERRED STOCK, SERIES F
        The Company's preferred stock, Series F has a par value of $0.001. There
        are 550,000 shares authorized and 50,000 shares issued and outstanding.
        The holders of the Series F preferred stock have no voting rights. Each
        share of Series F preferred stock is convertible into one share of
        common stock upon payment of the conversion price. The conversion price
        is an amount equal to 125% of the fair market value of the Company's
        common stock on the date of issuance of the shares of Series F
        preferred. In February 2000, 225,000 shares of the preferred stock were
        converted into 225,000 shares of common stock for total consideration of
        $311,525.

        PREFERRED STOCK, SERIES G
        The Company's preferred stock, Series G has a par value of $1,000. There
        are 4,000 shares authorized and no shares issued and outstanding. The
        holders of the Series G preferred stock have no voting rights.

        On November 14 and December 15, 1999, NC exercised its right under an
        agreement and issued 1,875 shares of Series G preferred stock. Holders
        of the preferred stock are entitled to dividends of $60 per year per
        each share owned. The preferred stock is convertible into common stock
        at the lesser of $1.26 per share or 85% of the market price of a share
        of common stock on the date of conversion. Market price is defined as
        the average of the two lowest closing bid prices for a share of common
        stock.

        During the year ended December 31, 2000, 2,935 shares of preferred
        Series G were converted into 2,336,329 shares of common stock. The
        preferred stock was originally issued in connection with convertible
        debentures (see Note 7).

        In accordance with FASB's Emerging Issues Task Force Topic No. D-60, the
        Company accounts for the beneficial conversion feature of convertible
        debt securities based on the difference between the conversion price and
        the fair value of the common stock into which the security is
        convertible, multiplied by the number of shares into which the security
        is convertible. The amount attributable to the beneficial conversion
        feature is recognized as dividends over the most beneficial conversion
        period using the effective interest method. Any unamortized beneficial
        conversion feature is recognized as retained earnings. The Company has
        recognized the beneficial conversion feature by recording $1,090,000 as
        a dividend, offset by additional paid-in capital.


                                   Page F-30
<PAGE>


NOTE 11 - STOCK OPTIONS AND WARRANTS

        STOCK OPTIONS
        The Company's Board of Directors adopted the 1998 Stock Incentive Plan
        (the "Plan") on February 17, 1998. The Plan, which was amended in April
        1999, authorizes the granting of stock options to officers, non-employee
        directors, employees, and consultants to purchase an aggregate of
        5,000,000 shares of common stock. Options awarded under the Plan expire
        after 10 years. The Company may also grant other stock options outside
        its stock option plan.

        The Company has adopted only the disclosure provisions of SFAS No. 123,
        "Accounting for Stock-Based Compensation." It applies APB Opinion No.
        25, "Accounting for Stock Issued to Employees," and related
        interpretations in accounting for its plans and does not recognize
        compensation expense for its stock-based compensation plans other than
        for restricted stock and options/warrants issued to outside third
        parties.

        If the Company had elected to recognize compensation expense based upon
        the fair value at the grant date for awards under its plan consistent
        with the methodology prescribed by SFAS No. 123, the Company's net loss
        and loss per share would be increased to the pro forma amounts indicated
        below for year ended December 31, 2000, the six months ended December
        31, 1999, and the year ended June 30, 1999:

<TABLE>
<CAPTION>
                                                                      For the
                                                      For the        Six Months       For the
                                                     Year Ended         Ended        Year Ended
                                                     December 31,    December 31,     June 30,
                                                           2000           1999          1999
                                                    -------------   -------------   -------------
               <S>                                  <C>             <C>             <C>
               Net loss available for common
                 shareholders
                  As reported                       $(10,533,838)   $  (5,670,345)   $ (3,213,489)
                  Pro forma                         $(12,689,971)   $  (7,826,478)   $ (4,923,289)
               Basic loss and diluted per
                 common share
                  As reported                       $      (0.33)   $       (0.37)   $      (0.33)
                  Pro forma                         $      (0.39)   $       (0.51)   $      (0.51)
</TABLE>

        These pro forma amounts may not be representative of future disclosures
        because they do not take into effect pro forma compensation expense
        related to grants made before 1995. The fair value of these options was
        estimated at the date of grant using the Black-Scholes option-pricing
        model with the following weighted-average assumptions for the year ended
        December 31, 2000, the six months ended December 31, 1999, and the year
        ended June 30, 1999: dividend yields of 0%, 0%, and 0%, respectively;
        expected volatility of 100%, 100%, and 100%, respectively; risk-free
        interest rates of 5.4%, 6.2%, and 5.5%, respectively; and expected lives
        of two, two, and two years, respectively.


