UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                   For the fiscal year ended December 31, 2002

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

                For transition period from _________ to _________

                        Commission file number 000-30244

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

           NEVADA                                               13-3389415
(State or other jurisdiction                                 (I.R.S. Employer
     of incorporation)                                    Identification Number)

                        4201 YALE BOULEVARD, NE SUITE G,
                              ALBUQUERQUE, NM 87107
               (Address of principal executive offices) (Zip code)

                    Issuer's telephone number (505) 344-9643

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

     None

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

     Title of each class Common Stock, $0.001 par value

     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 the past 90 days. [x]Yes [ ] No

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  SB  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. [x]

     The  registrant's  operating  revenues for its most recent fiscal year were
$5,179,160.

     The aggregate market value of the registrant's voting and non-voting common
equity held by non-affiliates (computed based on the average bid and asked price
of the  registrant's  Common Stock on the bulletin board, and for the purpose of
this computation only, on the assumption that all of the registrant's  directors
and officers are affiliates) was approximately $822,022 on March 28, 2003.

     The number of shares of Common Stock  outstanding  as of March 21, 2003 was
31,496,419.

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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

     Cyco.net,  Inc. is the successor  corporation  to AVE, Inc.  Cyco.net is an
e-commerce business. The main web site is in the form of an "e" zine, similar to
a  magazine  except  that  it  is  only  available  on-line.  The  web  site  is
www.cyco.net.   It  currently  has  two  fully   operational   ancillary  sites,
cycocigs.com and aabakismokes.com, which are in the market of selling cigarettes
on-line. We have also registered the sites of digidarkroom.com, cyconet.com, and
psychocigs.com, which sends viewers to cycocigs.com.

CORE BUSINESS

     Cyco.net,  Inc. was established in January 1999 to develop a network of web
based  companies.  These companies are centered around a central web site called
Cyco.net (www.cyco.net).

     The revenue producing web sites are Cycocigs.com and  Aabakismokes.com.  In
November   1999,   we  opened  our  first   e-commerce   web  site.   The  site,
www.cycocigs.com,  sells cigarettes over the Internet.  In March 2000, we opened
our  second  e-commerce  web  site.  The  site,  Aabakismokes.com,   also  sells
cigarettes over the Internet.  The name,  Asbakismokes.com,  provides  favorable
placement in guides that list companies or web sites in alphabetical  order. New
Mexico state laws allows us to sell out of state without paying the state excise
tax on  cigarettes,  thus enabling us to provide  customers  with their favorite
name brand cigarettes at discounted prices.

     The first  page of each web site  provides  a pull down  menu  listing  all
available brands of cigarettes. Once a brand is selected,  obtainable styles are
listed.  From there the customer places desired  cigarettes into a shopping cart
that details total quantities  ordered,  unit costs,  shipping charges,  and the
total  cost of the  order.  This  page also  provides  an  opportunity  to place
additional  orders,  and  continually  scheduled  shipments to the customer.  To
complete the order, customers enter a secure site to provide form of payment.

     The site accepts Visa,  MasterCard,  Discover Card,  and American  Express.
With credit card orders, we are paid when the order is shipped. We are generally
able to verify a  customer's  age because  credit card  holders must be 18 years
old. Any credit cards issued to minors must be co-signed by a parent or guardian
who receives monthly itemized statements. In questionable cases, we will require
photo  identification  to be  supplied  by  facsimile.  In an effort to  further
prevent minors from purchasing  cigarettes,  Cyco.net requires the shipment upon
receipt be signed for by an adult.

     Customers  must  agree to the  following  terms of sale to  complete  their
order:

     *    Billing address must be used as shipping  address to verify the age of
          recipient.

     *    Billing addresses outside the United States or within the state of New
          Mexico are prohibited.

     *    Purchaser must be 18 years of age and upon delivery be signed for.

     *    Purchaser agrees not to resell or retail any part of their order.

     *    Limit of 10 cartons per customer per order.

     These terms are listed in several places,  as well as on the final checkout
page.

     Orders placed Sunday afternoon through Thursday before 11:00 a.m., Mountain
Standard  Time,  are shipped the next business  day.  Orders  received  Thursday
evening through Sunday morning are shipped on Monday.  All orders are shipped by
United States Postal Service 2-3 day priority mail and must be signed for.

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CYCO.NET

     Our Cyco.net web site provides a lighthearted destination that presents the
Internet to individuals through quick wit,  interesting links and other standard
Internet offerings (I.E., stock quotes, horoscopes, etc.). The goal of this site
is to provide the Internet user with a starting point for their daily excursions
into the World Wide Web.

KEY MARKET

     Cyco.net's  primary  business  is the retail  sale of  cigarettes  over the
Internet. Our key market is the United States,  excluding New Mexico. New Mexico
law would  require  Cyco.net to pay a state excise tax on the sale of cigarettes
if Cyco.net sold cigarettes to residents of New Mexico. To help keep the cost of
our  cigarettes as low as possible,  Cyco.net  does not sell  cigarettes to such
residents.  At the  present  time,  Cyco.net  does not  expect  to  expand  into
geographic regions outside the United States. Instead,  Cyco.net will attempt to
expand its customer  base in the United  States by attempting to keep the prices
of our cigarettes as low as possible.

SOURCES OF SUPPLY

     Cyco.net  sources it products  primarily from  wholesalers.  Cigarettes are
widely  available from many sources,  and Cyco.net  could readily  establish new
sources of supply if it could not obtain cigarettes from its current  suppliers.
Because Cyco.net competes primarily on price,  along with convenience,  Cyco.net
attempts  to source its  product  for the lowest  possible  cost and to pass any
savings on to its customers.  Some of our competitors are able to source product
at lower  prices than us because of  discounts  they  receive for selling a high
volume of cigarettes and promotions given to traditional  retailers by cigarette
manufacturers.   To  date,  Cyco.net  has  not  been  given  an  opportunity  to
participate in these promotions because manufacturers have not permitted on-line
retailers like Cyco.net from participating in them.

INDUSTRY

     Cyco.net  operates  in  the  on-line  segment  of the  cigarette  industry.
According  to  Forrester  Research,  websites  will sell $2.2  billion  worth of
cigarettes this year and they project sales of $5 billion by 2005.

COMPETITION

     Retail sales of cigarettes is a highly  competitive  business.  Competitors
include  grocery  stores,  mass-marketers,   convenience  stores,  drug  stores,
e-tailers and other retail outlets.  Many of our competitors have  substantially
greater resources than us and sell a significantly  higher volume of cigarettes.
As a result of this higher volume and  manufacturer  promotions that Cyco.net is
excluded from  participating  in, our competitors can source their product for a
lower cost than us. Many of these same competitors,  however, have substantially
more  overhead  than us, such as store  fronts,  cashiers,  fixtures,  etc. As a
result,  Cyco.net can typically  sell its  cigarettes  for less than many of our
competitors.  Accordingly,  our customers are attracted to us based primarily on
price  and  convenience.  There  are no  substantial  barriers  to  prevent  our
competitors,  or start-up  entities,  from selling cigarettes over the Internet.
Currently,  Cyco.net is aware of several  hundred  on-line  businesses that sell
cigarettes over the Internet.

     As discussed above,  many of our competitors  receive  buy-down  promotions
that lower the prices of  cigarettes  purchased by our  competitors.  A buy-down
promotion involves the payment of a rebate to the retailer, who then reduces the
retail price of its  cigarettes.  To date,  cigarette  suppliers have refused to
allow Cyco.net to participate in these  buy-down  promotions.  As a result,  the
price  Cyco.net  pays  for  its  cigarettes  may  be  higher  than  many  of its
competitors.  Cyco.net  continues to try to obtain buy-down  promotions from its
suppliers  but has  been  unsuccessful  so far.  Cyco.net's  ability  to  obtain
buy-down  promotions prevents Cyco.net from offering its products for the lowest
possible prices.

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GROWTH

     As  indicated  above,  the  cigarette  industry  in the  United  States has
declined  in recent  years due to  anti-smoking  sentiments  and  higher  taxes.
Cyco.net  is not aware of any  available  sources  regarding  the size or growth
prospects of on-line cigarette sales.

     Cyco.net,  however,  expects  the U.S.  cigarette  industry  to  continue a
gradual  decline for the next several  years and believes  that on-line sales of
cigarettes  may gain a greater  portion of retail  cigarette  sales due to lower
prices and convenience than that offered by other outlets. In addition, Cyco.net
can provide customers with many cigarette brands that are not available at their
local retail outlet due to limited shelf space.

GOVERNMENT REGULATION

EXCISE TAXES

     Cigarettes are generally  subject to substantial  federal,  state and local
excise taxes in the United  States.  The Quil ruling by the U.S.  Supreme  Court
states that a state  cannot  place undue  burden on a company that does not have
physical  operations in that state.  Cyco.net  believes that there is reasonable
uncertainty  over the  applicability  of these  taxes  on its  on-line  sales of
cigarettes  and  therefore,  does not  collect or remit  excise  taxes (or other
taxes) on its sales.  If Cyco.net were required to collect and remit such taxes,
then the  prices of our  cigarettes  would  increase.  This could harm our sales
because  our  customers  are price  sensitive.  Accordingly,  our sales would be
adversely  affected by increases to the price of our  cigarettes.  To date,  the
City of New York, the State of Washington, the State of California and the State
of Oregon have filed civil actions  against the Company's  subsidiary  Cyco.net,
Inc., related to on-line cigarette sales to residents.

SALES TAXES

     Cyco.net  does not  collect or remit state sales or other taxes on the sale
of  cigarettes.  Cyco.net  does  not  believe  that it has  sufficient  business
contacts in one or more states to require it to collect and remit state sales or
other taxes. If Cyco.net is required to collect sales taxes, then Cyco.net would
need to update its computer  systems to calculate the appropriate  sales tax for
each  customer  order and to remit  such taxes to the  appropriate  governmental
agencies.  Moreover,  in  recent  years,  state  governments  have  aggressively
attempted to collect sales taxes from out-of-state companies.  These actions are
expensive to defend, regardless of the final outcome.

OTHER REGULATIONS

     Reports with  respect to the health  risks of  cigarette  smoking have been
publicized  for  many  years,  and the  sale,  promotion  and use of  cigarettes
continue to be subject to increasing governmental regulation.  Recently, several
bills have been proposed in Congress that would,  to varying  degrees,  give the
Food and Drug  Administration  authority to regulate  tobacco  products.  Any of
these bills could result in substantial regulation of cigarettes. The outcome of
these bills cannot be predicted.

EMPLOYEES

     Cyco.net, Inc. currently has four full-time employees.

COMPANY HISTORY

     Cyco.net is the successor to Deluxe Onyx Company, a company incorporated in
1921 and which produced motion pictures. In 1987, Deluxe Onyx Company changed to
Walsh  Communications  Group,  Inc and moved its  domicile to Nevada.  On May 4,
1990,  its name was changed to AVE,  Inc.  AVE,  Inc. was inactive  from 1990 to
April 1997 when it began to seek to acquire an operating  business.  In December
1997, AVE, Inc. acquired Digital Manufacturing Inc. in a reverse merger. Digital
Manufacturing Inc. produced an antenna that could be re-engineered to operate in
the home satellite  frequency  spectrum.  In February  1999,  AVE, Inc. sold its
antenna business.

     On July 22, 1999, AVE, Inc.  acquired  Cyco.net,  Inc. of Albuquerque,  New
Mexico in a transaction  accounted for as a recapitalization  of Cyco.net,  Inc.
Cyco.net  was  established  in December  1998 to develop a network of  web-based

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<PAGE>
companies.  Under the terms of the  agreement,  AVE,  Inc.  changed  its name to
Cyco.net,  Inc. Mr. R. Gene  Klawetter,  former  Chairman  and CEO of AVE,  Inc.
became a director of Cyco.net,  Inc. George Sullivan,  former AVE Vice President
of Operations resigned, as did Henri Hornby, former Director of AVE, Inc. In the
transaction,  Cyco.net,  Inc.  shareholders  received  2.08  shares  of AVE (now
Cyco.net) for each share of Cyco.net,  Inc. stock.  This provided the former AVE
shareholders  with 15% ownership  interest in the surviving company and Cyco.net
shareholders with 85% ownership interest of the surviving company.

RISKS RELATED TO OUR BUSINESS

     Cyco.net  is  subject  to  various  risks  which  may  materially  harm our
business, financial condition and results of operations.

WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE

     We have  historically  lost money. In the years ended December 31, 2002 and
2001,  we had net losses of $325,593 and $158,488,  respectively.  Future losses
are likely to occur.  Accordingly,  we may experience  significant liquidity and
cash flow problems because historically our operations have not been profitable.
No assurances can be given that we will be successful in reaching or maintaining
profitable operations.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS

     We have relied on significant  external  financing to fund our  operations.
Such financing has  historically  come from a combination of borrowings and sale
of common stock from third  parties and funds  provided by certain  officers and
directors. We cannot assure you that financing, whether from external sources or
related  parties,  will be  available  if  needed  or on  favorable  terms.  Our
inability  to obtain  adequate  financing  will  result  in the need to  curtail
business  operations.  Any of these  events would be  materially  harmful to our
business and may result in a lower stock price. We will need to raise additional
capital to fund our anticipated future expansion.  Among other things,  external
financing may be required to cover our operating costs.

