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, 2003

                   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 of incorporation) (I.R.S. Employer
              Identification Number)
             400 Gold SW, Suite 1000
                 ALBUQUERQUE, NM                             87102
      (Address of principal executive offices)             (Zip code)

            Issuer's telephone number                    (505) 710-2190

      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
$54,264.

      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  $25.9 million on March
22, 2004.

      The number of shares of Common Stock  outstanding as of March 22, 2004 was
91,240,931.

                                       1

<PAGE>

                                     PART I


ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW

      Cyco.net,  Inc. is the successor  corporation to AVE, Inc. Cyco.net was an
e-commerce  business until July of 2003 when it sold the assets of its cigarette
e-tail  business.  This  decision  was made after  several  states  filed  civil
lawsuits  against the New Mexico  subsidiary  involved in the sale of cigarettes
over the internet.  The company's  management felt that although the company had
legal ground to stand on it would be much to costly to defend in a court of law.
The company  chose to pursue other  business  opportunities  and on November 19,
2003,  Cyco.net,  Inc.  purchased all of the  outstanding  common stock of Orion
Security Services, Inc., a Wisconsin corporation, in a stock for stock purchase.

CORE BUSINESS

      Cyco.net,   Inc.  through  its  wholly  owned  subsidiary  Orion  Security
Services,   Inc.  ("OSSI")  provides  secure  computer  network  and  management
solutions and video surveillance systems via satellite communication.  OSSI is a
development stage company.

      OSSI's operations are in Oakton, Virginia and was organized to deliver two
products;  a revolutionary  new network security and management  control system,
OSSI  ComSecure(C)  Controller  and an  innovative,  manned or unmanned,  mobile
video-voice-data  and alarm  transfer  surveillance  system,  OSSI  SatSecure(C)
Surveillance System.

OSSI COMSECURE(C) CONTROLLER

      The  ComSecure(C)   Controller  is  designed  to  give  a  global  network
enterprise  full control of all traffic,  devices and  subscribers  within an IP
network.  With  Internet  inspired  threats  on  the  increase,  government  and
commercial   enterprises  are  able  to  now  gain  full  control  of  their  IT
infrastructure,  maximizing network  performance and simultaneously  offering an
enhanced user  experience.  This  all-in-one  rack mount device  changes the way
network  security and management is  accomplished  by managing what goes on both
inside and  outside the  network,  by  eliminating  damaging  content  from ever
entering the network and by automating tasks for enhanced network performance.

      By  managing  and  inspecting  every  IP  packet,  through  all  7  layers
traversing  the  network,  ComSecure(C)  Controller  will never allow IP packets
containing unauthorized or malicious code to penetrate an enterprise.

      The ComSecure(C)  Controller breaks the network processing  bottleneck and
increases total performance by executing tasks previously performed by firewalls
and routers,  and by eliminating  the need for additional  control boxes such as
authentication servers, packet shapers,  monitoring devices, intrusion detection
and protection servers and access control systems.

      The Company is focused on two  markets,  consisting  of public and private
sectors. The Company is working to establish  relationships with key departments
and agencies within the U.S.  Government  where the  ComSecure(C)  Controller is
deemed of strategic value and with integrator partners that control the delivery
mechanisms to government and commercial clients.

      The  ComSecure(C)  Controller is a patent pending complete network control
device designed to give the administrator  full control of all traffic,  devices
and subscribers in an IP network.

OSSI SATSECURE(C) SURVEILLANCE SYSTEM

      OSSI has  introduced a  surveillance  technology  in a rugged  transceiver
board-level design that delivers  bi-directional video, audio,  alarm/sensor and
data transfer  between  virtually  any two  locations on earth with  exceptional
quality in limited bandwidth environments from 9.6 to 384 KBPS. The SatSecure(C)

                                       2

<PAGE>

Surveillance  System can use a variety of  communication  channels such as ISDN,
IP, PSTN (Public Switched Telephone Networks),  INMARSAT SatPhones (64 KBPS) and
GSM  phones  (9.6  KBPS)  to  transfer  and  remotely   control  video,   audio,
alarm/sensor and data between two units at different locations.

      The Company  believes  that the  versatile  nature of its  products  lends
itself to several markets,  including law enforcement,  aviation,  telemedicine,
shipping,  exploration,  public  transportation,   construction,  retail,  power
plants,  civilian and military  government and state and local "First Responder"
activities.   All  these  markets  have  a  requirement  for   surveillance  and
collaborative  communication  capability  with the added  back-up  communication
component of satellite transmission.

SOURCES OF SUPPLY

      Cyco.net expects to contract with third party manufacturers to produce the
ComSecure and SatSecure products.

INDUSTRY

      The Company will be entering the highly  competitive  industry of computer
network security with the ComSecure(C)  Network Controller.  Currently there are
several options for protecting a secure computer network.  Most are comprised of
a group  of  components  that  collectively  form a  barrier  between  networks,
commonly  referred  to as  Firewalls.  Firewalls,  which  are not  standardized,
usually  consist of several  layers of  applications  and hardware  that work to
ensure that no single point of vulnerability exists.  Firewalls often consist of
a bastion host,  Proxy servers,  packet  screening tools,  multiple  routers,  a
"demilitarized zone", Virus Detection and Intrusion Detection Devices. Currently
there are several large  corporations that provide these services to the market,
including Cisco Systems, Nortel Networks, Check Point Software, and IBM.

COMPETITION

      Our competitors  have  substantially  greater  resources that we do, and a
large market  presence.  These  companies  also have name and brand  recognition
which  often  implies  reliability  to the  customer.  Currently,  most  network
security platforms are made up of several different devices and software,  which
are often  manufactured by different  companies.  This translates into customers
having  compatibility  issues,  and or the  exclusion  of one or more  levels of
protection which will ultimately leave their network  vulnerable to attack.  The
ComSecure(C)  Controller breaks the network processing  bottleneck and increases
total  performance  by executing  tasks  previously  performed by firewalls  and
routers,  and by  eliminating  the need for  additional  control  boxes  such as
authentication servers, packet shapers,  monitoring devices, intrusion detection
and  protection  servers  and  access  control  systems.  This all in one system
results in a smaller  footprint,  increased  performance  and  capability  and a
significantly lower cost of ownership.

      The Company has not been able to identify any direct  competitors with the
SatSecure Viewer.  Many companies sell some of the individual parts that make up
the SatSecure,  such as satellite  phones,  and remote cameras,  but the closest
competition  is a company in Europe called the AVS-RIO.  The AVS-RIO system is a
remote surveillance  system that transmits its signal via cable TV systems;  the
system must be employed in an area with access to cable TV. The SatSecure system
uses satellites to communicate; the SatSecure system can be deployed anywhere in
the world that is covered by communication satellites.

GOVERNMENT REGULATION

The Company does not know of any government regulations concerning either of its
products.

EMPLOYEES

      Cyco.net,  Inc.  currently has three  full-time  employees and OSSI,  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
its name 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

                                       3

<PAGE>

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
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. 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.  In the years ended  December 31, 2003 and
2002, we had net losses of $4,902,363  and $325,593,  respectively.  In addition
the  Company  is  subject to legal  action.  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, 2003 and
2002 financial statements, which states that Cyco.net's ability to continue as a
going concern depends upon its ability to secure financing 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.   The  Company   purchased  a  wholly-owned
subsidiary,  OSSI,  and through its SatSecure  system and  ComSecure  controller
sales, hopes to attain profitable operations.

WE ARE SUBJECT TO A WORKING CAPITAL DEFICIT, WHICH MEANS THAT OUR CURRENT ASSETS
ON DECEMBER 31, 2003 WERE NOT SUFFICIENT TO SATISFY OUR CURRENT LIABILITIES

      We had a working capital  deficit of $774,237 at December 31, 2003,  which
means that our current  liabilities  exceeded our current assets on December 31,
2003 by $774,237. 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, 2003 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,

                                       4

<PAGE>

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
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:

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

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

      o    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

      o    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.