                                   Page F-31
<PAGE>


NOTE 11 - STOCK OPTIONS AND WARRANTS (CONTINUED)

        STOCK OPTIONS (Continued)
        The Black-Scholes option valuation model was developed for use in
        estimating the fair value of traded options which have no vesting
        restrictions and are fully transferable. In addition, option valuation
        models require the input of highly subjective assumptions including the
        expected stock price volatility. Because the Company's employee stock
        options have characteristics significantly different from those of
        traded options, and because changes in the subjective input assumptions
        can materially affect the fair value estimate, in management's opinion,
        the existing models do not necessarily provide a reliable single measure
        of the fair value of its employee stock options.

        The following summarizes the stock option transactions under the Stock
        Option Plan:

<TABLE>
<CAPTION>
                                                                            Weighted-
                                                                             Average
                                                             Number of      Exercise
                                                             SHARES           PRICE
                                                         -------------    ------------
               <S>                                       <C>              <C>
               Balance, June 30, 1998                          287,028    $      14.79
                 Granted                                     3,593,370    $       1.19
                 Exercised                                    (773,370)   $       0.71
                 Expired                                      (585,416)   $       2.56
                                                         -------------
               Balance, June 30, 1999                        2,521,612    $       4.57
                 Granted                                     1,768,625    $       1.48
                 Exercised                                    (320,000)   $       0.76
                 Expired                                      (201,612)   $      14.79
                                                         -------------
               Balance, December 31, 1999                    3,768,625    $       1.28
                 Granted                                     2,592,704    $       2.38
                 Exercised                                  (1,730,000)   $       1.32
                 Expired                                    (1,151,750)   $       0.91
                                                         -------------
                  BALANCE, DECEMBER 31, 2000                 3,479,579    $       2.20
                                                         =============
                  EXERCISABLE, DECEMBER 31, 2000             2,819,864    $       1.79
                                                         =============
</TABLE>

        The weighted-average remaining contractual life of the options
        outstanding is 3.51 years at December 31, 2000. The exercise prices for
        the options outstanding as of December 31, 2000 ranged from $0.38 to
        $11.97.


                                   Page F-32
<PAGE>


NOTE 11 - STOCK OPTIONS AND WARRANTS (CONTINUED)

        STOCK OPTIONS (Continued)
        The information relating to these options is as follows:

<TABLE>
<CAPTION>
                                                       Weighted-       Weighted-        Weighted-
                                                        Average         Average         Average
                                                       Remaining        Exercise        Exercise
            Range of        Stock         Stock       Contractual         Price          Price
            Exercise       Options       Options    Life of Options    of Options      of Options
             PRICES      OUTSTANDING   EXERCISABLE    OUTSTANDING      OUTSTANDING    EXERCISABLE
         -------------   -----------   ------------ ---------------   ------------    -----------
         <S>             <C>           <C>          <C>               <C>             <C>
         $ 0.38 - 1.00       998,800        966,741          3.86     $     0.86      $   0.87
         $ 1.01 - 5.00     2,200,900      1,723,539          3.86     $     2.38      $   2.38
         $5.01 - 11.97       279,879        129,584          3.80     $     7.25      $   7.00
                         -----------   ------------
                           3,479,579      2,819,864
                         ===========   ============
</TABLE>


        During the year ended June 30, 1999, the Company issued options to
        purchase 253,370 shares of common stock. The options were exercised
        concurrently with their issuance in exchange for a subscription
        receivable of $136,969. During the six months ended December 31, 1999,
        the subscription receivable was forgiven due to the acquisition of
        Infolocity, Inc.