WE HAVE  BEEN THE  SUBJECT  OF A GOING  CONCERN  OPINION  FROM  OUR  INDEPENDENT
AUDITORS,  WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE  OPERATIONS UNLESS WE
OBTAIN ADDITIONAL FUNDING

     Our independent auditors have added an explanatory paragraph to their audit
opinions  issued in connection  with the years ended  December 31, 2002 and 2001
financial  statements,  which  states that  Cyco.net's  ability to continue as a
going concern depends upon its ability to secure financing,  increase  ownership
equity and  attain  profitable  operations.  Our  ability  to obtain  additional
funding will determine our ability to continue as a going concern. Our financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty. We expect to be able to continue operations for 12 months with
the cash currently on hand and anticipated from our operations.

WE ARE SUBJECT TO A WORKING CAPITAL DEFICIT, WHICH MEANS THAT OUR CURRENT ASSETS
ON DECEMBER 31, 2002 WERE NOT SUFFICIENT TO SATISFY OUR CURRENT LIABILITIES

     We had a working  capital  deficit of $172,466 at December 31, 2002,  which
means that our current  liabilities  exceeded our current assets on December 31,
2002 by $172,466. Current assets are assets that are expected to be converted to
cash within one year and,  therefore,  may be used to pay current liabilities as
they become due. Our working  capital  deficit means that our current  assets on
December 31, 2002 were not sufficient to satisfy all of our current  liabilities
on that date.

OUR COMMON  STOCK MAY BE AFFECTED BY LIMITED  TRADING  VOLUME AND MAY  FLUCTUATE
SIGNIFICANTLY

     There has been a limited  public  market for our common stock and there can
be no assurance that an active trading market for our common stock will develop.
An absence of an active trading market could adversely affect our  shareholders'
ability to sell our common stock in short time periods,  or possibly at all. Our
common  stock  has  experienced,  and is  likely to  experience  in the  future,
significant  price and volume  fluctuations  which  could  adversely  affect the
market price of our common stock without regard to our operating performance. In
addition,  we  believe  that  factors  such  as  quarterly  fluctuations  in our

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financial  results and changes in the overall  economy or the  condition  of the
financial  markets  could  cause  the  price of our  common  stock to  fluctuate
substantially.

OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT MORE DIFFICULT
FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS

     Our common  stock is deemed to be "penny  stock" as that term is defined in
Rule  3a51-1  promulgated  under  the  Securities  Exchange  Act of 1934.  These
requirements  may reduce the  potential  market for our common stock by reducing
the number of potential investors. This may make it more difficult for investors
in our common stock to sell shares to third  parties or to otherwise  dispose of
them. This could cause our stock price to decline. Penny stocks are stock:

     *    With a price of less than $5.00 per share;

     *    That are not traded on a "recognized" national exchange;

     *    Whose prices are not quoted on the NASDAQ  automated  quotation system
          (NASDAQ  listed  stock  must still have a price of not less than $5.00
          per share); or

     *    In issuers  with net  tangible  assets less than $2.0  million (if the
          issuer has been in  continuous  operation for at least three years) or
          $5.0 million (if in  continuous  operation for less than three years),
          or with average  revenues of less than $6.0 million for the last three
          years.

     Broker/dealers  dealing in penny stocks are  required to provide  potential
investors  with a  document  disclosing  the  risks of penny  stocks.  Moreover,
broker/dealers  are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.

WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL

     Our success  largely depends on the efforts and abilities of key executives
and  consultants,  including  Richard  Urrea,  our Chief  Executive  Officer and
President.  The loss of the  services  of Mr.  Urrea could  materially  harm our
business  because  of the  cost  and  time  necessary  to  replace  and  train a
replacement.  Such a loss  would  also  divert  management  attention  away from
operational issues. We do not presently maintain a key-man life insurance policy
on Mr. Urrea.

SINCE WE ARE AN  E-COMMERCE  BUSINESS,  WE WILL NEED TO OVERCOME  CERTAIN  RISKS
ASSOCIATED WITH TRANSACTING  BUSINESS OVER THE INTERNET,  INCLUDING  PRIVACY AND
SECURITY CONCERNS AND DOMAIN NAME CONFUSION

     We believe that many  Internet  users view  E-businesses  as risky,  due to
privacy  concerns  and other  factors.  People are often  reluctant  to purchase
online,  despite  the  promise  of  secure  transactions.  People  are  wary  of
relinquishing  personal  data,  including  credit  card  information,  over  the
Internet. Potential customers may incur difficulty finding particular sites, due
to domain name confusion,  i.e.,  Cyco.com (Cyco Software Company) vs. Cyco.net.
Companies risk losing customers who utilize search engines,  because competitors
are listed as well.  Cyco.net is aware of such pitfalls,  and attempts to lessen
the impact of these downfalls by providing  secure  transactions  for all online
purchases,  and requiring  minimal  personal  customer  information  to complete
transactions.  Cyco.net has attempted to assure its  customers  that it will not
sell nor provide customer information to third parties.

MANY OF OUR  COMPETITORS  ARE ABLE TO PURCHASE  PRODUCTS AT LOWER  PRICES DUE TO
BUY-DOWN  PROMOTIONS,  WHICH MEANS THAT THE PRICE WE PAY FOR OUR PRODUCTS MAY BE
HIGHER THAN THOSE PAID BY OUR COMPETITORS

     Since our competitors are allowed to use buy-down promotions to lower their
prices and the  manufacturers  continue to disallow  us to  participate  in such
programs, we are at a distinct disadvantage and will suffer reduced sales due to
non-competitive  prices. These buy-downs are the cigarette industry's version of
a rebate to entice sales.  In this case, the rebate goes to the retailer to mark
down the over the counter  price.  At this time,  manufacturers  have refused to
offer such buy-downs to Internet companies, including Cyco.net. Accordingly, the
price we pay for  cigarettes  may be higher  than the prices paid by some of our
competitors.

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THE  APPLICABILITY  OF THE JENKINS ACT MAY REQUIRE US TO COLLECT EXCISE TAXES IN
EVERY  STATE,  WHICH COULD  INCREASE  THE COST OF OUR  PRODUCTS  AND  DISCOURAGE
CUSTOMERS

     There is uncertainty  over  applicability  of the Jenkins Act to e-commerce
sales of cigarettes. If the Jenkins Act applies, then our customers will have to
pay excise taxes.  This would increase the cost of our products to customers and
thereby discourage our customers from purchasing our products.  The Jenkins Act,
United  States Code Title 15,  Section  376, was enacted in the 1940s to monitor
interstate  sales  of  cigarettes.  This Act  requires  that  companies  selling
cigarettes  report monthly the names and addresses of their customers with state
tobacco  tax  administrators.  It  is  uncertain  whether  the  Act  applies  to
e-commerce  because  Internet  sales  take  place  in a  state  other  than  the
customer's  state of origin.  Further,  the  Jenkins  Act  conflicts  with other
Federal laws, such as the Privacy Act of 1974 and the Electronics Communications
Act of 1986.  The  Jenkins  Act is also  considered  discriminatory  because  it
applies to  cigarette  sales  only,  and not the  interstate  sale of cigars and
tobacco.  If it is  deemed  that  the  Jenkins  Act is  applicable  to  Internet
cigarette sales, Cyco.net will report to individual state tax authorities.  Such
enforcement  could  adversely  affect sales  because the absence of excise taxes
makes the prices of our products less expensive than some  competitors'  prices.
The cost burden of  reporting  to every  state tax  authority  could  affect the
profitability of Cyco.net.

WE MAY BE  REQUIRED  TO  COLLECT  SALES  AND USE TAXES IN EVERY  STATE  THAT OUR
PRODUCTS ARE SOLD,  WHICH COULD INCREASE THE COST OF OUR PRODUCTS AND DISCOURAGE
CUSTOMERS

     If one or more  states or any foreign  country  successfully  asserts  that
Cyco.net should collect sales or other taxes on the sale of products,  net sales
and results of operations could be harmed.  Cyco.net does not currently  collect
sales or other similar taxes for shipments of goods into any state. However, one
or more  local,  state or  foreign  jurisdictions  may seek to impose  sales tax
collection  obligations  on us. If Cyco.net  becomes  obligated to collect sales
taxes,  it will need to update  its system  that  processes  customer  orders to
calculate the  appropriate  sales tax for each  customer  order and to remit the
collected  sales  taxes to the  appropriate  authorities.  These  upgrades  will
increase  operating  expenses.  In addition,  customers may be discouraged  from
purchasing  products from Cyco.net  because they have to pay sales tax. This may
discourage customers from buying our products and cause a reduction of sales.

THERE IS A RISING  ANTI-TOBACCO  SENTIMENT IN THE UNITED STATES THAT COULD CAUSE
SOME  INTERNET  USERS TO BAN OR BOYCOTT  OUR WEBSITE  AND  DISCOURAGE  POTENTIAL
ADVERTISERS AND CAUSE NEGATIVE PUBLICITY

     Cyco.net  believes  that there is a rising  anti-tobacco  sentiment  in the
United  States.  Such  sentiment may cause some Internet users to ban or boycott
our website and  business.  Although we do not currently  generate  revenue from
advertising,  potential advertisers may refuse to advertise with us because they
do not want to be associated with tobacco products.  This sentiment could result
in negative  publicity  to Cyco.net,  which could result in reduced  sales and a
lower stock price.

ITEM 2. DESCRIPTION OF PROPERTY

     Cyco.net  operates from leased office space at 4201 G. Yale Boulevard,  NE,
Albuquerque,  NM 87107.  Cyco.net  had a two year  lease,  with a basic  monthly
rental  payment of $1,664  until August 2001. A new lease has not been signed to
date,  however the Company is renting on a month -to-month basis. The basic rent
monthly payment is $1,703.

ITEM 3. LEGAL PROCEEDINGS

     On January 28, 2003, the Company's subsidiary Cyco.net, Inc. was named in a
civil action filed in the United States District Court Southern  District of New
York by the  City of New York as one of  approximately  a dozen  defendants  who
engaged in the business of internet  on-line  cigarette sales. The suite alleges
that Cyco.net, Inc. failed to report the names and addresses of its customers to
taxing  authorities.  The extent of the City's  damages are to be  determined at
trial.

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

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

     On April 1, 2003,  the State of Oregon filed a civil action in the State of
Oregon,  Marion County against the Company's subsidiary Cyco.net,  Inc. alleging
the sale of one carton of  cigarettes  to a minor  using her  mother's  name and
credit card, in violation of State Unlawful Trade  Practices Act. The suit seeks
to enjoin Cyco.net,  Inc. from doing business in Oregon,  $25,000 and attorney's
fees.

     In all four cases,  the  Company  intends to contest  the  allegations  and
believes  it has  meritorious  defenses  in each case.  Outside  counsel for the
Company has advised that at this stage in the  proceedings  they cannot offer an
opinion as to the probable outcome of the cases.

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

     None.

                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Cyco.net's  common stock has been quoted on the  Over-the-Counter  Bulletin
Board maintained by the NASD under the symbol "CYKE."

     The following table sets forth the range of high and low bid quotations for
each calendar quarter for Cyco.net's common stock for the prior three years.

                                                         BID PRICE PER SHARE
                                                        ---------------------
                                                          HIGH          LOW
                                                        -------       -------
     January 3, 2000 - March 31, 2000                   $0.6000       $0.1250

     April 3, 2000 - June 30, 2000                      $0.1800       $0.1000

     July 3, 2000 - September 29, 2000                  $0.1300       $0.1000

     October 2, 2000 - December 29, 2000                $0.1000       $0.1000


     January 2, 2001 - March 30, 2001                   $0.1000       $0.0200

     April 2, 2001 - June 29, 2001                      $0.1200       $0.0200

     July 2, 2001 - September 28, 2001                  $0.1200       $0.0600

     October 1, 2001 - December 31, 2001                $0.1000       $0.0600


     January 2, 2001 - March 29, 2002                   $0.0600       $0.0400

                                       8
<PAGE>
     April 1, 2001 - June 28, 2002                      $0.0500       $0.0300

     July 2, 2001 - September 30, 2002                  $0.1200       $0.0050

     October 1, 2001 - December 31, 2002                $0.0300       $0.0100

     The above prices were obtained from Nasdaq,  Inc. The quotations  represent
inter-dealer quotations, without retail mark-up, markdown or commission, and may
not necessarily represent actual transactions.

     As of March 21,  2003,  Cyco.net  believes  there  were  approximately  507
holders of record of our common stock.

     We have not paid  dividends in the past on any class of stock and we do not
anticipate paying dividends in the foreseeable future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     THE  FOLLOWING   INFORMATION   SHOULD  BE  READ  IN  CONJUNCTION  WITH  THE
CONSOLIDATED  FINANCIAL  STATEMENTS OF CYCO.NET AND THE NOTES THERETO  APPEARING
ELSEWHERE  IN THIS  FILING.  STATEMENTS  IN  THIS  MANAGEMENT'S  DISCUSSION  AND
ANALYSIS  OR  PLAN OF  OPERATION  AND  ELSEWHERE  IN THIS  FILING  THAT  ARE NOT
STATEMENTS   OF   HISTORICAL   OR  CURRENT  FACT   CONSTITUTE   "FORWARD-LOOKING
STATEMENTS."