ITEM 2.  DESCRIPTION OF PROPERTY

      On April 1, 2004, the Company moved its executive  offices to 400 Gold SW,
Suite  1000,  Albuquerque,  NM 87102.  Cyco.net  entered  into a two year  lease
contract with a monthly basic lease payment of $1,400. Rent expense for the year
ended December 31, 2003 was $15,666.  On January 28, 2004, Cyco.net entered into
a thirty-nine month lease contract for the operations of OSSI at 8280 Greensboro
Dr, McLean VA 22102. The basic monthly lease payment is $5,590.

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 suit 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 and 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.  The State of  California  has made a
settlement  offerv of $25,000 and settlement  negotiations  are in process as of
the date of this report.

                                       5

<PAGE>

      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  sought   injunctive   relief
restraining  Cyco.net,  Inc.  from  continuing  to engage in  unlawful  conduct,
restitution to consumers and civil penalties of up to $2,000 per violation, plus
attorneys'  fees and costs.  Subsequent to December 31, 2003, the parties agreed
to settle for $10,000.

      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. This suit has been settled out of court for $2,000.

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

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

      In  the  remaining  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.

                                       6

<PAGE>

                                     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 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, 2002 - March 29, 2002              $0.0600           $0.0400
      April 1, 2002 - June 28, 2002                 $0.0500           $0.0300
      July 2, 2002 - September 30, 2002             $0.1200           $0.0050
      October 1, 2002 - December 31, 2002           $0.0300           $0.0100

      January 2, 2003 - March 28, 2003              $0.0500           $0.0400
      April 1, 2003 - June 30, 2003                 $0.0100           $0.0050
      July 1, 2003 - September 30, 2003             $0.0100           $0.0050
      October 1, 2003 - December 31, 2003           $0.4800           $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 22,  2004,  Cyco.net  believes  there were  approximately  554
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.

                                       7

<PAGE>

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 of its two products;
ComSecure(C) Controller and SatSecure(C) Surveillance System by:

           o    Partnering with major integrators.

           o    Pursuing  product  certification  and pilot  program  evaluation
                contracts.

           o    Continuing funding efforts.

RESULTS OF OPERATIONS

      Effective  July 1, 2003,  Cyco.net,  Inc.  sold its tobacco  operations to
American Indian CigCo,  LLC. In conjunction with this sale American Indian CigCo
agreed to purchase  2,000,000 shares of the Company's common stock. The purchase
price  aggregated  $3,000,000  in the form of 2 notes  payable as  follows:  (1)
payment  for the assets of the  business  in the form of a note in the amount of
$200,000  payable in 12 equal  monthly  installments  of $16,667  commencing  on
August 1, 2003 and (2) payment for the 2,000,000 common shares is payable in the
form of a $2,800,000  note with  interest at 7% per annum,  on an interest  only
basis.  The interest  payments are due annually  commencing on July 31, 2004 and
the principal  balance is due on July 31, 2008.  Accrued interest  receivable of
$98,000 has not been  reflected in the  accompanying  financial  statements,  as
recognition will occur as proceeds are received.

      Because  the sale of the  business  and the common  shares  were made to a
thinly  capitalized  entity and significant  uncertainties  exist related to the
collectibility  of the amounts due, the gain from the sale of the business  will
be deferred  until such time as the proceeds are collected or until such time as
the cash flows from the operating activities of the business sold are sufficient
to fund the debt  service.  The deferred  portion of the gain on the sale of the
business  aggregating  $122,641 at December  31, 2003 is  reflected  as deferred
revenue.

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

      On November 19, 2003,  Cyco.net,  Inc.  purchased Orion Security  Systems,
Inc., a corporation in the  development  stage,  that provides  secure  computer
network and management  solutions,  and video surveillance systems via satellite
communication.  The business  combination  has been accounted for as a purchase.
The  results  of  operations  of OSSI have  been  included  in the  accompanying
financial  statements since the effective date of the  acquisition.  In exchange
for all of the issued and outstanding  common shares of OSSI, the Company issued
50,000,000  shares of its common  stock  valued at  $4,500,000.  The shares were
valued at $.09 per share,  the fair market  value at November  19,  2003.  As of
December 31, 2003, the Company  recorded a loss on asset  impairment  related to
this investment, in the amount of $4,500,000, which was charged to operations.

                                       8

<PAGE>

YEAR ENDED DECEMBER 31, 2003 COMPARED TO THE YEAR ENDED DECEMBER 31, 2002

      Revenues  for the year  ended  December  31,  2003  were  $54,264  and was
attributable to the sale of the Company's SatSecure  Surveillance System, one of
OSSI's new products. OSSI recognizes revenue upon shipment of the product.

      Cost of goods sold for the year ended  December  31, 2003 were $12,759 and
was  attributable  to sales of one of the  Company's  new products the SatSecure
Servaliance System. This resulted in a gross profit of $41,505.

      General and  administrative  expenses for the year ended December 31, 2003
were $749,667, which primarily consisted of $10,060 in advertising,  $456,588 in
payroll expenses,  $197,277 in professional  fees,  $15,666 in rent,  $11,012 in
amortization  and  depreciation,  $12,500  for website  maintenance,  $12,232 in
travel expense and $34,332 in miscellaneous other expenses.

      General and  administrative  expenses for the year ended December 31, 2002
were $751,340.  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.

      During the year ended  December 31, 2003,  the Company  recorded a loss on
asset  impairment  related to the purchase of OSSI, as discussed  above,  in the
amount of $4,500,000, which was charged to operations.

      Cyco.net  had an  operating  loss of  $5,208,162  for the 12 months  ended
December  31, 2003  compared to $751,340 in the  comparable  period in the prior
year. This increase is primarily  attributable  to the loss on asset  impairment
related to the purchase of OSSI.

      The  Company  recognized  $53,897 of the gain on  discontinued  operations
during the year ended December 31, 2003. As discussed  above, the balance of the
gain of $122,641  will be  recognized  as the payments on the  $200,000  current
receivable from American Indian Cigco have been received.

      Net income from  discontinued  operations  for the year ended December 31,
2003 and 2002 were $346,405 and $572,204,  respectively.  This relates primarily
to Cyco.net's former cigarette business which was sold in July 2003.

      Cyco.net  had a  net  loss  for  the  year  ended  December  31,  2003  of
$4,902,363,  compared to a net loss of  $325,593  for the same period last year.
This  increase  in net  loss is  primarily  attributable  to the  loss of  asset
impairment described above.

FINANCIAL RESOURCES AND LIQUIDITY

      For the year ended December 31, 2003, cash used in operations was $39,238,
cash provided by investing activities was $1,057, and cash provided by financing
activities was $41,845. This resulted in a net increase in cash of $3,664 in the
year ended December 31, 2003. Cash used in operations consisted of a net loss of
$4,902,363,  gain of sale of discontinued  operations of $53,897 and an increase
in trade  receivables of $1,840,  which was partially offset by amortization and
depreciation  expenses of $11,283,  a loss on asset  impairment  of  $4,500,000,
common stock issued for services of $10,000, a decrease in inventory of $22,576,
an increase in accounts payable and accrued expenses of $42,623, and an increase
in related  party  payables and accrued  expenses of $332,380.  Cash provided by
investing  activities  consisted of cash received in the OSSI acquisition.  Cash
used in financing activities consisted of proceeds from the sale of common stock
of $5,448 and proceeds  from American  Indian Cigco  receivable of $53,897 which
was offset by payments  on notes  payable to related  parties of $17,500.  As of
December 31, 2003, Cyco.net had cash-on-hand of $9,299.

      Cyco.net's  primary need for cash during the next 12 months are to satisfy
current  liabilities  of  $950,420,  as well as to  support  Cyco.net's  current
operations. Cyco.net's current operations are expected to be $170,000 per month,
including payroll,  rent,  utilities and litigation costs.  Cyco.net in the next
twelve  months  expects  to  receive  the  balance of  $139,752  of the  current
receivable  from ACC and  hopes to  attain  profitable  operations  through  its
SatSecure System and ComSecure Controller sales. However,  Cyco.net will need to

                                       9

<PAGE>

raise  additional  capital to finance  growth.  Such capital is expected to come
from the sale of securities, including the sale of common stock under the Equity
Line of Credit. Other than the Equity Line of Credit, Cyco.net does not have any
commitments for financing.