        WARRANTS - OTHER
        In addition to the 1,533,333 redeemable warrants exercisable at $5.25
        per share of common stock issued in connection with the September 1996
        public offering, there are 216,667 other outstanding warrants. As part
        of a June 1996 private placement of $500,000 aggregate principal amount
        of 10% promissory notes ("Bridge Notes"), 166,667 "Bridge Warrants" were
        issued. Upon repayment of the Bridge Notes in September 1996, the
        "Bridge Warrants" were automatically exchanged for 166,667 redeemable
        warrants exercisable at $5.25 per share. The Company has other existing
        warrants outstanding to purchase an aggregate of 50,000 shares of common
        stock at prices ranging from $21 to $24 per share. There were a total of
        approximately 1,916,667 warrants outstanding as of December 31, 2000 in
        relation to the public offering and private placement.


                                   Page F-33
<PAGE>


NOTE 12 - INCOME TAXES

        The provision for (benefit from) federal income taxes at statutory rates
        was computed as follows for year ended December 31, 2000, the six months
        ended December 31, 1999, and the year ended June 30, 1999:
<TABLE>
<CAPTION>
                                                                     For the
                                                       For the      Six Months        For the
                                                      Year Ended      Ended          Year Ended
                                                     December 31,   December 31,      June 30,
                                                        2000            1999            1999
                                                     -------------  -------------   -----------
           <S>                                       <C>            <C>             <C>
           Benefit from income taxes at statutory
                 34% rate                            $ (2,842,000)  $ (1,464,000)   $ (906,000)
               Tax effect (benefit) of
                 Change in valuation allowance          3,318,000      1,845,000     1,061,000
                 State income tax deduction, net of
                  federal benefit                        (476,000)      (381,000)     (155,000)

                          TOTAL                      $          -  $           -    $        -
                                                     ============  =============    ==========
</TABLE>

        The Company's total deferred tax assets and deferred tax asset valuation
        allowance at December 31 were as follows:

<TABLE>
<CAPTION>
                                                                       2000           1999
                                                                 --------------  -------------
               <S>                                               <C>             <C>
               Deferred tax asset
                  Net operating loss carryforwards               $  12,132,000   $   8,813,000
               Valuation allowance                                 (12,132,000)     (8,813,000)
                                                                 -------------   -------------
                      NET DEFERRED TAX ASSETS                    $           -   $           -
                                                                 =============   =============
</TABLE>


        As of December 31, 2000, the Company had federal and state net operating
        loss carryforwards of approximately $31,169,000 and $15,614,000,
        respectively, which expire through 2004 and 2016, respectively.

        Utilization of the net operating loss carryforwards in any one year may
        be limited by, among other things, alternative minimum tax rules and
        restrictions caused by changes in the Company's stock ownership
        (Internal Revenue Code Section 382). The 1996 ownership changes resulted
        in an annual Section 382 net operating loss limitation of approximately
        $945,700.


                                   Page F-34
<PAGE>


NOTE 13 - RELATED PARTY TRANSACTIONS

        The Company has entered into a production agreement with a Loan-Out
        Company for the services of a key officer and others as producer and to
        perform other duties. The Loan-Out Company is under the control of
        officers/directors of the Company and their family. This agreement
        expires in June 2002 and provides for an approximate annual payment of
        $262,000, plus a $1,500 monthly automobile reimbursement.

        During the year ended June 30, 1999, the Company issued a promissory
        note to the Loan-Out Company for the sum of $44,046, which represents
        amounts owed by the Company under its production agreement. The
        promissory note bears interest at the rate of 10% per annum and was due
        in December 1999. During the six months ended December 31, 2000, the due
        date of the note was extended to February 2000 and paid in full
        subsequent to the year ended December 31, 1999.

        During the year ended June 30, 1999, the Company entered into a
        Securities Purchase Agreement with the Loan-Out Company. The Loan-Out
        Company purchased 1,300,000 shares of Series C convertible preferred
        stock, par value $0.001 per share, for a purchase price of $0.001 per
        share.

        On January 7, 2000, the Company entered into two promissory notes with
        the Loan-Out Company for the principal sum of $2,450,000. The notes are
        in connection with the conversion of 1,300,000 shares of Series C
        Convertible Stock, as well as the exercise of the option to purchase
        1,500,000 shares of the Company's common stock. Interest shall accrue at
        5% per annum and shall be due and payable on or before December 31st of
        each year. All outstanding principal shall be due and payable on or
        before December 31, 2001.

        During the year ended June 30, 1999, the Company had a related party
        receivable of $99,891 from an officer, which was rescinded due to a
        contract cancellation. The receivable was written off as of December 31,
        1999.