PLAN OF OPERATION

     In the next 12  months,  Cyco.net  plans to pursue  sales  growth  and gain
additional traffic to its e-commerce sites by:

     *    Locating appropriate facilities in which to ship product.

     *    Advertising  through  print ads,  e-newsletters  and e-mails to target
          markets.

     *    Continue funding efforts.

     *    Identify  other  niches in e  -commerce  to expand and  diversify  its
          business to reduce dependence on a single sector of product.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002 COMPARED TO THE YEAR ENDED DECEMBER 31, 2001

     Revenues for the year ended December 31, 2002 were  $5,179,160  compared to
$4,213,321 for the comparable period in the prior year. The increase in revenues
for the current year was  attributable  to an increase in the sale of cigarettes
on the Internet.  Cyco.net  believes that this increase was primarily the result
of two factors,  the first was an increase in the number of  customers  visiting
its  websites  and the second was an  increase  in the  number of  purchases  by
customers visiting its websites.  Cyco.net attributes these increases to several
factors,  including an increased  comfort level  experienced  by customers  with
purchases over the Internet in general,  Cyco.net in particular,  and Cyco.net's
reputation for competitive pricing and on-time delivery.

     Cost of goods sold was $4,751,956,  or 91.8% of revenues for the year ended
December 31, 2002  compared to  $3,936,327,  or 93.4% of revenues,  for the same
period last year. The decrease in the cost of goods sold, expressed as a percent
of revenues,  was due to an increase in sales of discount  cigarette brands that
have  higher  profit  margins.  Included  in the cost of goods sold for the year
ended December 31, 2002, was the cost of the product of $4,259,959, the shipping
costs of $346,188 and the credit card processing fees of $145,809. Cost of goods
sold for the prior year  included,  the cost of the product of  $3,572,456,  the
shipping  costs of  $234,167,  the credit card  processing  fees of $125,105 and
other miscellaneous costs of $4,599.  Overall,  costs of goods sold increased by
$815,629.  The increase in cost of purchasing cigarettes of $687,503 was to meet
additional  demand.  The  increase of $112,021 in shipping  costs was  primarily
attributable  to an increase in the cost of shipping  the product to  customers.
The  increase  of  $20,704  in  credit  card   processing   fees  was  primarily
attributable  to increased  sales.  Cyco.net pays credit card  companies  (i.e.,

                                       9
<PAGE>
Visa,  MasterCard,  American  Express) a percentage of each transaction paid for
with a credit  card.  Accordingly,  Cyco.net's  increased  revenues  resulted in
increased  credit  card  processing  fees in the current  period.  Miscellaneous
expenses decreased by $4,599 due primarily to reduced product handling charges.

     General and  administrative  expenses for the year ended  December 31, 2002
were $751,340  compared to $435,329 for the same period last year.  The increase
of $316,011 is due primarily to the write-off of offering costs of $107,689, the
stock  compensation  of $184,200 and the  conversion of amounts due from related
parties into  compensation of $24,706.  During the year ended December 31, 2002,
the major  components  of  general  and  administrative  expenses  consisted  of
approximately $30,969 in advertising, $406,479 in payroll (including $150,000 in
non-cash  stock  compensation  and the  conversion  of amounts due from  related
parties into compensation of $24,706),  $50,241 in professional fees, $25,906 in
rent,  $27,299 in  amortization  and  depreciation,  $141,889  in finance  costs
(including  the write-off of offering  costs of $107,689 and the change in terms
of a warrant of  $34,200),  $12,991  for website  maintenance,  $9,783 in travel
expense and $45,783 in  miscellaneous  other  expenses.  Included in general and
administrative  expenses  during the same  period  last year were  approximately
$19,068 in  advertising,  $298,445  in payroll  (including  $120,000 in non-cash
stock compensation), $36,794 in professional fees (including $30,800 in non-cash
stock  compensation),  $25,018 in rent, $21,687 in amortization and depreciation
and  $34,318  in  miscellaneous  other  expenses  . The  increase  of $11,901 in
advertising  expenses was  attributable  to Internet  advertising,  primarily in
connection with listing  Cyco.net on Internet  search  engines.  The increase in
payroll  expenses of $108,034 is due primarily to an increase in non-cash  stock
compensation of $30,000, the conversion of amounts due from related parties into
compensation  of $24,706  with the  balance of $53,328 due to  additional  staff
hired and the addition of health insurance benefits for employees in the current
period. The non-cash stock  compensation  consisted of the issuance of 5,000,000
shares of common  stock,  valued  at  $150,000  in the  current  period  and the
issuance of 4,000,000  shares of common  stock,  valued at $120,000 in the prior
year.  The  increase of $5,613 in  amortization  and  depreciation  is primarily
attributable to the purchase of software  development and  enhancements  used in
Cyco.net's business operations.

     Cyco.net  had a net loss for the year ended  December 31, 2002 of $325,593,
compared to a net loss of $158,488 for the same period last year.

FINANCIAL RESOURCES AND LIQUIDITY

     For the year ended  December  31, 2002,  cash  provided by  operations  was
$44,854,  cash  used in  investing  activities  was  $17,330,  and cash  used in
financing  activities  was $27,108.  This  resulted in a net increase in cash of
$416 in the year ended December 31, 2002. Cash provided by operations  consisted
mainly of a net loss of $325,593 and an increase in inventory of $15,382,  which
was  partially  offset by  amortization  and  depreciation  expenses of $27,299,
common stock issued for compensation of $184,200, conversion of amounts due from
related  parties into  compensation of $24,706,  write-off of deferred  offering
costs of  $107,689,  a decrease  in  receivables  of $6,705  and a  increase  in
accounts  payable  and  accrued  expenses  of  $35,230.  Cash used in  investing
activities  consisted mainly of fees incurred in the development of its Internet
websites. Cash used in financing activities consisted of deferred offering costs
of $27,108. As of December 31, 2002, Cyco.net had cash-on-hand of $5,635.

     In the years ended  December  31, 2001 and 2002,  Cyco.net was able to meet
its cash  needs  solely  through  the sale of  cigarettes.  Cyco.net  expects to
experience  an increase in its product sales that will be sufficient to meet its
current  operating  expenses.  However,  Cyco.net will need to raise  additional
capital to finance  growth,  including  locating new facilities to ship product,
launching an affiliate  program,  advertising,  enhancing its website and hiring
additional  employees.  Such  capital  is  expected  to come  from  the  sale of
securities,  including the sale of common stock under the Equity Line of Credit.
Other than the Equity Line of Credit, Cyco.net does not have any commitments for
financing.

     Pursuant to the Equity  Line of Credit,  Cyco.net  may,  at its  discretion
through July 22, 2004,  periodically  issue and sell up to 40,000,000  shares of
common stock for a total purchase price of $5.0 million. If Cyco.net requests an
advance under the Equity Line of Credit,  Cornell  Capital  Partners,  L.P. will
purchase  shares of common stock for 82% of the lowest  closing bid price on the
Over-the-Counter  Bulletin Board or other  principal  market on which our common
stock is traded for the 5 days  immediately  following the notice date.  Cornell
Capital  Partners,  L.P.  intends to sell any shares  purchased under the Equity
Line of Credit at the market price.

                                       10
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES

IN AUGUST  2002,  CYCO.NET  ISSUED A TOTAL OF  5,000,000  SHARES OF COMMON STOCK
VALUED AT $150,000 AS FOLLOWS:  1,000,000  SHARES EACH TO RICHARD URREA,  DANIEL
URREA, BRENT WOLFORD, LYNNETTE BUDAGHER AND TREY URREA.

     In August 2001,  Cyco.net  entered into the Equity Line of Credit Agreement
with  Cornell  Capital  Partners,  L.P.  pursuant  to which  it may  issue up to
40,000,000  shares  of  common  stock  at an  18%  discount  to  the  prevailing
marketprice of the common stock. In August 2001,  Cyco.net issued 500,000 shares
of common stock to Persia  Consulting  Group for consulting  services  valued at
$28,000 or $0.06 per share.  Cyco.net  also issued 50,000 shares of common stock
to David Gonzalez for consulting  services  valued at $2,800 or $0.06 per share.
Cyco.net  issued  options to Lynnette  Budagher to  purchase  750,000  shares of
common stock at an exercise price of $0.06 per share.

     In April 2001,  Cyco.net issued  3,500,000 shares of common stock valued at
$70,000,  one-half to Richard Urrea and one-half to Daniel Urrea.  Cyco.net also
issued  500,000  shares of common  stock  valued at $10,000 to Brent  Wolford as
compensation for enhancements made to its website.

     During the year ended December 31, 2000,  Cyco.net issued  1,036,000 shares
of its $0.001 par value  common  stock to various  individuals  in exchange  for
services valued at $103,600.  These shares were issued as follows: 30,000 shares
for consulting services valued at $3,000 to Insiderstreet.com,  1,000,000 shares
for legal  services  valued at $100,000 to Con Queso,  LLC and 6,000  shares for
electrical  work valued at $600 to John J. Barnaba,  Jr. The Company also issued
250,000  shares of its $0.001 par value  common  stock to Ryan S.  Diederich  in
exchange for the acquisition of a web site valued at $25,000.

     During the year ended December 31, 2000,  Cyco.net issued 720,000 shares of
its $0.001 par value  common  stock to various  investors  for cash  aggregating
$62,000.  These shares were issued as follows:  Edward R.  Fittipaldi  purchased
20,000 shares for $2,000;Patrick L. Kinsella purchased 50,000 shares for $5,000;
Aztec  Trust  purchased  50,000  shares for $5,000;  Robert P. Tinnin  purchased
100,000 for $10,000;  Jerry D.  Richardson  purchased  50,000 shares for $5,000;
Dennis R. Snyder purchased 100,000 for $10,000;  John T. Badal purchased 100,000
shares for $10,000;  Danny Deaver purchased 200,000 shares for $10,000; and Doug
Fenton purchased 50,000 shares for $5,000.

     During the period from August 1999 through  December 1999,  Cyco.net issued
620,000 shares of its $0.001 par value common stock for cash aggregating $45,000
and a receivable of $15,000.  The receivable was collected  during January 2000.
These shares were issued as follows:  Bobbie A. Love purchased 50,000 shares for
$10,000;  John O. Harry  purchased  20,000  for  $10,000;  Brenden T.  Riccobene
purchased 200,000 shares for $10,000; Dennis Chavez purchased 200,000 shares for
$15,000;  and Don Rehm purchased 150,000 shares for $15,000 receivable collected
in January 2000.

     During July 1999,  Cyco.net issued 2,909,219 shares of its $0.001 par value
common stock in conjunction with a recapitalization. These shares were issued as
follows:

              NAME           # OF SHARES              NAME           # OF SHARES
              ----           -----------              ----           -----------
Henri Hornby                  1,068,000      E-2 Brokers               137,000
Pacific Paragon Investments      53,000      Neil F. Hornby            100,000
Gene Klawetter                  763,000      KKG Capital               100,000
Jim Betner                      261,000      Ferris Peery               40,000
George Sullivan                 160,000      Olympic Capital Group      31,000
David Evans                      57,000      Various                    39,219
Dan Smith                       100,000

     During the period from May 1999 through July 1999,  Cyco.net issued 977,600
shares of its $0.001 par value common stock for cash aggregating $42,000.  These
shares were issued as  follows:  Max  Sonnenberg  purchased  104,000  shares for
$5,000;  Larry  Minarsich  purchased  208,000  shares for  $10,000;  Doug Fenton
purchased 41,600 shares for $2,000;  Daniel Behles purchased  104,000 shares for

                                       11
<PAGE>
$5,000;  Charles  Elias and Joseph Elias  purchased  104,000  shares for $5,000;
Dennis Chavez purchased 208,000 shares for $10,000; and Con Queso, LLC purchased
208,000 shares for $5,000.  In addition,  during the period from May 199 through
July 1999, Cyco.net issued 457,600 shares of its $.001 par value common stock to
various  individuals  in exchange for services  valued at $18,500.  These shares
were  issued as  follows:  Con  Queso,  LLC  received  145,000  shares for legal
services valued at $3,500; Leon Palmisano received 208,000 shares for consulting
valued at  $10,000;  and Paul  Roney  received  104,000  shares  for aid in fund
raising valued at $5,000.