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

      GOING CONCERN.  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,  2003 and 2002,  the
Company incurred net (losses) of ($4,902,363) and ($325,593),  respectively.  At
December 31, 2003, the Company had a working capital (deficit) of $(774,237) and
stockholders'  (deficit)  of  $(761,390).  In addition the Company is subject to
legal action.

      The Company's  ability to continue as a going  concern is contingent  upon
its ability to secure financing 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 purchased a wholly-owned subsidiary, OSSI, and through its
Sat-secure systems sales, hopes to attain profitable operations.

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

RECENT SALES OF UNREGISTERED SECURITIES

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

      In January and  February  of 2004,  Cyco.net  issued a total of  5,525,000
shares of common stock for cash and services.  Common stock  totaling  4,550,000
shares were issued to various investors for cash aggregating $467,500 and common
stock totaling  975,000 shares valued at $371,500 were issued to various service
providers in lieu of cash for services.

      On November 19, 2003,  Cyco.net,  Inc.  purchased  all of the  outstanding
common stock of Orion Security Services, Inc. ("OSSI"), a Wisconsin corporation.
In the stock for stock  purchase,  Cyco.net,  Inc. issued  50,000,000  shares of
common stock in exchange for all of the issued and  outstanding  common stock of
Orion Security Services, Inc.

      Cyco.net  acquired the stock of OSSI from the following people in exchange
for the number of shares of  Cyco.net's  common stock set forth  opposite  their
names:

Name:                                    No. of Shares:
----                                     -------------
Robert V. Demson                         26,000,000
Francisco Urrea, Jr.                     20,000,000
Paul B. Goldberg                         1,800,000
Harry A. Montefusco                      1,800,000
John F. Morrison                         400,000

                                       10

<PAGE>

      In October  2003,  Cyco.net  issued  1,000,000  shares of common  stock to
Francisco Urrea, Jr., a director, for consulting fees.

      Effective  July 1,  2003,  Cyco.net  agreed to sell its  Internet  tobacco
products  business  to  American  CigCo,  LLC.  In  conjunction  with this sale,
American CigCo agreed to purchase  2,000,000  shares of Cyco.net's  common stock
for $2,800,000  payable in the form of a promissory note bearing  interest at 7%
per year.  Interest  payments are due annually  commencing July 31, 2004 and the
principal is due July 31, 2008.

      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.

      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 May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
150, "Accounting for Certain Financial  Instruments with Characteristics of both
Liabilities  and Equity." SFAS 150 changes the  accounting  guidance for certain
financial  instruments  that,  under previous  guidance,  could be classified as
equity or "mezzanine" equity by now requiring those instruments to be classified
as liabilities (or assets in some circumstances) on the balance sheet.  Further,
SFAS 150  requires  disclosure  regarding  the  terms of those  instruments  and
settlement  alternatives.  SFAS 150 is  generally  effective  for all  financial
instruments  entered  into or  modified  after May 31,  2003,  and is  otherwise
effective at the beginning of the first interim period  beginning after June 15,
2003.  The adoption of SFAS 150 in the first quarter of fiscal 2004 did not have
a material impact on the Company's financial position,  results of operations or
cash flows.

      In April 2003,  the FASB issued SFAS No. 149,  "Amendment of Statement 133
on Derivative  Instruments and Hedging Activities".  SFAS 149 amends SFAS 133 to
clarify  the   definition  of  a  derivative   and   incorporate   many  of  the
implementation  issues  cleared  as a result of the  Derivatives  Implementation
Group  process.  This  statement  is  effective  for  contracts  entered into or
modified  after June 30, 2003,  and should be applied  prospectively  after that
date. The adoption of SFAS 149 is not expected to have a material  effect on the
financial statements.

      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

                                       11

<PAGE>

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.

CRITICAL ACCOUNTING POLICIES

      Cyco's  consolidated  financial  statements and related  public  financial
information  are based on the  application  of accounting  principles  generally
accepted in the United  States  ("GAAP").  GAAP  requires the use of  estimates,
assumptions,  judgments and subjective  interpretations of accounting principles
that have an impact on the assets,  liabilities,  revenue  and  expense  amounts
reported.  These estimates can also affect supplemental information contained in
our external disclosures including information regarding contingencies, risk and
financial condition.  We believe our use of estimates and underlying  accounting
assumptions adhere to GAAP and are consistently and conservatively  applied.  We
base our estimates on  historical  experience  and on various other  assumptions
that we believe to be reasonable  under the  circumstances.  Actual  results may
differ   materially  from  these   estimates  under  different   assumptions  or
conditions.  We  continue  to  monitor  significant  estimates  made  during the
preparation of our financial statements.

      Our  significant  accounting  policies  are  summarized  in  Note 1 of our
consolidated  financial  statements.  While  all  these  significant  accounting
policies impact its financial  condition and results of operations,  the Company
views certain of these policies as critical.  Policies determined to be critical
are those  policies  that  have the most  significant  impact  on the  Company's
consolidated financial statements and require management to use a greater degree
of judgment and estimates.  Actual results may differ from those estimates.  Our
management  believes that given current facts and circumstances,  it is unlikely
that applying any other  reasonable  judgments or estimate  methodologies  would
cause a material  effect on our  consolidated  results of operations,  financial
position or liquidity for the periods presented in this report.

      Our critical  accounting policies are organization,  revenue  recognition,
and deferred offering costs.

      ORGANIZATION.  Cyco.Net, Inc., a Nevada corporation,  operates through its
wholly owned  subsidiaries,  Cyco.net Inc. and Orion Security Systems,  Inc. The
Company's  primary line of business  was the sale of  cigarettes  through  three
websites to customers in the United States of America.  Effective  July 1, 2003,
the Company sold its internet tobacco products division.

      On November 19, 2003, the Company purchased all of the outstanding  common
stock of Orion Security Systems,  Inc. ("OSSI"),  a Wisconsin  corporation whose
primary  line of  business  is the  sale  of its  ComSecure  Controller  and its
SatSecure  Surveillance  System,  which is  designed  to provide  bi-directional
video,  audio,  data and alarm  transfer  between a wide  variety of  locations,
including but not limited to land based positions,  airborn  aircraft,  ships at
sea, and a command and control.

      REVENUE  RECOGNITION.  Prior to July 1, 2003, the Company's sole source of
revenue was the sale of cigarettes through its 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 were FOB  shipping  point and the  Company
recorded revenue from cigarette sales when the product  shipped.  Effective July
1, 2003, the Company sold its internet  tobacco products  division,  accordingly
revenues and costs associated with the internet  tobacco  products  division are
presented as discontinued operations.

      Effective  November 19, 2003,  the Company's sole source of revenue is the
sale  of  the  ComSecure(C)  Controller  and  SatSecure(C)  Surveillance  System
discussed  above.  The  terms of sale are FOB  shipping  point  and the  Company
records revenue when the product is shipped.

                                       12
<PAGE>

      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.

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

ITEM 8A. 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.

                                       13

<PAGE>

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS

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

          NAME                     AGE          POSITION
          -----------------        -----        -----------------------------
          Richard Urrea            39           Chief Executive Officer and
                                                President
          Daniel Urrea             32           Chief Financial Officer
          Francisco                74           Director
          Urrea, Jr.
          Robert V. Demson         50           Chief Operating Officer of OSSI


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

      RICHARD URREA has been President and Chief Executive  Officer of Cyco.net,
Inc.  since  inception  in  January  1999.  He  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. has served on the Board of  Directors  of Cyco.net,
Inc.  since  inception  in January  1999.  Mr.  Urrea 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  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  Chief  Financial  Officer  with  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.

                                       14

<PAGE>

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.