        During the year ended June 30, 1999, the Company entered into financial
        consulting agreements with a shareholder and issued an aggregate of
        650,000 shares of common stock valued at $280,000 for consulting
        services. In addition, the Company granted 500,000 options at an
        exercise price of $0.50 per share, all of which have been exercised at
        June 30, 1999.

        During the year ended June 30, 1999, the Company entered into a
        Securities Purchase Agreement with a consulting company. The consulting
        company purchased 1,700,000 shares of the Company's Series C preferred
        stock, par value $0.001 per share, for a purchase price of $0.001 per
        share. The Company also issued 500,000 options at an exercise price of
        $0.50 per share, all of which were exercised at December 31, 1999.


                                   Page F-35
<PAGE>


NOTE 13 - RELATED PARTY TRANSACTIONS (CONTINUED)

        During the six months ended December 31, 1999, the consulting company
        converted 1,700,000 shares of the Company's Series C preferred stock
        into the same number of common stock shares at a conversion price of
        $0.50 per share. In connection with the conversion, a promissory note
        was issued for the principal sum of $598,800, of which $200,000 was paid
        in February 2000. Interest accrues at 5% per annum and is due and
        payable on or before December 31, 2002. The Company further issued
        70,000 shares of common stock valued at $133,700 for services rendered.

        The Company receives financial consulting services from a member of the
        Board of Directors. During the six months ended December 31, 1999 and
        the year ended June 30, 1999, the Company paid $35,000 and $81,000,
        respectively, for consulting services. In addition, during the six
        months ended December 31, 1999, the Company issued 50,000 options at an
        exercise price of $1. During the year ended June 30, 1999, the Company
        issued 300,000 and 25,000 options at an exercise price of $0.82 and
        $2.35, respectively. All options are exercisable and outstanding at
        December 31, 2000. For the year ended December 31, 2000, the consultant
        was an employee of the Company.

        During the year ended June 30, 1999, the Company granted 50,000 options
        to a former executive at an exercise price of $1.75 per share. These
        options are exercisable and outstanding at December 31, 2000.

        During the year ended June 30, 1999, the Company granted 150,000 options
        to another former executive at an exercise price of $1.50 per share.
        These options are exercisable and outstanding at December 31, 2000.

        During the year ended June 30, 1999, the Company granted 25,000 and
        500,000 options to a director of the Company at exercise prices of $2.35
        and $1.35, respectively. These options are exercisable and outstanding
        at December 31, 2000.

        During the six months ended December 31, 1999, the Company issued
        128,709 shares of common stock valued at $261,278 for consulting
        services to a relative of an officer of the Company.

        Related party amounts due for the year ended June 30, 1999 aggregated to
        $69,046. These amounts due were non-interest-bearing and were payable on
        December 31, 2000. The loans were due to two officers of the Company, of
        which $25,000 was paid in July 1999, and the remaining balance of
        $44,046 was paid as of December 31, 2000.


                                   Page F-36
<PAGE>


NOTE 13 - RELATED PARTY TRANSACTIONS (CONTINUED)

        On January 19, 2000, the Company entered into three promissory note
        agreements with a former officer of the Company for a total of
        $1,050,000. The notes are in connection with a Stock Purchase Agreement
        for the exercise of the option to purchase 600,000 shares of the
        Company's common stock at $1.75 per share. Interest shall accrue at 5%
        per annum and shall be due and payable at the same time as principal
        payments on or before December 31, 2001, 2002, and 2003 per promissory
        note.

        On March 2, 2000, the Company entered into a promissory agreement with
        another officer of the Company for the principal sum of $161,500, of
        which $61,500 was paid in March 2000. The note is in connection with the
        issuance of common stock for the exercise of the option to purchase
        175,000 shares of common stock at $0.92 per share. Interest shall accrue
        at 5% per annum and shall be due and payable on or before February 28th
        of each year. All outstanding principal shall be due and payable on or
        before February 28, 2002.

        During the year ended December 31, 2000, the Company purchased
        approximately $599,000 of marketing communications services from a
        company owned partially by the wife of an officer.