     At inception,  during January 1999,  Cyco.net issued  14,976,000  shares of
common stock for services  valued at $7,200,  which  management  believes is the
fair market value of the services provided. These shares were issued as follows:

     NAME               # OF SHARES            NAME                  # OF SHARES
     ----               -----------            ----                  -----------
Francisco Urrea, Jr.     2,496,000    Nunzio DeSantis Family Trust    2,496,000
Richard Urrea            2,496,000    Brent Wolford                   2,080,000
MAU, LLC                 2,496,000    Trey Urrea                        416,000
Daniel Urrea             2,496,000

     With respect to the sale of unregistered  securities  referenced above, all
transactions  were exempt  from  registration  pursuant  to Section  4(2) of the
Securities Act of 1933 (the "1933 Act"), and Regulation D promulgated  under the
1933 Act. In each instance,  the purchaser had access to sufficient  information
regarding  Cyco.net  so  as  to  make  an  informed  investment  decision.  More
specifically, Cyco.net had a reasonable basis to believe that each purchaser was
either an  "accredited  investor" as defined in  Regulation D of the 1933 Act or
otherwise had the requisite  sophistication  to make an investment in Cyco.net's
common stock.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2002, the Financial  Accounting Standards Board ("FASB") issued
SFAS 148 "Accounting for Stock-Based Compensation--Transition and Disclosure--an
amendment of SFAS 123." SFAS 148 provides  alternative methods of transition for
a voluntary  change to the fair value based method of accounting for stock-based
employee  compensation  from the  intrinsic  value-based  method  of  accounting
prescribed  by APB 25. As  allowed  by SFAS 123,  the  Company  has  elected  to
continue  to apply  the  intrinsic  value-based  method of  accounting,  and has
adopted the disclosure  requirements of SFAS 123. The Company currently does not
anticipate adopting the provisions of SFAS 148.

     In July 2002, the FASB issued SFAS 146,  "Accounting  for Costs  Associated
with  Exit or  Disposal  Activities."  SFAS 146  provides  new  guidance  on the
recognition of costs associated with exit or disposal  activities.  The standard
requires   companies  to  recognize  costs  associated  with  exit  or  disposal
activities  when they are incurred  rather than at the date of  commitment to an
exit or disposal plan. SFAS 146 supercedes previous accounting guidance provided
by the EITF Issue 94-3 "Liability  Recognition for Certain Employee  Termination
Benefits and Other Costs to Exit an Activity  (including  Certain Costs Incurred
in a Restructuring)."  EITF Issue 94-3 required recognition of costs at the date
of  commitment  to an  exit  or  disposal  plan.  SFAS  146  is  to  be  applied
prospectively to exit or disposal activities  initiated after December 31, 2002.
Early  application is permitted.  The adoption of SFAS 146 by the Company is not
expected to have a material impact on the Company's financial position,  results
of operations, or cash flows.

     In April 2002, the FASB issued SFAS 145,  "Rescission of FASB Statements 4,
44, and 64,  Amendment of FASB Statement 13, and Technical  Corrections."  Among
other things,  this statement  rescinds FASB Statement 4,  "Reporting  Gains and
Losses from  Extinguishment  of Debt" which  required  all gains and losses from
extinguishment  of debt to be  aggregated  and, if  material,  classified  as an
extraordinary  item, net of related income tax effect. As a result, the criteria
in APB Opinion 30, "Reporting the Results of Operations -- Reporting the Effects
of  Disposal  of a  Segment  of  a  Business,  and  Extraordinary,  Unusual  and
Infrequently  Occurring Events and  Transactions,"  will now be used to classify
those gains and losses. The provisions of SFAS 145 related to the classification
of debt extinguishment are effective for years beginning after May 15, 2002. The
adoption of SFAS 145 by the Company is not expected to have a material impact on
the Company's financial position, results of operations, or cash flows.

     In November  2001,  the EITF of the FASB issued EITF 01-9  "Accounting  for
Consideration  Given by a Vendor to a  Subscriber  (Including  a Reseller of the
Vendor's  Products)."  EITF 01-9 provides  guidance on when a sales incentive or
other consideration given should be a reduction of revenue or an expense and the
timing of such recognition.  The guidance provided in EITF 01-9 is effective for
financial  statements for interim or annual periods beginning after December 15,
2001. The adoption of EITF 01-9 by the Company did not have a material impact on
the Company's financial statements.

                                       12
<PAGE>
     In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal  of  Long-Lived   Assets."  SFAS  144  provides  new  guidance  on  the
recognition of impairment  losses on long-lived assets with definite lives to be
held and  used or to be  disposed  of and also  issued  the  definition  of what
constitutes  a  discontinued  operation  and how the  results of a  discontinued
operation  are to be measured and  presented.  SFAS 144 is effective  for fiscal
years beginning after December 15, 2001. The adoption of SFAS 144 did not have a
material impact on the Company's financial position,  results of operations,  or
cash flows.

     In June 2001, the FASB issued SFAS 143,  "Accounting  for Asset  Retirement
Obligations."  SFAS 143  requires  the fair  value of a  liability  for an asset
retirement  obligation  to be  recognized in the period that it is incurred if a
reasonable  estimate of fair value can be made. The associated  asset retirement
costs are  capitalized as part of the carrying  amount of the long-lived  asset.
SFAS 143 is  effective  for fiscal  years  beginning  after June 15,  2002.  The
adoption of SFAS 143 is not expected to have a material  impact on the Company's
financial position, results of operations or cash flows.

     In June 2001,  the FASB issued  SFAS 142,  "Goodwill  and Other  Intangible
Assets," which provides for  non-amortization  of goodwill and intangible assets
that have indefinite  useful lives,  annual tests of impairments of those assets
and interim tests of  impairment  when an event occurs that more likely than not
has reduced the fair value of such assets.  The statement also provides specific
guidance about how to determine and measure goodwill  impairments,  and requires
additional disclosure of information about goodwill and other intangible assets.
The provisions of this statement are required to be applied starting with fiscal
years  beginning  after December 15, 2001, and applied to all goodwill and other
intangible assets recognized in the financial  statements at that date. Goodwill
and  intangible  assets  acquired  after  June 30,  2001 will be  subject to the
non-amortization provisions of the statement. Early application is permitted for
entities  with fiscal years  beginning  after March 15, 2001,  provided that the
first interim financial statements had not been issued previously. The Company's
adoption  of the  provisions  of SFAS 142 did not have a material  impact on the
Company's financial position, results of operations or cash flows.

     In June 2001, the FASB issued SFAS 141, "Business  Combinations,"  which is
effective for all business combinations  initiated after June 30, 2001. SFAS 141
requires  companies to account for all business  combinations using the purchase
method of accounting,  recognize  intangible assets if certain criteria are met,
as well as provide additional  disclosures  regarding business  combinations and
allocation of purchase  price.  The adoption of SFAS 141 did not have a material
impact on the Company's financial position, results of operations or cash flows.

CRITICAL ACCOUNTING POLICIES

     The following summary of Cyco.net's critical accounting policies taken from
Cyco.net's  financial  statements for the year ended December 31, 2002. Cyco.net
used these  policies in preparing  its financial  statements  for the year ended
December 31, 2002.

     ORGANIZATION.  Cyco.Net,  Inc. (the "Company") was  incorporated on January
25, 1999 in the State of New Mexico.  The Company's  primary line of business is
the sale of cigarettes  through three websites to customers in the United States
of America.

     PRINCIPLES OF CONSOLIDATION.  The consolidated financial statements include
the accounts of the Company and its wholly  owned  subsidiary.  All  significant
intercompany accounts and transactions have been eliminated.

     REVENUE  RECOGNITION.  The Company's  sole source of revenue is the sale of
cigarettes through their primary website (cyco.net),  which has been designed as
an "e-zine", and two ancillary websites (cycocigs.com and aabakismokes.com). The
terms of sale are FOB  shipping  point  and the  Company  records  revenue  from
cigarette sales when the product is shipped.

     Outbound  shipping  charges  to  customers  are  included  in net sales and
amounted  to  $382,642  and  $268,494   during   December  31,  2002  and  2001,
respectively.

     CREDIT  CARD  COSTS.  The Company  receives  payment for their  product via
credit  cards.  Credit  card  costs are  expensed  in the  period  incurred.  An
allowance for  chargebacks is also recorded at the time of  remittance.  To date
chargebacks have not been significant.

     Discount  and fees  related to the equity line of credit.  The discount and
any  related  fees on the shares  issued  pursuant  to the equity line of credit
described in Note 3 will be treated as though they were  commissions and will be
deducted from additional paid in capital at the time the shares are issued.

     INVENTORY.  Inventory, consisting of products available for sale, is stated
at the lower of cost or market.  Cost is  determined  on a  first-in,  first-out
basis.

                                       13
<PAGE>
     ADVERTISING.  The Company  expenses all costs of  advertising  as incurred.
Advertising  costs included in general and  administrative  expenses  aggregated
$30,969 in 2002 and $19,068 in 2001.

     CASH AND CASH EQUIVALENTS. For purposes of balance sheet classification and
the  statements  of  cash  flows,  the  Company   considers  all  highly  liquid
investments  purchased  with an original  maturity of three months or less to be
cash equivalents.

     ACCOUNTS  RECEIVABLE.  Accounts  receivable  are  stated at  estimated  net
realizable  value.  Accounts  receivable  are  comprised  of  balances  due from
customers net of estimated allowances for uncollectible accounts. In determining
collectibility, historical trends are evaluated and specific customer issues are
reviewed to arrive at appropriate allowances.

     FAIR VALUE OF FINANCIAL INSTRUMENTS.  Fair value estimates discussed herein
are based upon certain market assumptions and pertinent information available to
management as of December 31, 2002.  The  respective  carrying  value of certain
on-balance-sheet  financial  instruments  approximated their fair values.  These
financial  instruments  include  cash  and  cash  equivalents,  receivables  and
accounts payable and accrued  expenses.  Fair values were assumed to approximate
carrying values for these financial  instruments  because they are short term in
nature,  their carrying amounts  approximate fair values, or they are receivable
or payable on demand.

     PROPERTY AND  EQUIPMENT.  Property  and  equipment is stated at cost and is
being  depreciated using the  straight-line  method over the estimated  economic
life of 5 years.

     IMPAIRMENT  OF  LONG-LIVED  ASSETS.  The Company  periodically  reviews the
carrying amount of property, plant and equipment and its identifiable intangible
assets to determine whether current events or circumstances  warrant adjustments
to such carrying amounts. If an impairment adjustment is deemed necessary,  such
loss is measured by the amount that the  carrying  value of such assets  exceeds
their fair value. Considerable management judgement is necessary to estimate the
fair value of assets; accordingly,  actual results could vary significantly from
such  estimates.  Assets to be  disposed  of are  carried  at the lower of their
financial statement carrying amount or fair value less costs to sell.

     DEFERRED  OFFERING  COSTS.  The Company  defers costs  associated  with the
raising of capital until such time as the offering is  completed,  at which time
the costs are  charged  against  the  capital  raised.  Should the  offering  be
terminated  the costs are  charged to  operations  during  the  period  when the
offering  is  terminated.  During the year ended  December  31, 2002 the Company
charged an  aggregate  of $107,689 to  operations  related to these  costs.  The
Company  determined that it was no longer  appropriate to capitalize these costs
based upon  estimates  of the amount of money that could be raised  through  the
equity  line of credit  computed  using the  Company's  stock  price and trading
volume (see Note 3).

     NET (LOSS) PER COMMON  SHARE.  The Company  follows  Statement of Financial
Accounting  Standards No. 128,  "Earnings  Per Share"  ("SFAS No.  128").  Basic
earnings  (loss) per common share  calculations  are  determined by dividing net
income  (loss)  by the  weighted  average  number  of  shares  of  common  stock
outstanding   during  the  year.   Diluted  earnings  (loss)  per  common  share
calculations  are  determined  by  dividing  net income  (loss) by the  weighted
average  number  of  common  shares  and  dilutive   common  share   equivalents
outstanding.  During  the  periods  when they are  anti-dilutive,  common  stock
equivalents, if any, are not considered in the computation.

     INTANGIBLES.  Product and website  development costs incurred in developing
the Company's website are accounted for in accordance with Statement of Position
(SOP) 98-1, "Accounting for the Costs to Develop or Obtain Software for Internal
Use".  Product and website  development  costs include  amounts  incurred by the
Company to develop,  enhance, manage, monitor and operate the Company's website.
External  direct  costs of  materials  and services  consumed in  developing  or
obtaining internal-use computer software, payroll and payroll- related costs for
employees who devote time directly related to the internal-use computer software
project,  and interest  costs incurred while  developing  internal-use  computer
software are capitalized.  Product  development costs,  preliminary  project and
past implementation  product costs are expensed as incurred.  Internal costs for
upgrades and enhancements that result in probable  additional  functionality are
capitalized. These capitalized costs are amortized over a two year period.

     STOCK-BASED  COMPENSATION.  The  Company  accounts  for equity  instruments
issued  to  employees  for  services  based  on the  fair  value  of the  equity
instruments  issued and  accounts  for equity  instruments  issued to other than
employees  based on the fair  value of the  consideration  received  or the fair
value of the equity instruments, whichever is more reliably measurable.

     The Company  accounts for stock based  compensation in accordance with SFAS
No. 123,  "Accounting for Stock-Based  Compensation." The provisions of SFAS No.
123 allow  companies to either expense the estimated fair value of stock options
or to continue to follow the intrinsic value method set forth in APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma

                                       14
<PAGE>
effects on net income  (loss) had the fair value of the options  been  expensed.
The Company has elected to continue to apply APB 25 in accounting  for its stock
option incentive plans.