      ROBERT V. DEMSON has been President and Chief Operating  Officer with OSSI
since 2002. From 2000 to 2002, he worked for Baltimore  Technologies as Director
of  Federal  Sales.  He was  responsible  for the  Sales  and  Marketing  of the
company's  access  control/privilege  management,  PKI tool kit  suite,  digital
certificate  and  digital  signature   products  and  services  to  the  Federal
Government and the integrators controlling major Information Assurance programs.
From 1996 to 2000, Mr. Demson worked for Datacard Group as Vice President of the
Government  Solutions  Group.  He directed  the  federal,  state and  provincial
government  sales  and  marketing  team  for the US and  Canada  delivering  the
company's  critical secure identity  network  systems and  technologies  such as
secure drivers license systems, electronic benefits transaction solutions, smart
cards,  biometrics and digital imaging to government clients.  Offerings include
the world's  premier  family of  identity  software  and the  largest  family of
plastic card issuance  printers.  Applications  included employee and student ID
programs,  as well as national  ID,  healthcare,  driver's  license and passport
programs. He successfully executed the North American strategic government sales
plan  leading to  government  contracts  for systems,  services and  maintenance
exceeding $100,000,000 over five years.

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.

COMMITTEES

      Cyco.net's Board of Directors serves as the audit committee.  The Board of
Directors  does not have a "financial  expert" due to the lack of capital needed
to attract a qualified expert.

CODE OF ETHICS

      On April 8, 2004, the Board of Directors of the Company  adopted a written
Code of Ethics  designed  to deter  wrongdoing  and  promote  honest and ethical
conduct,  full,  fair and  accurate  disclosure,  compliance  with laws,  prompt
internal reporting and  accountability to adherence to the Code of Ethics.  This
Code of Ethics has been filed with the Securities and Exchange  Commission as an
Exhibit to this Form 10-KSB.

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,  2003,  2002  and 2001 to  Cyco.net's  three  highest  paid
executive officers. 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.

                                       15

<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,
Chief Executive      2003     $42,100     $75,000(4)     --                --     --       --         --
Officer
And President        2002    $110,750           --       --        $30,000(1)     --       --         --
                     2001     $75,600           --       --        $35,000(2)     --       --         --

Daniel Urrea,        2003     $30,333     $75,000(4)     --                --     --       --         --
Chief Financial      2002     $57,822           --       --        $30,000(1)     --       --         --
Officer
And                  2001     $40,000           --       --        $35,000(2)     --       --         --
Secretary/Treasurer

Robert V Demson,     2003    $156,000(3)        --       --                --     --       --         --
Chief Operating      2002    $ 54,000(3)        --       --                --     --       --         --
Officer OSSI

----------

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

      (3)    During the years ended December 31, 2003 and 2002,  Robert  Demson's  salary was accrued.  Mr. Demson's
salary is currently $225,000 per year.

      (4)     A bonus of $75,000  each was accrued for Richard  Urrea and Daniel Urrea for reduced  salaries  paid in
the year ended December 31, 2003.
</TABLE>

EMPLOYMENT AGREEMENTS

      Effective  January  1, 2004,  Cyco.net  entered  into a 5-year  employment
agreement with Richard  Urrea.  Mr. Urrea is employed as the President and Chief
Executive Officer of Cyco.net.  Mr. Urrea's annual salary is $120,000. Mr. Urrea
is also  entitled to  discretionary  bonuses to be  determined  by the Company's
board of directors and the use of a Company car.

      Effective  January  1, 2004,  Cyco.net  entered  into a 5-year  employment
agreement  with Daniel  Urrea.  Mr.  Urrea is  employed  as the Chief  Financial
Officer of Cyco.net.  Mr.  Urrea's  annual salary is $90,000.  Mr. Urrea is also
entitled to  discretionary  bonuses to be determined  by the Company's  board of
directors and the use of a Company car.

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, 2003.

                                       16

<PAGE>

                                                                     NUMBER
                                      NUMBER                     OF SECURITIES
                                        OF                         REMAINING
                                    SECURITIES                     AVAILABLE
                                      TO BE                       FOR FUTURE
                                      ISSUED   WEIGHTED-AVERAGE    ISSUANCE
                                       UPON        EXERCISE      UNDER EQUITY
                                     EXERCISE        PRICE       COMPENSATION
                                        OF            OF             PLANS
                                   OUTSTANDING    OUTSTANDING     (EXCLUDING
                                     OPTIONS,      OPTIONS,       SECURITIES
                                     WARRANTS    WARRANTS AND      REFLECTED
                                    AND RIGHTS      RIGHTS      IN COLUMN (a))
                                    ----------   ------------   --------------
                                       (a)            (b)             (c)
                                    ----------   ------------   --------------

Equity compensation plans
approved by security holders          1,350,000          $0.08        2,650,000

Equity compensation plans not
approved by security holders                  0             $0                0

TOTAL                                 1,350,000          $0.08        2,650,000


No options have been granted to the named officers and directors.

                                       17

<PAGE>

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, 2003,  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.

                                                         COMMON STOCK
                                                      BENEFICIALLY OWNED
                                             -----------------------------------
NAME/ADDRESS                                        NUMBER          PERCENT(1)
------------------------------------------   ------------------ ----------------
Robert V Demson                              26,000,000                30.3%
11702 Saddle Crescent Circle
Oakton, VA 22124

Mathew Urrea - Tres Santos Limited
 Partnership(2)                             10,000,000                11.7%
7850 Jefferson NE Suite 140
Albuquerque, NM 87109

Mathew Urrea - Urrea Family Limited
 Partnership(2)                              8,000,000                  9.3%
7850 Jefferson NE Suite 140
Albuquerque, NM 87109

Daniel Urrea                                 5,046,000                  5.9%
3009 Charleston NE
Albuquerque, NM 87110

Richard Urrea                                4,721,000                  5.5%
600 Alcalde SW #4D
Albuquerque, NM 87104

Francisco Urrea Jr.                          3,709,000                  4.3%
3009 Charleston NE
Albuquerque, NM 87110


All Officers and Directors                   39,476,000                46.1%

----------
      (1)  Applicable  percentage of ownership is based on 85,715,913  shares of
           common  stock  outstanding  as of December 31,  2003,  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,
           2003 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)  Mathew Urrea is the Trustee for and has  beneficial  ownership of the
           common stock held by the Urrea Family through these two partnerships.
           Mathew  Urrea is a brother to Richard  Urrea and Daniel Urrea and the
           son of Francisco Urrea, Jr.

                                       18

<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      During the years ended December 31, 2003 and 2002 the Company paid $12,500
and  $26,500,  respectively,  in  consulting  fees to Brent  Wolford for website
development  and  maintenance.  In October 2003,  the Company  issued  1,000,000
shares of restricted  common stock to Francisco Urrea,  Jr., a Company director,
for consulting fees.

      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, 2003 the Company has recorded  notes  payable and accrued
interest  payable to affiliates in the  aggregate  amount of $20,443,  including
interest  of $6,673.  In  addition,  the  Company  owes an  officer/shareholder,
$15,368 for  reimbursement of operating  expenses paid on behalf of the Company,
plus $210,000 of accrued and unpaid  compensation,  which is included in general
and  administrative  expenses ($156,000 and $54,000 for the years ended December
31, 2003 and 2002, respectively).

      At December  31,  2003,  accrued  expenses - related  party  includes  the
$210,000 of unpaid  compensation  described above, plus an aggregate of $300,000
of unpaid bonuses to employees and the Company's website  designer,  all of whom
are also shareholders.

      On November 19, 2003,  Cyco.net,  Inc.  purchased  all of the  outstanding
common stock of Orion Security Services, Inc. ("OSSI"), a Wisconsin corporation.
In the stock for stock  purchase,  Cyco.net,  Inc. issued  50,000,000  shares of
common stock in exchange for all of the issued and  outstanding  common stock of
Orion Security Services, Inc.