NOTE 14 - SEGMENT INFORMATION

        The Company has two industry reportable segments: 1) Internet-based
        analysis and 2) strategic support and distribution of television and
        video programming. The accounting policies of the segments are the same
        as described in Note 2. The Company evaluates segment performance based
        on income from operations. All intercompany transactions between
        segments have been eliminated.

<TABLE>
<CAPTION>
                                                              YEAR  ENDED  DECEMBER  31, 2000
                                                     -----------------------------------------
                                                          INTERNET   DISTRIBUTION      TOTAL
                                                     -------------  -------------  -----------
               <S>                                   <C>            <C>            <C>
               Revenues                              $  1,347,303   $    317,922   $ 1,665,225
               Segment loss                          $ (8,033,864)  $   (326,261)  $(8,360,125)
               Total assets                          $  4,168,396   $    801,230   $ 4,969,626
               Depreciation and amortization         $    157,643   $      8,530   $   166,173
</TABLE>



<TABLE>
<CAPTION>
                                                         SIX MONTHS  ENDED  DECEMBER 31, 1999
                                                     -----------------------------------------
                                                          INTERNET   DISTRIBUTION      TOTAL
                                                     -------------  -------------  -----------
               <S>                                   <C>            <C>            <C>
               Revenues                              $    155,466   $    187,519   $   342,985
               Segment loss                          $   (712,769)  $ (4,011,813)  $(4,724,582)
               Total assets                          $  1,434,898   $  2,704,911   $ 4,139,809
               Depreciation and amortization         $     14,080   $     34,801   $    48,881
</TABLE>



                                   Page F-37
<PAGE>


NOTE 14 - SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                            YEAR  ENDED  JUNE  30, 1999
                                                     --------------------------------------------
                                                         INTERNET    DISTRIBUTION       TOTAL
                                                     ------------   --------------  -------------
               <S>                                   <C>            <C>             <C>
               Revenues                              $    55,235    $   2,936,718   $  2,991,953
               Segment loss                          $   (57,187)   $  (2,665,052)  $ (2,722,239)
               Total assets                          $   413,976    $   4,040,644   $  4,454,620
               Depreciation and amortization         $     1,626    $     102,355   $    103,981
</TABLE>


NOTE 15 - MAJOR CUSTOMERS

        For the year ended December 31, 2000, the Company had sales to one
        customer (the "Customer") representing 15% of total revenues. For the
        six months ended December 31, 1999, the Company had sales to the
        Customer representing 10% of total revenues. For the year ended June 30,
        1999, the Company had sales to the Customer representing 77% of total
        revenues.

        As of December 31, 2000, 17% of the Company's accounts receivable was
        from the Customer. As of December 31, 1999, 1% of the Company's accounts
        receivable was from the Customer.


NOTE 16 - FOURTH QUARTER ADJUSTMENTS

        An adjustment to additional paid-in capital of $1,090,000 was made to
        record dividends on Series G preferred stock, representing a beneficial
        conversion feature.

        An adjustment to goodwill of $251,913 was made to record a loss on
        impairment.


NOTE 17 - SUBSEQUENT EVENTS

        MINDFULEYE.COM, INC.
        On February 28, 2001, the Company entered into a formal letter of intent
        to acquire MindfulEye.com, Inc., a subscription-based Internet
        monitoring company that automatically alerts inventors in real time to
        online news, rumors, information, and changes in public sentiment about
        companies in which they have interest. The closing of the proposed stock
        offer is subject to reciprocal due diligence, applicable corporate
        approvals, and the successful negotiation and execution of a definitive
        merger agreement.

        Under the terms of the letter of intent, the Company has agreed to
        purchase all of the outstanding stock of MindfulEye.com, Inc. for
        $4,000,000. The purchase price is to be paid in shares of the Company's
        stock.


                                   Page F-38
<PAGE>


NOTE 17 - SUBSEQUENT EVENTS (CONTINUED)

        FINANCING AGREEMENT
        On February 28, 2001, the Company entered into a financing agreement for
        a loan of $2,000,000, which the Company can draw as needed. The loan is
        for a maximum of one year with interest at 10% per annum. The financing
        company will receive 5% of the amount of the loan in warrants.

        The financing company further agreed to enter into an equity credit line
        arrangement to register $10,000,000 of stock in a shelf registration.
        Upon registration of the shares, the Company will have the ability to
        draw on this line by issuing registered stock in exchange for funds.

                                   Page F-39