     USE OF ESTIMATES.  The  preparation  of financial  statements in conformity
with accounting  principles  generally  accepted in the United States of America
requires  management to make estimates and  assumptions  that affect the amounts
reported in the financial  statements  and  accompanying  notes.  Actual results
could differ from those estimates.

     SEGMENT  INFORMATION.  The Company follows SFAS No. 131,  "Disclosure about
Segments of an  Enterprise  and Related  Information".  Certain  information  is
disclosed,  per SFAS No. 131,  based on the way management  organizes  financial
information  for making  operating  decisions  and  assessing  performance.  The
Company currently operates in one business segment and will evaluate  additional
segment disclosure requirements as it expands operations.

     RECLASSIFICATIONS.   Certain  amounts   presented  in  the  previous  years
financial  statements  have been  reclassified  to conform to the  current  year
presentation.

     CONCENTRATIONS.   There  have  been  a  number  of   adverse   legislative,
regulatory,  political and other  developments  concerning the tobacco  industry
that have received widespread media attention. These developments may negatively
affect the  perception  of potential and current  customers  with respect to the
tobacco industry, and therefore effect the Company's operations.

     Cigarettes are generally  subject to substantial  federal,  state and local
excise  taxes in the United  States.  However,  the  Company  believes  there is
uncertainty  over  the   applicability  of  these  taxes  to  on-line  sales  of
cigarettes.  The Company does not collect or remit excise taxes (or other taxes)
on its sales due to this  uncertainty.  If the Company were  required to collect
and remit such taxes,  then the prices of its cigarettes  would  increase.  This
could harm sales because its customers are price sensitive.  Accordingly,  sales
would be adversely affected by increases to the price of its cigarettes.

     The  Company  does not  collect or remit  state sales or other taxes on the
sale of cigarettes. The Company does not believe that it has sufficient business
contacts in one or more states to require it to collect and remit state sales or
other taxes.  If the Company  were  required to collect  sales  taxes,  then the
Company would need to update its computer  systems to calculate the  appropriate
sales tax for each  customer  order and to remit such  taxes to the  appropriate
governmental  agencies.  Moreover,  in  recent  years,  state  governments  have
aggressively attempted to collect sales taxes from out-of-state companies. These
actions are expensive to defend, regardless of the final outcome. The Company is
subject to a civil  action  filed by the City of New York  related to this issue
(See Note 8).

ITEM 7. FINANCIAL STATEMENTS

     The  responses  to this item are  submitted  in a separate  section of this
Annual Report on Form 10-KSB. See Index to the Financial Statements on page F-1.

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

     None.

                                       15
<PAGE>
                                    PART III

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

     Cyco.net's present directors and executive officers are as follows:

          NAME                    AGE                POSITION
          ----                    ---                --------
          Richard Urrea            38      Chief Executive Officer and President
          Daniel Urrea             31      Chief Financial Officer
          Brent Wolford            26      Chief Technical Officer
          Francisco Urrea, Jr.     73      Director

     The following is a brief description of the background of the directors and
executive officers of Cyco.net.

     RICHARD URREA served as President of Sycom International, Inc. from 1997 to
1999.  Sycom is a data  communications  company.  Mr. Urrea led the company from
start up through national marketing plan and implementation of its manufacturing
plan.  The  company  currently   manufactures  its  products  and  markets  them
throughout the U.S. and is in the process  expanding into foreign markets.  From
1996 to 1997,  Mr. Urrea was President of Klaire  International  Ltd., an export
company  distributing  automotive  parts in Mexico.  From  1995-1996,  Mr. Urrea
served as the managing member of Toltec Fruit,  L.C. a limited liability company
involved  in the  importation  of fruit into the United  States  from Mexico and
South  America.  From 1993 to 1995,  Mr.  Urrea  worked on the  development  and
marketing plan for Septima Enterprises Inc. From 1991 to 1993, Mr. Urrea managed
the  Albuquerque  Office of White  Discount  Securities.  In 1990, Mr. Urrea was
contract  administrator  for  Foresight,  Inc.,  an  Albuquerque,  laser-optics,
government  contractor.  In 1989, Mr. Urrea served as marketing director for HDI
System,  Inc. where he devised and implemented an  international  marketing plan
for an ignition system for marine application. In 1985 and 1986, Mr. Urrea owned
and  operated  Shannon  Euro  Motorcars,  a European  automobile  importing  and
maintenance  company.  Mr.  Urrea  sold the  business  in 1986 to attend  Baylor
University.  Mr.  Urrea  received  his  Bachelor of Business  Administration  in
Marketing and Business Broadcasting from Baylor University's Hankammer School of
Business in 1989.

     FRANCISCO URREA, JR. was the founder of several public companies  including
Diagnostek,  Inc., a  prescription  benefits  management  and hospital  pharmacy
management company (New York Stock Exchange),  Nuclear Pharmacy Incorporated,  a
centralized  radiopharmacuetical  company  servicing  several hundred  hospitals
throughout the United States (NASDAQ), Summa Medical Corporation, a research and
development  company  (American Stock Exchange),  Septima  Enterprises,  Inc., a
company that has developed a high voltage  automotive  ignition  system  (NASDAQ
Bulletin Board) and Advanced Optics  Electronics,  Inc., a company  developing a
high-intensity, flat- panel display (NASDAQ Bulletin Board). Mr. Urrea served as
Chairman of the Board of Directors of Nuclear  Pharmacy  Incorporated  from 1974
until  1982.  Mr.  Urrea  served  as  Chairman  of the  Board of  Summa  Medical
Corporation  from 1978 until 1990, as President from 1978 through April 1982 and
as President again from October 1986 through  February 1990. Mr. Urrea served as
Chairman of the Board of Directors of  Diagnostek  from 1983 through  1985.  Mr.
Urrea also was a director of Septima  Enterprises  and served as president  from
1988 through 1992. Mr. Urrea has served as Vice Chairman of the New Mexico State
Investment  Council,  Chairman  of the New  Mexico  Game  and  Fish  Department,
Commissioner of the New Mexico State Racing Commission, Member of the New Mexico
Industrial  Development  Commission,  Member of the New Mexico Foreign Trade and
Investment  Council,  and Member of the United  States  Department of Commerce's
Biotechnology  Advisory  Committee.  Mr. Urrea  graduated from Saint Mary's High
School in 1949 after which he served two years in the United  States Navy during
the Korean War. He is  currently  Chairman of the Board of  Directors  of Klaire

                                       16
<PAGE>
International,  Ltd., a company  holding the  exclusive  distribution  rights in
Mexico for a patented automotive ignition product developed in the United States
by Septima Enterprises, Inc.

     DANIEL  URREA has been  associated  with the  Cyco.net  since  inception in
January 1999. Prior to his involvement with the Cyco.net,  Mr. Urrea worked with
Sycom  International,  manufacturer  and distributor of Radio  Telemetry  Units.
During that time Mr. Urrea was responsible for the maintenance of the accounting
records  for  the  company,  and  was  instrumental  in the  development  of the
company's business plan. Before this, Mr. Urrea worked for Klaire International,
an exporter of automotive  accessories  to Mexico,  in the same  capacity.  From
January 1996 thorough  August 1996 Mr. Urrea worked with Equinox  International,
an international  marketing and distribution  company,  where he was involved in
sales  and  talent  recruiting  activities.  In the  Spring of 1995,  Mr.  Urrea
received a Bachelors in Business  Administration with a concentration in Finance
from the Anderson  Schools of  Management at the  University of New Mexico.  Mr.
Urrea has also spent several months out of the country where he studied business
and other cultures.

     BRENT  WOLFORD has been  involved in Cyco.net  since  inception,  and is in
charge of Web page design and  maintenance.  Mr.  Wolford will graduate from the
University  of New  Mexico  with a Major  in  Computer  Science,  and a Minor in
Business Management. He is literate in all major operating systems including DOS
6.2,  Macintosh OS8, UN*X, and Windows  95/98/NT,  and has extensive  experience
with  several  applications  including  Microsoft  Office  +  Frontpage,   Adobe
Photoshop + Pagemaker,  Alias Wavefront, Bryce 3D and many more. Before becoming
involved with Cyco.net,  Mr. Wolford built and continues to maintain several Web
Sites including the Dartmouth Street Gallery (http://www.dsg-art.com),  Mortgage
Internet   Technologies   (http://www.vlender.com),   and   Digital   Skunk  Bud
Productions (http://www.dsbp.cx).

FAMILY RELATIONSHIPS

     Richard Urrea,  our President and Chief  Executive  Officer,  is the son of
Francisco Urrea, Jr., one of our Directors, and the brother of Daniel Urrea, our
Chief Financial Officer.

ITEM 10. EXECUTIVE COMPENSATION

     The following table shows all the cash  compensation  paid by Cyco.net,  as
well as certain  other  compensation  paid or accrued,  during the fiscal  years
ended  December  31,  2002,  2001  and 2000 to  Cyco.net's  three  highest  paid
executive  officers.  No salaries were paid prior to 1999.  No restricted  stock
awards,  long-term incentive plan payouts or other types of compensation,  other
than  the  compensation  identified  in the  chart  below,  were  paid to  these
executive  officers  during these fiscal years.  Except as indicated  below,  no
executive  officer earned a total annual salary and bonus for any of these years
in excess of $100,000.

                                       17
<PAGE>
<TABLE>
<CAPTION>
                                      ANNUAL COMPENSATION                     LONG-TERM COMPENSATION
                           ------------------------------------------    --------------------------------
                                                                                 AWARDS           PAYOUTS
                                                                         ----------------------   -------
                                                            OTHER        RESTRICTED
                                                            ANNUAL          STOCK      OPTIONS/    LTIP      ALL OTHER
NAME AND                            SALARY     BONUS     COMPENSATION     AWARD(S)       SARS     PAYOUTS   COMPENSATION
PRINCIPAL POSITION         YEAR       ($)       ($)           ($)            ($)          (#)       ($)          ($)
------------------         ----     ------     -----     ------------     --------       ----     -------   ------------
<S>                        <C>     <C>         <C>       <C>              <C>            <C>      <C>       <C>
Richard Urrea,             2002    $110,750                               $30,000(1)                              --
Chief Executive Officer    2001     $75,600      --           --          $35,000(2)       --         --          --
And President              2000     $70,999      --           --                 --        --         --          --

Daniel Urrea,              2002     $57,822                               $30,000(1)
Chief Financial Officer    2001     $40,000      --           --          $35,000(2)       --         --          --
                           2000     $29,999      --           --                 --        --         --          --

Brent Wolford,             2002     $26,500                               $30,000(1)
Chief Technical Officer    2001     $24,000      --           --          $10,000(2)       --         --          --
                           2000      $9,000      --           --                 --        --         --          --
</TABLE>
----------

     (1) These  represent  1,000,000  shares of common  stock  issued to each of
Richard  Urrea,,  Daniel  Urrea and Brent  Wolford.  These shares were valued at
$0.03 per share on the date of grant.

     (2) These  represent  1,750,000  shares of common  stock  issued to each of
Richard Urrea and Daniel Urrea and 500,000 shares issued to Brent Wolford. These
shares were valued at $0.03 per share on the date of grant.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN

     The following  table sets forth the  securities  that have been  authorized
under equity compensation plans as of December 31, 2002.

<TABLE>
<CAPTION>
                                                                                                         NUMBER
                                                                                                      OF SECURITIES
                                                                                                        REMAINING
                                                                                                        AVAILABLE
                                                                     NUMBER                            FOR FUTURE
                                                                 OF SECURITIES       WEIGHTED-          ISSUANCE
                                                                  TO BE ISSUED        AVERAGE         UNDER EQUITY
                                                                 UPON EXERCISE    EXERCISE PRICE   COMPENSATION PLANS
                                                                 OF OUTSTANDING   OF OUTSTANDING       (EXCLUDING
                                                                    OPTIONS,         OPTIONS,          SECURITIES
                                                                  WARRANTS AND     WARRANTS AND         REFLECTED
                                                                     RIGHTS           RIGHTS         IN COLUMN (A))
                                                                 -------------    --------------   ------------------
                                                                      (A)               (B)                (C)
                                                                 -------------    --------------   ------------------
<S>                                                                <C>                <C>              <C>
Equity compensation plans not approved by security holders                 0          $   0                    0

Equity compensation plans approved by security holders             1,350,000          $0.08            2,650,000
                                                                   ---------          -----            ---------
TOTAL                                                              1,350,000          $0.08            2,650,000
                                                                   =========          =====            =========
</TABLE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Voting Securities And Principal Holders Thereof

     The following table sets forth, as of December 31, 2002,  information  with
respect to the beneficial  ownership of our common stock by (i) persons known by
us to beneficially  own more than five percent of the outstanding  shares,  (ii)
each director, (iii) each executive officer and (iv) all directors and executive
officers as a group.