      Cyco.net  acquired the stock of OSSI from the following people in exchange
for the number of shares of  Cyco.net's  common stock set forth  opposite  their
names:

Name:                                    No. of Shares:
----                                     -------------
Robert V. Demson                         26,000,000
Francisco Urrea, Jr.                     20,000,000
Paul B. Goldberg                         1,800,000
Harry A. Montefusco                      1,800,000
John F. Morrison                         400,000

      In August 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>

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      Incorporated by reference to Exhibit
               dated July 9, 1999                             2.2 to 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     Incorporated by reference to Exhibit
               Ave, Inc. dated 5/7/90                         2.7 to 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   Incorporated by reference to Exhibit
               Onyx Company dated January 23, 1987            2.8 to 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         Incorporated by reference to Exhibit
               DeLuxe dated 1/23/87                           2.9 to 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            Incorporated by reference to Exhibit
               Incorporation dated January 23, 1987           2.10 to the Company's Annual Report
                                                              on Form 10-KSB as filed with the
                                                              Securities and Exchange Commission on
                                                              April 16, 2001

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

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

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

3.8            Certificate of Amendment of Cyco.net, Inc.     Incorporated by reference to Exhibit
                                                              21.3 to the Company's Annual Report
                                                              on Form 10-KSB as filed with the
                                                              Securities and Exchange Commission on
                                                              April 16, 2001
</TABLE>
                                               20

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.    DESCRIPTION                                    LOCATION
-----------    -----------                                    --------
<S>            <C>                                            <C>
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       Incorporated by reference to Exhibit
               Articles of Incorporation of AVE, Inc.         3.10 to 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        Incorporated by reference to Exhibit
               Incorporation of Cyco.net, Inc. filed with     3.11 to Cyco.net's Registration
               Nevada Secretary of State on August 9, 2001    Statement on Form SB-2 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    Incorporated by reference to Exhibit
               August 9, 1999                                 10.1 to 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         Incorporated by reference to Exhibit
               Francisco Urrea, Jr.                           99 to the Company's Annual Report on
                                                              Form 10-KSB as filed with the
                                                              Securities and Exchange Commission on
                                                              April 16, 2001

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

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

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

10.7           Equity Line of Credit Agreement dated as of    Incorporated by reference to Exhibit
               August 2001 between Cyco.net and Cornell       10.7 to the Company's 10-QSB for the
               Capital Partners, L.P.                         quarter ended September 30, 2001
                                                              filed with the Securities and
                                                              Exchange Commission on November 12,
                                                              2001
</TABLE>
                                               21

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.    DESCRIPTION                                    LOCATION
-----------    -----------                                    --------
<S>            <C>                                            <C>
10.8           Warrant dated as of August 2001 given by       Incorporated by reference to Exhibit
               Cyco.net to Cornell Capital Partners, L.P.     10.7 to 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     Incorporated by reference to Exhibit
               2001 between Cyco.net and Cornell Capital      10.7 to the Company's 10-QSB for the
               Partners, L.P.                                 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       Incorporated by reference to Exhibit
               among Cyco.net, Cornell Capital Partners,      10.7 to the Company's 10-QSB for the
               L.P., Butler Gonzalez LLP and First Union      quarter ended September 30, 2001
               National Bank                                  filed with the Securities and
                                                              Exchange Commission on November 12,
                                                              2001

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

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

10.13          Five Year Capital Note dated June 13, 2003,    Incorporated by reference to Exhibit
               among Cyco.net, Inc., American Indian Cigco,   10.13 to the Company's Quarterly
               LLC                                            Report on Form 10QSB as filed with
               and CigCo-Epic Venture.                        the Securities and Exchange
                                                              Commission on August 19,2003


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

10.15          Standby Equity Distribution Agreement dated    Provided herewith
               as of March 2004 between Cyco.net and
               Cornell Capital Partners, LP

10.16          Registration Rights Agreement dated as of      Provided herewith
               March 2004 between Cyco.net and Cornell
               Capital Partners, LP

10.17          Placement Agent Agreement dated as of March    Provided herewith
               2004 between Cyco.net and Cornell Capital
               Partners, LP

10.18          Employment Agreement dated as of January 1,    Provided herewith
               2004 between Cyco.net and Richard Urrea

10.19          Employment Agreement dated as of January 1,    Provided herewith
               2004 between Cyco.net and Daniel Urrea

14.1           Code of Ethics                                 Provided herewith
</TABLE>
                                       22

<PAGE>

EXHIBIT NO.    DESCRIPTION                                    LOCATION
-----------    -----------                                    --------
31.1           Certification re: Section 302 (CEO)            Provided herewith

31.2           Certification re: Section 302 (CFO)            Provided herewith

32.2           Certification re: Section 906 (CEO)            Provided herewith

32.2           Certification re: Section 906 (CFO)            Provided herewith


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

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

      AUDIT FEES. The aggregate fees billed for professional  services  rendered
was  $15,575  and  $12,170  for the  audit  of the  Company's  annual  financial
statements for the fiscal years ended December 31, 2003 and 2002,  respectively,
and the reviews of the  financial  statements  included in the  Company's  Forms
10-QSB for those fiscal years.

      AUDIT-RELATED  FEES.  The  aggregate  fees  billed in each of the last two
fiscal years for assurance and related services by the principal accountant that
are  reasonably  related  to the  performance  of the  audit  or  review  of the
Company's financial statements and not reported under the caption "Audit Fee."

      TAX FEES.  No fees were  billed in each of the last two  fiscal  years for
professional  services rendered by the principal  accountant for tax compliance,
tax advice and tax planning services.

      ALL OTHER FEES.  Other than the services  described  above,  the aggregate
fees billed for services  rendered by the  principal  accountant  was $0 and $0,
respectively,  for the fiscal years ended December 31, 2003 and 2002. These fees
related to the review of the Company's Registration Statement.

      AUDIT COMMITTEE  POLICIES AND PROCEDURES.  The Board of Directors performs
the duties of an audit  committee.  The Board of Directors must  pre-approve all
auditing services and permitted non-audit services (including the fees and terms
thereof) to be performed for Cyco.net by its  independent  auditors,  subject to
the  de  minimus   exceptions  for  non-audit   services  described  in  Section
10A(i)(1)(B) of the Securities Exchange Act of 1934, which should be nonetheless
be approved by the Board of Directors prior to the completion of the audit. Each
year the  independent  auditor's  retention to audit our  financial  statements,
including the associated fee, is approved by the committee  before the filing of
the previous year's annual report on Form 10-KSB. At the beginning of the fiscal
year, the Board of Directors will evaluate other known potential  engagements of
the  independent  auditor,  including the scope of work proposed to be performed
and the proposed fees,  and approve or reject each service,  taking into account
whether the  services  are  permissible  under  applicable  law and the possible
impact of each non-audit service on the independent auditor's  independence from
management.  At each such  subsequent  meeting,  the auditor and  management may
present  subsequent  services for approval.  Typically,  these would be services
such as due diligence for an acquisition,  that would not have been known at the
beginning of the year.

      Since May 6, 2003,  the  effective  date of the  Securities  and  Exchange
Commission  rules stating that an auditor is not  independent of an audit client
if the services it provides to the client are not appropriately  approved,  each
new  engagement  of Stark  Winter  Schenkein & Co.,  LLP,  has been  approved in
advance by the Board of Directors, and none of those engagements made use of the
de minimus  exception to the pre-approval  contained in Section  10A(i)(1)(B) of
the Securities Exchange Act of 1934.