                                       18
<PAGE>
                                                   COMMON STOCK
                                                BENEFICIALLY OWNED
NAME/ADDRESS                              NUMBER               PERCENT(1)
------------                              ------               ----------
Richard Urrea                            4,921,000                15.6%
600 Alcalde SW #4D
Albuquerque, NM 87104

Matthew Urrea                            2,496,000                 7.9%
2213 Matthew NW
Albuquerque, NM 87110

Daniel Urrea                             5,046,000                16.0%
3009 Charleston NE
Albuquerque, NM 87110

Nunzio P De Santis                       2,496,000                 7.9%
600 Central Ave. S. W., 3rd Floor
Albuquerque, NM 87102

Francisco Urrea Jr.                      1,509,000                 4.8%
3009 Charleston NE
Albuquerque, NM 87110

Brent Wolford                            3,580,000                11.4%
2601 Silver Avenue SE #8
Albuquerque, NM 87106

Lynnette Budagher(2)                     1,750,000                 5.6%
4029 Montreal Lp NE
Rio Rancho, NM 87144

All Officers and Directors              15,056,000                47.8%

----------

     (1)  Applicable  percentage of ownership is based on  31,496,419  shares of
          common  stock  outstanding  as of December  31,  2002,  together  with
          applicable  options  for each  shareholder.  Beneficial  ownership  is
          determined  in  accordance  with  the  rules  of  the  Commission  and
          generally   includes  voting  or  investment  power  with  respect  to
          securities.  Shares  of  common  stock  subject  to  options  that are
          currently  exercisable or  exercisable  within 60 days of December 31,
          2002 are deemed to be  beneficially  owned by the person  holding such
          options for the purpose of computing  the  percentage  of ownership of
          such  person,  but are not treated as  outstanding  for the purpose of
          computing the  percentage  ownership of any other  person.  The common
          stock is the only outstanding class of equity securities of Cyco.net.

     (2)  Of the  1,750,000  shares of common  stock held by Lynnette  Budagher,
          750,000 shares are stock options.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     During the year ended December 31, 2002 the Company  converted  $24,706 due
from related parties into  compensation  for Richard Urrea. The $24,706 due from
related  parties  was the  result of amounts  paid on behalf of related  parties
prior to December  31,  2000.  As a result,  the Company  recorded  compensation
expense of $24,706, which is included in general and administrative expenses.

     During the years ended December 31, 2002 and 2001, the Company paid $26,500
and  $24,000,  respectively,  in  consulting  fees to Brent  Wolford for website
development and maintenance.

     In August of 2002,  the Company  issued  1,000,000  shares of common  stock
valued at $30,000  to each of the  following  related  parties:  Richard  Urrea,
Daniel Urrea and Brent Wolford.

     At December  31,  2002,  the Company has recorded a payable to an affiliate
aggregating $1,000.

                                       19
<PAGE>
     In April 2001, Cyco.net issued a total of 4,000,000 shares of common stock,
consisting of 1,750,000 shares to Richard Urrea, our Chief Executive Officer and
President;  1,750,000 shares to Daniel Urrea, our Chief Financial  Officer;  and
500,000 shares to Brent Wolford, our Chief Technical Officer.  These shares were
issued as bonus  compensation.  On the date of grant,  the shares were valued at
$0.03 per share or a total of $120,000.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  The following exhibits are filed as part of this filing:

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

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

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

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

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

   3.4       Certificate Amending Certificate of Incorporation         Incorporated by reference to Exhibit 2.10 to
             dated January 23, 1987                                    the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001

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

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

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

                                       20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.                  DESCRIPTION                                              LOCATION
-----------                  -----------                                              --------
<S>          <C>                                                       <C>
   3.8       Certificate of Amendment of Cyco.net, Inc.                Incorporated by reference to Exhibit 21.3 to
                                                                       the Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001

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

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

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

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

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

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

   10.3      Promissory note from Cyco.net, Inc. to Francisco          Incorporated by reference to Exhibit 99 to the
             Urrea, Jr.                                                Company's Annual Report on Form 10-KSB as
                                                                       filed with the Securities and Exchange
                                                                       Commission on April 16, 2001

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

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

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

                                       21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.                  DESCRIPTION                                              LOCATION
-----------                  -----------                                              --------
<S>          <C>                                                       <C>
   10.7      Equity Line of Credit Agreement dated as of August        Incorporated by reference to Exhibit 10.7 to
             2001 between Cyco.net and Cornell Capital Partners,       the Company's 10-QSB for the quarter ended
             L.P.                                                      September 30, 2001 filed with the Securities
                                                                       and Exchange Commission on November 12, 2001

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

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

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

     (b) No reports on Form 8-K were filed under the Securities  Exchange Act of
1934 during the quarter ended December 31, 2002.

ITEM 14. CONTROLS AND PROCEDURES

     (a)  EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES:

     Within  90 days  prior  to the  date  of this  Report,  we  carried  out an
evaluation,  under  the  supervision  and with the  participation  of our  Chief
Executive  Officer and Chief  Financial  Officer,  of the  effectiveness  of the
design and operation of our disclosure  controls and  procedures.  Based on this
evaluation,  our Chief Executive  Officer and Chief Financial  Officer concluded
that our disclosure  controls and  procedures  are effective in timely  alerting
them to material  information  required to be included in our  periodic  reports
that are filed with the Securities and Exchange  Commission.  It should be noted
that the  design  of any  system  of  controls  is based  in part  upon  certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving  its stated goals under all  potential
future  conditions,  regardless  of how remote.  In  addition,  we reviewed  our
internal  controls,  and there have been no significant  changes in our internal
controls or in other  factors that could  significantly  affect  those  controls
subsequent to the date of their last valuation.

     (b)  CHANGES IN INTERNAL CONTROLS:

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

                                       22
<PAGE>
                                 CYCO.NET, INC.
                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----
Report of Independent Auditors                                               F-1

Consolidated Balance Sheet                                                   F-2

Consolidated Statements of Operations                                        F-3

Consolidated Statements of Changes in Stockholders' Equity (Deficit)         F-4

Consolidated Statements of Cash Flows                                        F-5

Notes to Consolidated Financial Statements                              F-6-F-13

                                      F-i
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors
Cyco.Net, Inc.

We have audited the accompanying  consolidated balance sheet of Cyco.Net, Inc as
of December 31, 2002,  and the related  consolidated  statements of  operations,
stockholders' (deficit), and cash flows for each of the two years ended December
31, 2002.  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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits 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 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 financial position of Cyco.Net,  Inc. as of December
31, 2002, and the results of its operations,  and its cash flows for each of the
two years ended  December 31, 2002, in  conformity  with  accounting  principles
generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
consolidated  financial  statements,  the Company has suffered  recurring losses
from  operations  and has working  capital  and  stockholders'  deficits.  These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going concern.  Management's plans in regard to these matters are also discussed
in Note 2. The financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.



Stark Winter Schenkein & Co., LLP
Denver, Colorado
March 14, 2003

                                      F-1
<PAGE>
                                 CYCO.NET, INC.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2002

                                     ASSETS
CURRENT ASSETS
  Cash                                                                $   5,635
  Receivables                                                            25,292
  Inventory                                                              24,645
                                                                      ---------
     Total current assets                                                55,572
                                                                      ---------

PROPERTY AND EQUIPMENT, net of
  accumulated depreciation of $3,147                                      5,908
                                                                      ---------

OTHER ASSETS
  Intangible assets - Domain name and website,
    net of accumulated amortization of $51,254                           21,746
  Deposit                                                                 1,905
                                                                      ---------
                                                                         23,651
                                                                      ---------

                                                                      $  85,131
                                                                      =========

                     LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
  Accounts payable and accrued expenses                               $ 227,038
  Accounts payable - related party                                        1,000
                                                                      ---------
                                                                        228,038
                                                                      ---------

STOCKHOLDERS' (DEFICIT)
  Common Stock, $0.001 par value,
    100,000,000 shares authorized,
    31,496,419 issued and outstanding                                    31,496
  Additional paid in capital                                            668,309
  Accumulated (deficit)                                                (842,712)
                                                                      ---------
                                                                       (142,907)
                                                                      ---------

                                                                      $  85,131
                                                                      =========

          See accompanying notes to consolidated financial statements.

                                      F-2
<PAGE>
                                 CYCO.NET, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             Year ended December 31,
                                                          ----------------------------
                                                              2002            2001
                                                          ------------    ------------
<S>                                                       <C>             <C>
Revenues                                                  $  5,179,160    $  4,213,321
                                                          ------------    ------------
Cost of goods sold
   Product                                                   4,259,959       3,572,456
   Shipping                                                    346,188         234,167
   Credit card processing                                      145,809         125,105
   Other                                                            --           4,599
                                                          ------------    ------------
                                                             4,751,956       3,936,327
                                                          ------------    ------------

Gross profit                                                   427,204         276,994

General and administrative expenses                            751,340         435,329
                                                          ------------    ------------

(Loss) from operations                                        (324,136)       (158,335)
                                                          ------------    ------------
Other income (expense)
  Interest expense                                              (1,457)           (153)
                                                          ------------    ------------

Net (loss)                                                $   (325,593)   $   (158,488)
                                                          ============    ============
Per share information:
Net (loss) per common share (basic and diluted)           $      (0.01)   $      (0.01)
                                                          ============    ============

Weighted average shares outstanding (basic and diluted)     28,592,309      25,530,392
                                                          ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                                 CYCO.NET, INC.
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)

<TABLE>
<CAPTION>
                                                          Common Stock         Additional
                                                     -----------------------    Paid in    Accumulated
                                                       Shares       Amount      Capital     (Deficit)       Total
                                                     ----------   ----------   ----------   ----------    ----------
<S>                                                  <C>          <C>          <C>          <C>           <C>
Balance at December 31, 2000                         21,946,419   $   21,946   $  342,859   $ (358,631)   $    6,174

Shares issued fo services a $0.03 per share           4,000,000        4,000      116,000           --       120,000

Shares issued for services at $0.06 per share           550,000          550       30,250           --        30,800

  Net (loss) for the year                                    --           --           --     (158,488)     (158,488)
                                                     ----------   ----------   ----------   ----------    ----------

Balance at December 31, 2001                         26,496,419   $   26,496   $  489,109   $ (517,119)   $   (1,514)

Shares issued for services at $0.03 per share         5,000,000        5,000      145,000           --       150,000

Stock compensation related to term
   change on warrant                                         --           --       34,200           --        34,200

  Net (loss) for the year                                    --           --           --     (325,593)     (325,593)
                                                     ----------   ----------   ----------   ----------    ----------
Balance at December 31, 2002                         31,496,419   $   31,496   $  668,309   $ (842,712)   $ (142,907)
                                                     ==========   ==========   ==========   ==========    ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                                 CYCO.NET, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED
                                                                                  DECEMBER 31,
                                                                            ----------------------
                                                                               2002         2001
                                                                            ---------    ---------
<S>                                                                         <C>          <C>
Cash flows from operating actvities:
Net (loss)                                                                  $(325,593)   $(158,488)
Adjustments to reconcile net (loss) to net cash provided by
 operating activities:
   Amortization                                                                25,542       20,504
   Depreciation                                                                 1,757        1,183
   Stock compensation                                                         184,200      150,800
   Write-off of deferred offering costs                                       107,689           --
   Conversion of amounts due from related parties into compensation            24,706           --
Changes in assets and liabilities:
   Decrease in receivables                                                      6,705       38,381
   (Increase) in inventory                                                    (15,382)      (3,488)
   Increase  in accounts payable and accrued expenses                          35,230       28,908
                                                                            ---------    ---------
          Net cash provided by operating activities                            44,854       77,800
                                                                            ---------    ---------
Cash flows from investing activities:
   Acquisition of intangible assets                                           (14,000)     (34,000)
   Acquisition of property and equipment                                       (3,330)      (2,126)
                                                                            ---------    ---------
          Net cash (used in) investing activities                             (17,330)     (36,126)
                                                                            ---------    ---------
Cash flows from financing activities:
  (Increase) in deferred offering costs                                       (27,108)     (80,581)
  (Decrease) in amounts due to related party                                       --         (712)
                                                                            ---------    ---------
          Net cash (used in) financing activities                             (27,108)     (81,293)
                                                                            ---------    ---------

          Net increase (decrease) in cash                                         416      (39,619)
Cash at beginning of year                                                       5,219       44,838
                                                                            ---------    ---------

Cash at end of year                                                         $   5,635    $   5,219
                                                                            =========    =========
Supplemental cash flow information:
  Cash paid for income taxes                                                $      --    $      --
                                                                            =========    =========
  Cash paid for interest                                                    $   1,457    $     153
                                                                            =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2002

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Cyco.Net, Inc. (the "Company") was incorporated on January 25, 1999 in the State
of New Mexico.  The Company's primary line of business is the sale of cigarettes
through three websites to customers in the United States of America.

PRINCIPLES OF CONSOLIDATION

The consolidated  financial  statements  include the accounts of the Company and
its  wholly  owned  subsidiary.   All  significant   intercompany  accounts  and
transactions have been eliminated.

REVENUE RECOGNITION

The  Company's  sole source of revenue is the sale of  cigarettes  through their
primary  website  (cyco.net),  which has been  designed as an "e-zine",  and two
ancillary websites  (cycocigs.com and  aabakismokes.com).  The terms of sale are
FOB shipping point and the Company records revenue from cigarette sales when the
product is shipped.

Outbound  shipping charges to customers are included in revenues and amounted to
$382,642 and $268,494 during December 31, 2002 and 2001, respectively.

Commissions  related to sales made through  affiliated  sites will be recognized
upon  notification from the affiliate that such revenues have been earned by the
Company.

CREDIT CARD COSTS

The Company  receives  payment for their product via credit  cards.  Credit card
costs are expensed in the period incurred.  An allowance for chargebacks is also
recorded  at  the  time  of  remittance.  To  date  chargebacks  have  not  been
significant.

DISCOUNT AND FEES RELATED TO THE EQUITY LINE OF CREDIT

The discount and any related  fees on the shares  issued  pursuant to the equity
line  of  credit  described  in Note 3 will  be  treated  as  though  they  were
commissions and will be deducted from additional paid in capital at the time the
shares are issued.

INVENTORY

Inventory,  consisting of products available for sale, is stated at the lower of
cost or market. Cost is determined on a first-in, first-out basis.

ADVERTISING

The Company  expenses all costs of  advertising as incurred.  Advertising  costs
included in general and administrative  expenses  aggregated $30,969 in 2002 and
$19,068 in 2001.

CASH AND CASH EQUIVALENTS

For purposes of balance sheet  classification  and the statements of cash flows,
the Company considers all highly liquid  investments  purchased with an original
maturity of three months or less to be cash equivalents.

                                      F-6
<PAGE>
ACCOUNTS RECEIVABLE

Accounts  receivable  are stated at estimated  net  realizable  value.  Accounts
receivable  are  comprised  of  balances  due from  customers  net of  estimated
allowances for uncollectible accounts. In determining collectibility, historical
trends are  evaluated  and  specific  customer  issues are reviewed to arrive at
appropriate allowances.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates  discussed herein are based upon certain market assumptions
and pertinent  information  available to management as of December 31, 2002. The
respective  carrying  value of certain  on-balance-sheet  financial  instruments
approximated  their fair values.  These financial  instruments  include cash and
cash equivalents,  receivables and accounts payable and accrued  expenses.  Fair
values  were  assumed  to  approximate   carrying  values  for  these  financial
instruments  because  they are short  term in  nature,  their  carrying  amounts
approximate fair values, or they are receivable or payable on demand.

PROPERTY AND EQUIPMENT

Property and  equipment,  which consists of furniture and office  equipment,  is
stated at cost and is being depreciated using the straight-line  method over the
estimated economic life of 5 years.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company  periodically  reviews the carrying  amount of  property,  plant and
equipment and its identifiable  intangible  assets to determine  whether current
events or  circumstances  warrant  adjustments to such carrying  amounts.  If an
impairment  adjustment is deemed necessary,  such loss is measured by the amount
that the carrying  value of such assets  exceeds their fair value.  Considerable
management  judgment  is  necessary  to  estimate  the  fair  value  of  assets;
accordingly, actual results could vary significantly from such estimates. Assets
to be disposed of are carried at the lower of their financial statement carrying
amount or fair value less costs to sell.

DEFERRED OFFERING COSTS

The Company defers costs  associated with the raising of capital until such time
as the offering is  completed,  at which time the costs are charged  against the
capital  raised.  Should the  offering  be  terminated  the costs are charged to
operations  during the period when the offering is  terminated.  During the year
ended  December  31,  2002 the  Company  charged an  aggregate  of  $107,689  to
operations  related to these costs. The Company determined that it was no longer
appropriate  to  capitalize  these costs based upon  estimates  of the amount of
money that could be raised through the equity line of credit  computed using the
Company's stock price and trading volume (see Note 3).

NET (LOSS) PER COMMON SHARE

The  Company  follows  Statement  of  Financial  Accounting  Standards  No. 128,
"Earnings Per Share" ("SFAS No. 128").  Basic  earnings  (loss) per common share
calculations  are  determined  by  dividing  net income  (loss) by the  weighted
average number of shares of common stock  outstanding  during the year.  Diluted
earnings  (loss) per common share  calculations  are  determined by dividing net
income  (loss) by the  weighted  average  number of common  shares and  dilutive
common  share  equivalents  outstanding.   During  the  periods  when  they  are
anti-dilutive,  common  stock  equivalents,  if any, are not  considered  in the
computation.

INTANGIBLES

Product and website  development  costs  incurred in  developing  the  Company's
website are accounted for in accordance  with  Statement of Position (SOP) 98-1,
"Accounting  for the Costs to  Develop or Obtain  Software  for  Internal  Use".
Product and website development costs include amounts incurred by the Company to
develop,  enhance,  manage, monitor and operate the Company's website.  External
direct  costs of  materials  and services  consumed in  developing  or obtaining
internal-use computer software, payroll and payroll- related costs for employees
who devote time directly related to the internal-use  computer software project,
and interest costs incurred while developing  internal-use computer software are

                                      F-7
<PAGE>
capitalized.   Product   development   costs,   preliminary   project  and  past
implementation  product  costs are  expensed  as  incurred.  Internal  costs for
upgrades and enhancements that result in probable  additional  functionality are
capitalized. These capitalized costs are amortized over a two year period.

STOCK-BASED COMPENSATION

The Company  accounts for equity  instruments  issued to employees  for services
based on the fair value of the equity instruments issued and accounts for equity
instruments  issued  to other  than  employees  based  on the fair  value of the
consideration received or the fair value of the equity instruments, whichever is
more reliably measurable.

The Company  accounts for stock based  compensation  in accordance with SFAS No.
123,  "Accounting for Stock-Based  Compensation." The provisions of SFAS No. 123
allow  companies to either  expense the estimated fair value of stock options or
to continue to follow the  intrinsic  value  method set forth in APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma
effects on net income  (loss) had the fair value of the options  been  expensed.
The Company has elected to continue to apply APB 25 in accounting  for its stock
option incentive plans.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

SEGMENT INFORMATION

The Company  follows SFAS 131,  "Disclosure  about Segments of an Enterprise and
Related Information".  Certain information is disclosed,  per SFAS 131, based on
the  way  management  organizes  financial   information  for  making  operating
decisions  and  assessing  performance.  The Company  currently  operates in one
business segment and will evaluate additional segment disclosure requirements as
it expands operations.

RECLASSIFICATIONS

Certain amounts  presented in the previous years financial  statements have been
reclassified to conform to the current year presentation.

CONCENTRATIONS

There have been a number of adverse legislative, regulatory, political and other
developments concerning the tobacco industry that have received widespread media
attention.  These developments may negatively affect the perception of potential
and current customers with respect to the tobacco industry, and therefore effect
the Company's operations.

Cigarettes are generally subject to substantial federal,  state and local excise
taxes in the United States.  However,  the Company believes there is uncertainty
over the  applicability  of these  taxes to  on-line  sales of  cigarettes.  The
Company does not collect or remit excise taxes (or other taxes) on its sales due
to this  uncertainty.  If the  Company  were  required to collect and remit such
taxes,  then the prices of its cigarettes would increase.  This could harm sales
because its customers are price sensitive. Accordingly, sales would be adversely
affected by increases to the price of its cigarettes.

The Company  does not collect or remit state sales or other taxes on the sale of
cigarettes.  The  Company  does  not  believe  that it has  sufficient  business
contacts in one or more states to require it to collect and remit state sales or
other taxes.  If the Company  were  required to collect  sales  taxes,  then the
Company would need to update its computer  systems to calculate the  appropriate
sales tax for each  customer  order and to remit such  taxes to the  appropriate
governmental  agencies.  Moreover,  in  recent  years,  state  governments  have
aggressively attempted to collect sales taxes from out-of-state companies. These
actions are expensive to defend, regardless of the final outcome. The Company is
subject to a civil  action  filed by the City of New York  related to this issue
(See Note 8).

RECENT PRONOUNCEMENTS

In December 2002, the Financial  Accounting Standards Board ("FASB") issued SFAS
148  "Accounting  for Stock-Based  Compensation--Transition  and  Disclosure--an
amendment of SFAS 123." SFAS 148 provides  alternative methods of transition for

                                      F-8
<PAGE>
a voluntary  change to the fair value based method of accounting for stock-based
employee  compensation  from the  intrinsic  value-based  method  of  accounting
prescribed  by APB 25. As  allowed  by SFAS 123,  the  Company  has  elected  to
continue  to apply  the  intrinsic  value-based  method of  accounting,  and has
adopted the disclosure  requirements of SFAS 123. The Company currently does not
anticipate adopting the provisions of SFAS 148.

In July 2002, the FASB issued SFAS 146,  "Accounting  for Costs  Associated with
Exit or Disposal  Activities." SFAS 146 provides new guidance on the recognition
of costs  associated  with exit or disposal  activities.  The standard  requires
companies to recognize costs  associated  with exit or disposal  activities when
they are incurred  rather than at the date of  commitment to an exit or disposal
plan.  SFAS 146 supercedes  previous  accounting  guidance  provided by the EITF
Issue 94-3 "Liability  Recognition for Certain Employee Termination Benefits and
Other  Costs  to  Exit  an  Activity  (including  Certain  Costs  Incurred  in a
Restructuring)."  EITF Issue 94-3 required  recognition  of costs at the date of
commitment to an exit or disposal plan. SFAS 146 is to be applied  prospectively
to  exit or  disposal  activities  initiated  after  December  31,  2002.  Early
application  is  permitted.  The  adoption  of SFAS  146 by the  Company  is not
expected to have a material impact on the Company's financial position,  results
of operations, or cash flows.

In April 2002, the FASB issued SFAS 145,  "Rescission of FASB  Statements 4, 44,
and 64, Amendment of FASB Statement 13, and Technical  Corrections." Among other
things,  this statement  rescinds FASB Statement 4, "Reporting  Gains and Losses
from   Extinguishment  of  Debt"  which  required  all  gains  and  losses  from
extinguishment  of debt to be  aggregated  and, if  material,  classified  as an
extraordinary  item, net of related income tax effect. As a result, the criteria
in APB Opinion 30, "Reporting the Results of Operations -- Reporting the Effects
of  Disposal  of a  Segment  of  a  Business,  and  Extraordinary,  Unusual  and
Infrequently  Occurring Events and  Transactions,"  will now be used to classify
those gains and losses. The provisions of SFAS 145 related to the classification
of debt extinguishment are effective for years beginning after May 15, 2002. The
adoption of SFAS 145 by the Company is not expected to have a material impact on
the Company's financial position, results of operations, or cash flows.

In  November  2001,  the EITF of the  FASB  issued  EITF  01-9  "Accounting  for
Consideration  Given by a Vendor to a  Subscriber  (Including  a Reseller of the
Vendor's  Products)."  EITF 01-9 provides  guidance on when a sales incentive or
other consideration given should be a reduction of revenue or an expense and the
timing of such recognition.  The guidance provided in EITF 01-9 is effective for
financial  statements for interim or annual periods beginning after December 15,
2001. The adoption of EITF 01-9 by the Company did not have a material impact on
the Company's financial statements.

In August 2001,  the FASB issued SFAS 144,  "Accounting  for the  Impairment  or
Disposal  of  Long-Lived   Assets."  SFAS  144  provides  new  guidance  on  the
recognition of impairment  losses on long-lived assets with definite lives to be
held and  used or to be  disposed  of and also  issued  the  definition  of what
constitutes  a  discontinued  operation  and how the  results of a  discontinued
operation  are to be measured and  presented.  SFAS 144 is effective  for fiscal
years beginning after December 15, 2001. The adoption of SFAS 144 did not have a
material impact on the Company's financial position,  results of operations,  or
cash flows.

In June  2001,  the FASB  issued  SFAS 143,  "Accounting  for  Asset  Retirement
Obligations."  SFAS 143  requires  the fair  value of a  liability  for an asset
retirement  obligation  to be  recognized in the period that it is incurred if a
reasonable  estimate of fair value can be made. The associated  asset retirement
costs are  capitalized as part of the carrying  amount of the long-lived  asset.
SFAS 143 is  effective  for fiscal  years  beginning  after June 15,  2002.  The
adoption of SFAS 143 is not expected to have a material  impact on the Company's
financial position, results of operations or cash flows.

In June 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible  Assets,"
which provides for  non-amortization of goodwill and intangible assets that have
indefinite useful lives, annual tests of impairments of those assets and interim
tests of  impairment  when an event occurs that more likely than not has reduced
the fair value of such assets.  The statement  also provides  specific  guidance
about how to determine and measure goodwill impairments, and requires additional
disclosure  of  information  about  goodwill and other  intangible  assets.  The
provisions  of this  statement  are required to be applied  starting with fiscal
years  beginning  after December 15, 2001, and applied to all goodwill and other
intangible assets recognized in the financial  statements at that date. Goodwill
and  intangible  assets  acquired  after  June 30,  2001 will be  subject to the
non-amortization provisions of the statement. Early application is permitted for
entities  with fiscal years  beginning  after March 15, 2001,  provided that the
first interim financial statements had not been issued previously. The Company's
adoption  of the  provisions  of SFAS 142 did not have a material  impact on the
Company's financial position, results of operations or cash flows.

In June  2001,  the FASB  issued  SFAS 141,  "Business  Combinations,"  which is
effective for all business combinations  initiated after June 30, 2001. SFAS 141
requires  companies to account for all business  combinations using the purchase
method of accounting,  recognize  intangible assets if certain criteria are met,

                                      F-9
<PAGE>
as well as provide additional  disclosures  regarding business  combinations and
allocation of purchase  price.  The adoption of SFAS 141 did not have a material
impact on the Company's financial position, results of operations or cash flows.