                                       23

<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 12, 2004                    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 12, 2004                    By:  /s/ RICHARD URREA
                                               -----------------
                                               Richard Urrea
                                               President and Chief Executive
                                               Officer


Date:   April 12, 2004                    By:  /s/ DANIEL URREA
                                               ----------------
                                               Daniel Urrea
                                               Chief Financial Officer


Date:   April 12, 2004                    By:  /s/ FRANCISCO URREA, JR.
                                               ------------------------
                                               Francisco Urrea, Jr.
                                               Director

                                       24

<PAGE>

                                 Cyco.Net, Inc.
                                Table of Contents


                                                                            Page
                                                                            ----

Report of Independent Auditors                                                 1

Consolidated Balance Sheet                                                     2

Consolidated Statements of Operations                                          3

Consolidated Statements of Changes in Stockholders' (Deficit)                  4

Consolidated Statements of Cash Flows                                          5

Notes to Consolidated Financial Statements                                  6-21

<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, 2003,  and the related  consolidated  statements of  operations,
stockholders' (deficit), and cash flows for each of the two years ended December
31, 2003.  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, 2003, and the results of its operations,  and its cash flows for each of the
two years ended  December 31, 2003, 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 23, 2004


<PAGE>

                                 CYCO.NET, INC.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2003

                                     ASSETS

CURRENT ASSETS
    Cash                                                         $     9,299
    Receivables - trade                                               27,132
    Receivable - ACC                                                 139,752
                                                                 ---------------
      Total current assets                                           176,183
                                                                 ---------------
PROPERTY AND EQUIPMENT, net of accumulated
    depreciation of $4,392                                            10,942
                                                                 ---------------
OTHER ASSETS
  Deposit                                                              1,905
                                                                 ---------------
                                                                 $   189,030
                                                                 ===============


                     LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES
   Accounts payable and accrued expenses                         $   281,968
   Accounts payable - related party                                   15,368
   Accrued expenses - related party                                  510,000
   Notes and interest payable - related party                         20,443
   Deferred gain                                                     122,641
                                                                 ---------------
      Total current liabilities                                      950,420
                                                                 ---------------
STOCKHOLDERS' (DEFICIT)
   Common stock, $0.001 par value, 100,000,000 shares
      authorized, 85,715,931 shares issued and outstanding            85,716
   Additional paid in capital                                      7,697,969
   Stock subscription receivable                                  (2,800,000)
   Accumulated (deficit)                                          (5,745,075)
                                                                 ---------------
                                                                    (761,390)
                                                                 ---------------

                                                                 $   189,030
                                                                 ===============


        See accompanying notes to the consolidated financial statements.

                                       2
<PAGE>

                                   CYCO.NET, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS


                                                       YEAR ENDED DECEMBER 31,
                                                      2003           2002
                                                 --------------  ------------

REVENUES                                          $     54,264   $         -
                                                 --------------  ------------
COSTS OF GOODS SOLD                                     12,759             -
                                                 --------------  ------------
GROSS PROFIT                                            41,505             -
                                                 --------------  ------------
OTHER COSTS AND EXPENSES
   General and administrative                          749,667       751,340
   Loss on asset impairment                          4,500,000             -
                                                 --------------  ------------
                                                     5,249,667       751,340
                                                 --------------  ------------
OPERATING INCOME (LOSS)                             (5,208,162)     (751,340)
                                                 --------------  ------------
OTHER INCOME (EXPENSE)
   Interest income                                       5,100             -
  Interest expense                                      (2,603)       (1,457)
  Gain on sale of assets of discontinued
    operations                                          53,897             -
                                                 --------------  ------------
                                                        56,394        (1,457)
                                                 --------------  ------------
(LOSS) BEFORE INCOME TAXES (BENEFIT)                (5,151,768)     (752,797)

INCOME TAXES (BENEFIT)                                  97,000       145,000
                                                 --------------  ------------
(LOSS) BEFORE DISCONTINUED OPERATIONS               (5,248,768)     (897,797)

DISCONTINUED OPERATIONS
   Net income of discontinued operations,
   net of income taxes (benefit) of $97,000
   and $145,000, respectively                          346,405      572,204
                                                 --------------  ------------

NET (LOSS)                                        $ (4,902,363)  $ (325,593)
                                                 ==============  ============

WEIGHTED AVERAGE SHARES OUTSTANDING -
        BASIC AND DILUTED                           39,499,292    28,592,309
                                                 ==============  ============

NET (LOSS) PER COMMON SHARE
   (Loss) from operations                              $ (0.13)      $ (0.03)
   Income from discontinued operations                    0.01          0.02
                                                 --------------  ------------
                                                       $ (0.12)      $ (0.01)
                                                 ==============  ============



        See accompanying notes to the consolidated financial statements.

                                       3

<PAGE>


<TABLE>
<CAPTION>

                                                           CYCO.NET, INC.
                                          CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)



                                                                         Common Stock                  Additional
                                                                  -------------------------------        Paid in
                                                                    Shares             Amount            Capital
                                                                  ----------------  -------------   ---------------
<S>                                                               <C>               <C>             <C>
Balance at December 31, 2001                                           26,496,419       $ 26,496         $ 489,109

  Shares issued for services at $.03 per share                          5,000,000          5,000           145,000

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

  Net (loss) for the year                                                       -              -                 -
                                                                  ----------------  -------------   ---------------

Balance at December 31, 2002                                           31,496,419         31,496           668,309

  Shares issued  at $.005 per share, pursuant
      to Equity Line of Credit draw                                     1,219,512          1,220             4,228

  Shares issued for stock subscription at $1.40 per share               2,000,000          2,000         2,798,000

  Shares issued for services at $.01 per share                          1,000,000          1,000             9,000

  Shares issued at OSSI purchase at $.09 per share                     50,000,000         50,000         4,218,432

  Purchase of OSSI                                                              -              -                 -

  Net (loss) for the year                                                       -              -                 -
                                                                  ----------------  -------------   ---------------

Balance December 31, 2003                                              85,715,931       $ 85,716       $ 7,697,969
                                                                  ================  =============   ===============




                                  See accompanying notes to the consolidated financial statements.

                                                                  4
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                           CYCO.NET, INC.
                                          CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)



                                                                           Stock
                                                                       Subscription         Accumulated
                                                                        Receivable           (Deficit)         Total
                                                                   ------------------   ----------------  ----------------
<S>                                                                <C>                  <C>               <C>
Balance at December 31, 2001                                                     $ -         $ (517,119)         $ (1,514)

  Shares issued for services at $.03 per share                                     -                  -           150,000

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

  Net (loss) for the year                                                          -           (325,593)         (325,593)
                                                                   ------------------   ----------------  ----------------
Balance at December 31, 2002                                                       -           (842,712)         (142,907)

  Shares issued  at $.005 per share, pursuant
      to Equity Line of Credit draw                                                -                  -             5,448

  Shares issued for stock subscription at $1.40 per share                 (2,800,000)                 -                 -

  Shares issued for services at $.01 per share                                     -                  -            10,000

  Shares issued at OSSI purchase at $.09 per share                                 -                  -         4,268,432

  Purchase of OSSI                                                                 -                  -                 -

  Net (loss) for the year                                                          -         (4,902,363)       (4,902,363)
                                                                   ------------------   ----------------  ----------------

Balance December 31, 2003                                               $ (2,800,000)      $ (5,745,075)       $ (761,390)
                                                                   ==================   ================  ================




                                  See accompanying notes to the consolidated financial statements.

                                                                  4A
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                             CYCO.NET, INC.
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                YEAR ENDED DECEMBER 31,
                                                                                            2003                    2002
                                                                                         ----------------   --------------
<S>                                                                                       <C>               <C>
OPERATING ACTIVITIES
       Net (loss)                                                                         $   (4,902,363)   $    (325,593)
       Adjustments to reconcile net (loss) to net cash
          provided by (used in) operating activities:
             Amortization                                                                         10,000           25,542
             Depreciation                                                                          1,283            1,757
             Stock compensation                                                                        -          184,200
             Loss on asset impairment                                                          4,500,000                -
             Gain on sale of assets of discontinued operations                                   (53,897)
             Common stock issued for services                                                     10,000                -
             Conversion of amounts due from related parties into compensation                          -           24,706
             Write-off of deferred offering costs                                                      -          107,689
       Changes in assets and liabilities:
            (Increase) decrease in receivables - trade                                            (1,840)           6,705
            (Increase) decrease in inventory                                                      22,576          (15,382)
            Increase in accounts payable and accrued expenses                                     42,623           35,230
            Increase in accounts and notes payable to related party                               15,980                -
            Increase in accrued expenses - related party                                         316,400                -
                                                                                         ----------------   --------------
                    Net cash provided by (used in) operating activities                          (39,238)          44,854
                                                                                         ----------------   --------------
INVESTING ACTIVITIES
       (Purchase) disposal of property and equipment                                                   -           (3,330)
       Cash received in OSSI acquisition                                                           1,057                -
       (Purchase) disposal of intangible assets                                                        -          (14,000)
                                                                                         ----------------   --------------
                   Net cash (used in) investing activities                                         1,057          (17,330)
                                                                                         ----------------   --------------