NOTE 2. GOING CONCERN

The Company's financial statements are presented on a going concern basis, which
contemplates  the  realization of assets and  satisfaction of liabilities in the
normal course of business.

The Company has experienced losses from operations as a result of its investment
necessary to achieve its operating plan, which is long-range in nature.  For the
years ended  December  31, 2002 and 2001,  the Company  incurred net (losses) of
$325,593 and  $158,488,  respectively.  At December 31, 2002,  the Company had a
working capital (deficit) of $172,466 and stockholders' (deficit) of $142,907.

The  Company's  ability to continue as a going  concern is  contingent  upon its
ability to secure  financing,  increase  ownership equity and attain  profitable
operations.  In addition,  the Company's  ability to continue as a going concern
must  be  considered  in  light  of the  problems,  expenses  and  complications
frequently  encountered by entrance into established markets and the competitive
environment in which the Company operates.

The  Company is  pursuing  financing  for its  operations  and  working  towards
increasing their gross profit by seeking lower cost suppliers.  In addition, the
Company is searching for other segments in which to generate revenue.

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

NOTE 3. EQUITY LINE OF CREDIT

Pursuant to an Equity Line of Credit agreement dated August 16, 2001 the Company
may, at their discretion, periodically issue and sell up to 40,000,000 shares of
common  stock for a total  purchase  price of  $5,000,000.  Upon  request  of an
advance  under  the  Equity  Line of  Credit,  Cornell  Capital  Partners,  L.P.
(Cornell)  will  purchase  shares of the  Company's  common stock for 82% of the
lowest  closing  bid  price  on the  Over-the-Counter  Bulletin  Board  or other
principal  market on which our common stock is traded for the 5 days immediately
following the notice date.  Cornell  intends to sell any shares  purchased under
the Equity Line of Credit at the market price.

ADVANCES.  Pursuant to the Equity Line of Credit,  the Company may  periodically
sell shares of common stock to Cornell to raise capital to fund working  capital
needs.  The  periodic  sale of shares is known as an  advance.  The  Company may
request an advance every 5 trading days.

MECHANICS. The Company may, at its' discretion, request advances from Cornell by
written  notice,  specifying  the amount  requested  up to the  maximum  advance
amount. A closing will be held 7 trading days after such written notice at which
time the Company  will  deliver  shares of common stock and Cornell will pay the
advance amount.  The Company has the ability to determine when and if an advance
is desired.

COMMITMENT  PERIOD.  The  Company  may request an advance at any time during the
commitment  period.  The commitment period begins on the date the Securities and
Exchange  Commission first declares the registration  statement  effective.  The
commitment  period  expires  on the  earliest  to occur of (i) the date on which
Cornell has made advances totaling $5,000,000 or (ii) July 22, 2004.

MAXIMUM  ADVANCE  AMOUNT.  The Company  may not request  advances in excess of a
total of  $5,000,000.  In  addition,  each  individual  advance  is subject to a
maximum advance amount based on an average daily volume of the Company's  common
stock.  The maximum  amount of each advance is equal to 75% of the average daily
volume of the  Company's  common stock for the 40 trading days prior to the date
of an advance multiplied by 82% of the lowest closing bid price of the Company's
common stock for the 5 trading days immediately  following the notice date of an
advance.

NUMBER OF SHARES TO BE ISSUED.  The Company  cannot predict the actual number of
shares  of common  stock  that will be issued  pursuant  to the  Equity  Line of
Credit,  in part,  because the purchase price of the shares will fluctuate based
on prevailing  market  conditions  and the Company has not  determined the total
amount of advances to be drawn. Nonetheless, the Company estimates the number of
shares of common stock that will be issued using certain assumptions.

                                      F-10
<PAGE>
NET  PROCEEDS.  The Company  cannot  predict the total  amount of proceeds to be
raised in this transaction,  in part, because the Company has not determined the
total amount of the advances to be drawn. The Company is obligated to pay a cash
fee to Cornell Capital equal to 8.4% of each advance.

As of December 31,  2002,  the Company had not  requested  an advance  under the
Equity Line of Credit.

NOTE 4. STOCKHOLDERS' (DEFICIT)

During the year ended December 31, 2001 the Company issued  4,550,000  shares of
common stock to employees and  non-employees  in exchange for services valued at
$150,800.  These  shares were valued at their fair market  value on the date the
Company agreed to issue the shares.

During the year ended  December  31,  2001 the Company  issued a stock  purchase
warrant,  exercisable for 300,000 shares of common stock, expiring on August 16,
2006 (See Note 7).

During the year ended December 31, 2002 the Company issued  5,000,000  shares of
common stock to employees and  non-employees  in exchange for services valued at
$150,000.  These  shares were valued at their fair market  value on the date the
Company agreed to issue the shares.

During the year ended  December  31, 2002 the Company was required to change the
terms  of  the  above  described  warrant  and,   accordingly,   recorded  stock
compensation of $34,200 (See Note 7).

During  prior  years the  Company  has  issued  shares of common  stock  without
registration  under the  Securities Act of 1933.  Although the Company  believes
that the sales did not involve a public  offering of its securities and that the
Company did comply with the "safe harbor" exemptions from registration, it could
be liable for  rescission  of the cash sales,  aggregating  2,167,600  shares of
common stock,  if such  exemptions were found not to apply and this could have a
material negative impact on the Company.

NOTE 5. RELATED PARTY TRANSACTIONS

During the years ended  December  31, 2002 and 2001 the Company paid $26,500 and
$24,000,  respectively,  in  consulting  fees to  related  parties  for  website
development and maintenance.

During the year ended December 31, 2002 the Company  converted  $24,706 due from
related  parties  into   compensation.   As  a  result,   the  Company  recorded
compensation expense of $24,706, which is included in general and administrative
expenses.

At  December  31,  2002 the  Company  has  recorded  a payable  to an  affiliate
aggregating $1,000.

NOTE 6. INCOME TAXES

The Company  accounts  for income taxes under SFAS 109,  "Accounting  for Income
Taxes"  which  requires use of the  liability  method.  SFAS 109  provides  that
deferred  tax assets  and  liabilities  are  recorded  based on the  differences
between the tax bases of assets and liabilities  and their carrying  amounts for
financial reporting purposes, referred to as temporary differences. Deferred tax
assets  and  liabilities  at the end of each  period  are  determined  using the
currently  enacted tax rates  applied to taxable  income in the periods in which
the deferred tax assets and liabilities are expected to be settled or realized.

The types of  temporary  differences  between  the tax basis of assets and their
financial  reporting  amounts  that give rise to a  significant  portion  of the
deferred tax asset are as follows:

                                                    RECONCILING      TAX
                                                       ITEM         EFFECT
                                                     --------      --------
     Capital loss carryforward                       $ 25,000      $  8,500
     Net operating loss carryforward                  639,000       217,000
                                                     --------      --------
                                                     $673,000      $225,000
                                                     ========      ========

The capital loss  carryforward  will expire in 2004 and the net  operating  loss
carryforward will expire through 2022.

                                      F-11
<PAGE>
The  deferred tax asset has been fully  reserved as of December  31,  2002.  The
change in the  valuation  allowance  for the  deferred tax asset during the year
ended December 31, 2002 was $25,500.

NOTE 7. STOCK BASED COMPENSATION

STOCK OPTIONS

The Company has a  compensatory  stock option plan.  Under the plan, the Company
may grant options for up to 4,000,000 shares of common stock. The exercise price
of each option shall be determined by the  Compensation  Committee or by the CEO
with reference to factors such as current fair market value of the common stock,
net book value per share,  regular or other remuneration  already being received
by the optionee.  The maximum term of the options is five years and they vest on
the date granted. All options outstanding at December 31, 2002 have been granted
to employees.

Summarized  information  relative  to the  Company's  stock  option  plan are as
follows:

                                                     NUMBER    WEIGHTED AVERAGE
                                                    OF SHARES   EXERCISE PRICE
                                                    ---------   --------------
     Outstanding at December 31, 2000                 600,000       $0.10
       Granted                                        750,000        0.06
       Exercised                                           --          --
       Forfeited                                           --          --
                                                    ---------       -----
     Outstanding at December 31, 2001               1,350,000        0.08
       Granted                                             --          --
       Exercised                                           --          --
       Forfeited                                           --          --
                                                    ---------       -----
     Outstanding at December 31, 2002               1,350,000       $0.08
                                                    =========       =====

The option for 600,000  shares expires in 2004 and the option for 750,000 shares
expires in 2006.

The  effect  of  applying  SFAS 123 pro  forma  net  (loss)  is not  necessarily
representative of the effects on reported net income (loss) for future years due
to, among other  things,  the vesting  period of the stock  options and the fair
value of  additional  stock  options  in future  years.  The fair  values of the
options  granted  during 2001 were estimated at $0.06 on the date of grant using
the  Black-Scholes  option  pricing  model with the  following  assumptions:  no
dividend  yield,  volatility  of 458%, a risk-free  interest  rate of 6.0%,  and
expected lives of 5 years from date of vesting.

For purpose of pro forma disclosure,  the estimated fair value of the options is
charged to expense in the year that the options were granted.  The Company's pro
forma information is as follows:

                                                               DECEMBER 31,
                                                                   2001
                                                               -----------
     Pro forma net (loss)                                      $  (203,488)
                                                               ===========
     Pro forma (loss) per share -
      Basic and diluted                                        $     (0.01)
                                                               ===========

STOCK PURCHASE WARRANT

During the year ended  December  31,  2001 the Company  issued a stock  purchase
warrant,  exercisable for 300,000 shares of common stock, expiring on August 16,
2006.  The exercise price of the warrant is the lower of (i) 120% of the closing
price of the  Company's  stock on August 16,  2001,  or (ii) the lowest price at

                                      F-12
<PAGE>
which the Company  issues or sells common stock  subsequent  to August 16, 2001.
After such  adjustment,  the number of shares is also  adjustable  by the former
exercise  price  multiplied by the number of shares  divided by the new exercise
price.

During the year ended  December  31, 2002 the Company was required to change the
terms of the warrant.  As of December 31, 2002 the warrant is  exercisable  into
1,440,000  shares of common  stock at $0.03 per share.  The  warrant  expires on
August 16, 2006.

NOTE 8. CONTINGENT LIABILITY

On January  28,  2003,  the Company was named in a civil suit by the City of New
York as one of  approximately a dozen  defendants who engaged in the business of
internet on-line cigarette sales. The Company intends to contest the lawsuit and
plans to file a motion to dismiss in April 2003. Outside counsel for the Company
has advised that at this stage in the  proceedings  they cannot offer an opinion
as to the probable outcome of the case.

                                      F-13
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                       CYCO.NET, INC.

Date: April 11, 2003                   By: /s/ RICHARD URREA
                                           -------------------------------------
                                           Richard Urrea
                                           President and Chief Executive Officer

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

Date: April 11, 2003                   By: /s/ RICHARD URREA
                                           -------------------------------------
                                           Richard Urrea
                                           President and Chief Executive Officer


Date: April 11, 2003                   By: /s/ DANIEL URREA
                                           -------------------------------------
                                           Daniel Urrea
                                           Chief Financial Officer


Date: April 11, 2003                   By: /s/ FRANCISCO URREA, JR.
                                           -------------------------------------
                                           Francisco Urrea, Jr.
                                           Director
<PAGE>
                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection  with the Annual Report of Cyco.net,  Inc. (the "Company") on
Form 10-KSB for the period ended  December 31, 2002 as filed with the Securities
and  Exchange  Commission  on  the  date  hereof  (the  "Report"),  each  of the
undersigned,  in the  capacities  and  on  the  dates  indicated  below,  hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to his knowledge:

     1. The Report fully  complies  with the  requirements  of Section  13(a) or
15(d) of the Securities Exchange Act of 1934; and

     2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.


     By: /s/ Richard A. Urrea          April 11, 2003
         --------------------------
         Richard A. Urrea
         Chief Executive Officer


     By: /s/ Daniel Urrea              April 11, 2003
         --------------------------
         Daniel Urrea
         Chief Financial Officer
<PAGE>
                                  CERTIFICATION

I, Richard A. Urrea certify that:

1. I have reviewed this annual report on Form 10-KSB of Cyco.net, Inc.

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report.

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions  about the effectiveness
of the  disclosure  controls and  procedures  based on our  evaluation as of the
Evaluation Date;

5. The registrant's other certifying  officers and I have disclosed based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: April 11, 2003
By: /s/ Richard A. Urrea
    -----------------------------
    Richard A. Urrea
    Chief Executive Officer
<PAGE>
                                  CERTIFICATION

I, Daniel Urrea certify that:

1. I have reviewed this annual report on Form 10-KSB of Cyco.net, Inc.

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report.

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions  about the effectiveness
of the  disclosure  controls and  procedures  based on our  evaluation as of the
Evaluation Date;

5. The registrant's other certifying  officers and I have disclosed based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: April 11, 2003
By: /s/ Daniel Urrea
    -----------------------------
    Daniel Urrea
    Chief Financial Officer