FINANCING ACTIVITIES
       Proceeds from sale of common stock                                                          5,448                -
       Payments on notes payable - related party                                                 (17,500)               -
       Proceeds from receivable - ACC                                                             53,897                -
       Payments of deferred offering costs                                                             -          (27,108)
                                                                                         ----------------   --------------
                   Net cash provided by (used in) financing activities                            41,845          (27,108)
                                                                                         ----------------   --------------
                         Net increase in cash                                                      3,664              416

CASH AT BEGINNING OF YEAR                                                                          5,635            5,219
                                                                                         ----------------   --------------
CASH AT END OF YEAR                                                                       $        9,299    $       5,635
                                                                                         ================   ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
            Cash paid for interest                                                        $            -    $       1,457
                                                                                         ================   ==============
             Cash paid for income taxes                                                   $            -    $           -
                                                                                         ================   ==============

SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NON-CASH FINANCING AND INVESTING ACTIVITIES

       Issuance of stock for services                                                     $       10,000     $    150,000
                                                                                         ================   ==============
       Account receivable - ACC, net of discount of $6,351                                $     (193,649)    $          -
                                                                                         ================   ==============
       Stock subscription receivable                                                      $   (2,800,000)    $          -
                                                                                         ================   ==============
       Sale of net assets of discontinued operations                                      $       17,112     $          -
                                                                                         ================   ==============
       Issuance of stock for purchase of assets                                           $    4,268,432     $          -
                                                                                         ================   ==============

                                  See accompanying notes to the consolidated financial statements.

                                                                  5

</TABLE>

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

<PAGE>

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Cyco.Net,  Inc.  (the  "Company")  is  the  successor  to  AVE,  Inc.  a  Nevada
corporation and operates through its wholly owned subsidiaries,  Cyco.net (a New
Mexico corporation) and Orion Security Systems ("OSSI"), discussed below.

Prior to July 1, 2003,  the  Company's  primary line of business was the sale of
cigarettes  through three websites to customers in the United States of America.
Effective July 1, 2003, the Company sold its internet tobacco products division,
as more fully discussed in Notes 5 and 11.

On November 19, 2003, the Company purchased all of the outstanding  common stock
of Orion Security Systems,  Inc. ("OSSI"). a Wisconsin corporation whose primary
line of  business  is the sale of its  Sat-secure  system,  which is designed to
provide  bi-directional  video,  audio,  data and alarm transfer  between a wide
variety of locations, including but not limited to land based positions, airborn
aircraft, ships at sea, and a command and control center (see Note 12).

PRINCIPLES OF CONSOLIDATION

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

RECLASSIFICATIONS

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

REVENUE RECOGNITION

Prior to July 1, 2003,  the  Company's  sole  source of revenue  was the sale of
cigarettes through its 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 were FOB  shipping  point and the Company  recorded  revenue  from
cigarette  sales  when the  product  shipped.  As  discussed  in Notes 5 and 11,
effective July 1, 2003, the Company sold its internet tobacco products division,
accordingly  revenues and costs  associated with the internet  tobacco  products
division are presented as discontinued operations.

Effective November 19, 2003, the Company's sole source of revenue is the sale of
the Sat-secure  system discussed above. The terms of sale are FOB shipping point
and the Company records revenue when the product is shipped (see Note 12).

DISCOUNT AND FEES RELATED TO THE EQUITY LINE OF CREDIT

                                                                               6

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

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 $10,060 in 2003 and
$30,969 in 2002.

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 - TRADE

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, 2003. 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 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.

                                                                               7

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

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  ("SFAS") 128,
"Earnings Per Share".  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

                                                                               8

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

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. As
discussed in Note 11, the Company sold its internet tobacco  products  division,
including the related assets, effective July 1, 2003.

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 123,
"Accounting  for  Stock-Based  Compensation."  The  provisions of SFAS 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 Accounting Principles
Board  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.

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 have negatively affect the perception of potential
and current customers with respect to the tobacco industry,  and therefore had a
significant  influence in the  Company's  decision to sell its internet  tobacco
products division as discussed in Note 11.

                                                                               9

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

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 has not collected or remitted excise taxes (or other taxes) on its sales
due to this  uncertainty.  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.  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  civil  actions  filed by the City of New York and four
states,  related to this issue,  as well as cigarette  sales to minors (See Note
10).

RECENT PRONOUNCEMENTS

In May 2003, the Financial  Accounting Standards Board ("FASB") issued SFAS 150,
"Accounting  for Certain  Financial  Instruments  with  Characteristics  of both
Liabilities  and Equity." SFAS 150 changes the  accounting  guidance for certain
financial  instruments  that,  under previous  guidance,  could be classified as
equity or "mezzanine" equity by now requiring those instruments to be classified
as liabilities (or assets in some circumstances) on the balance sheet.  Further,
SFAS 150  requires  disclosure  regarding  the  terms of those  instruments  and
settlement  alternatives.  SFAS 150 is  generally  effective  for all  financial
instruments  entered  into or  modified  after May 31,  2003,  and is  otherwise
effective at the beginning of the first interim period  beginning after June 15,
2003.  The adoption of SFAS 150 in the first quarter of fiscal 2004 did not have
a material impact on the Company's financial position,  results of operations or
cash flows.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities".  SFAS 149 amends SFAS 133 to
clarify  the   definition  of  a  derivative   and   incorporate   many  of  the
implementation  issues  cleared  as a result of the  Derivatives  Implementation
Group  process.  This  statement  is  effective  for  contracts  entered into or
modified  after June 30, 2003,  and should be applied  prospectively  after that
date. The adoption of SFAS 149 is not expected to have a material  effect on the
financial statements.

In  December  2002,  the  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

                                                                              10

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

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,  2003.  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  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, 2003 and 2002,  the Company  incurred net (losses) of
($4,902,363) and ($325,593), respectively. At December 31, 2003, the Company had
a working  capital  (deficit)  of  $(774,237)  and  stockholders'  (deficit)  of
$(761,390). In addition the Company is subject to legal action (see Note 10).

The  Company's  ability to continue as a going  concern is  contingent  upon its
ability to secure financing 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.  As  discussed  in Note  12,  the  Company  purchased  a  wholly-owned
subsidiary,   OSSI,  and  through  its  Satsecure(C)  systems  and  ComSecure(C)

                                                                              11

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

controller sales, hopes to attain profitable operations.

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

NOTE 3.  EQUITY LINE OF CREDIT

Pursuant to an Equity Line of Credit agreement dated August 16, 2001 the Company
may, at its 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 the  Company's  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.  Subsequent  to
December  31,  2003,  the  Company  and Cornell  entered  into a Standby  Equity
Distribution  Agreement,  for the  issuance  of and  sale to  Cornell,  of up to
$20,000,000 of the Company's common stock (see Note 14).

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.

                                                                              12

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

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.

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.

STOCK  ISSUANCE.  As of December 31, 2003 the Company had  requested one advance
under the Equity  Line of Credit,  pursuant  to which,  1,219,512  shares of the
Company's  $.001 par value common stock were  issued,  for net cash  proceeds of
$5,448.

NOTE 4.  STOCKHOLDERS' (DEFICIT)

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 a previously  issued stock  purchase  warrant  exercisable  for 300,000
shares of common stock, expiring on August 16, 2006 and,  accordingly,  recorded
stock compensation of $34,200 (see Note 8).

As  discussed  in Note 3, the Company  issued  1,219,512  shares of common stock
pursuant to its equity line of credit, for cash proceeds of $5,448.

During the year ended December 31, 2003 the Company issued  1,000,000  shares of
common  stock to a director in exchange for  services  valued at $10,000.  These
shares were valued at their fair market value on the date the Company  agreed to
issue the shares.

Pursuant to the sale of its internet tobacco products  division,  effective July
1, 2003,  the Company  issued  2,000,000  shares of its common stock,  for notes
payable, as more fully described in Note 11.

In connection  with the  acquisition of OSSI,  effective  November 19, 2003, the
Company issued  50,000,000  shares of its common stock,  in exchange for all the
issued and  outstanding  shares of OSSI.  The shares  were  valued at their fair
market value as of November 19, 2003 of $4,500,000 (see Note 12).

                                                                              13

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Subsequent To December 31, 2003, as more fully discussed in Note 14, the Company
issued a total of 5,525,000 shares of common stock for cash and services.

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.  DISCONTINUED OPERATIONS

Effective  July 1, 2003 the Company  reached an  agreement  to sell its Internet
tobacco  products  division (See Note 11). The Company  agreed to dispose of the
division due to the lack of working  capital  required to resolve the litigation
issues as discussed in Note 10.

Operating  results of  discontinued  operations for the years ended December 31,
2003 and 2002 are shown separately in the accompanying statements of operations.

Net sales and net income from discontinued operations are as follows:

                                  2003                 2002
                                  ----                 ----

          Net sales          $2,873,065           $5,179,060
                             ==========           ==========
          Net income         $  346,405           $  572,204
                             ==========           ==========

Assets related to discontinued operations, which were included in the sale, were
as follows:

Inventory                                      $  2,070
Property and equipment - net                      3,295
Intangible assets - net                          11,746
                                               --------
Net assets of discontinued operations          $ 17,111
                                               ========

NOTE 6.  RELATED PARTY TRANSACTIONS

During the years ended  December  31, 2003 and 2002 the Company paid $12,500 and
$26,500,  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

                                                                              14

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

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, 2003 the Company has recorded notes payable and accrued interest
payable to affiliates in the aggregate amount of $20,443,  including interest of
$6,673.  In  addition,  the  Company  owes an  officer/shareholder,  $15,368 for
reimbursement of operating expenses paid on behalf of the Company, plus $210,000
of  accrued  and  unpaid   compensation,   which  is  included  in  general  and
administrative  expenses  ($156,000 and $54,000 for the years ended December 31,
2003 and 2002, respectively).

Accrued  expenses - related party  includes the $210,000 of unpaid  compensation
described  above,  plus an aggregate of $300,000 of unpaid  bonuses to employees
and the Company's website designer, all of whom are also shareholders.

NOTE 7.  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            5,292,000         1,799,500
                                              ---------         ---------
                                             $5,331,000        $1,808,000
                                             ==========        ==========

The capital loss  carryforward  will expire in 2004 and the net  operating  loss
carryforward will expire through 2023.

The  deferred tax asset has been fully  reserved as of December  31,  2003.  The
change in the  valuation  allowance  for the  deferred tax asset during the year
ended December 31, 2003 was an increase of $1,582,500.

NOTE 8.  STOCK BASED COMPENSATION

STOCK OPTIONS
-------------

The Company has a  compensatory  stock option plan.  Under the plan, the Company

                                                                              15

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

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, 2003 have been granted
to employees.

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

                                                Number of       Weighted Average
                                                 Shares          Exercise Price
                                                 ------          --------------
Outstanding at December 31, 2001               1,350,000               0.08
Granted                                                -                  -
Exercised                                              -                  -
Forfeited                                              -                  -
                                               ---------              -----
Outstanding at December 31,2002 and 2003       1,350,000              $0.08
                                               =========              =====

An option for 600,000  shares  expires in 2004 and an 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.

NOTE 9.  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
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, 2003 the warrant is  exercisable  into
1,440,000  shares of common  stock at $0.03 per share (see Note 4). The  warrant
expires on August 16, 2006.

NOTE 10.  CONTIGENT LIABILITY

On April 1, 2003,  the State of California  filed a civil action in the Superior
Court of  California,  County of San Diego,  against the  Company's  subsidiary,
alleging  sales of cigarettes to minors,  deceptive  failure to file Jenkins Act
reports  and inform  California  consumers  that they are  required to pay sales

                                                                              16

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

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,  and the State of California has offered to settle for $25,000. As of
the date of this report,  ongoing  settlement  negotiations are in process.  The
case has been consolidated with several other pending suits against other online
tobacco retailers.

On April 1, 2003,  the State of Washington  filed a civil action in the State of
Washington, King County Superior Court against the Company's subsidiary alleging
sales of cigarettes to minors, deceptive failure to file Jenkins Act reports and
inform  Washington  consumers  that they are  required to pay sales taxes to the
State of Washington.  The suit's four counts alleged unfair  business  practice,
unfair method of compensation and misrepresentation.  The suit sought injunctive
relief restraining Cyco.net, Inc. from continuing to engage in unlawful conduct,
restitution to consumers and civil penalties of up to $2,000 per violation, plus
attorneys'  fees and costs.  Subsequent to December 31, 2003, the parties agreed
to settle for  $10,000,  which  funds are being held in escrow  until  April 15,
2004, at which time they will be released to the State of Washington.

On April 1,  2003,  the  State of  Oregon  filed a civil  action in the State of
Oregon,  Marion County against the Company's subsidiary alleging the sale of one
carton of  cigarettes  to a minor using her mother's  name and credit  card,  in
violation of State Unlawful  Trade  Practices Act. The suit sought to enjoin the
Company from doing business in Oregon, and was settled out of court, in the fall
of 2003, for $2,000, with no admission of liability.

On January 28, 2003,  the Company was named in a civil suit filed by the City of
New York as one of  approximately  a dozen  defendants  who are  engaged  in the
business of internet online tobacco sale

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

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

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

                                                                              17

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

cases.

NOTE 11.  SALE OF BUSINESS

Effective  on July 1,  2003 the  Company  agreed  to sell its  Internet  tobacco
products  business  to  American  CigCo,  LLC (ACC).  In  conjunction  with this
purchase ACC agreed to purchase  2,000,000 shares of the Company's common stock.
The  purchase  price  aggregated  $3,000,000  in the form of 2 notes  payable as
follows:

      o    Payment  for the assets of the  business in the form of a note in the
           amount  of  $200,000  payable  in 12 equal  monthly  installments  of
           $16,667  commencing  on August 1,  2003.  The  balance of the note is
           $139,752 at December 31, 2003.

      o    Payment for the  2,000,000  common shares is payable in the form of a
           $2,800,000  note with  interest at 7% per annum,  on an interest only
           basis. The interest payments are due annually  commencing on July 31,
           2004  and the  principal  balance  is due on July 31,  2008.  Accrued
           interest  receivable  of  $98,000  has  not  been  reflected  in  the
           accompanying  financial  statements,  as  recognition  will  occur as
           proceeds are received.

Because  the sale of the  business  and the common  shares were made to a thinly
capitalized   entity  and  significant   uncertainties   exist  related  to  the
collectibility  of the amounts due, the gain from the sale of the business  will
be deferred  until such time as the proceeds are collected or until such time as
the cash flows from the operating activities of the business sold are sufficient
to fund the debt  service.  The deferred  portion of the gain on the sale of the
business  aggregating  $122,641 at December  31, 2003 is  reflected  as deferred
revenue (see discontinued operations at Note 5).

In  addition,  interest  income  from the  $2,800,000  note  receivable  will be
recognized as the proceeds are collected and the unpaid portion of the principal
balance will be recorded as a reduction of stockholders' equity.

NOTE 12.  ACQUISITION OF ASSETS AND LOSS ON ASSET IMPAIRMENT

Effective November 19, 2003, Cyco.net, Inc. entered into a merger agreement with
Orion  Security  Services,   Inc.  ("OSSI"),  a  Wisconsin  corporation  in  the
development   stage,  that  provides  secure  computer  network  and  management
solutions,  and video  surveillance  systems via  satellite  communication.  The
business  combination  has been  accounted  for as a  purchase.  The  results of
operations of OSSI have been included in the accompanying  financial  statements
since the effective date of the  acquisition.  In exchange for all of the issued
and outstanding  common shares of OSSI, the Company issued  50,000,000 shares of
its common stock valued at $4,500,000. The shares were valued at $.09 per share,
the fair market value at November 19, 2003. As of December 31, 2003, the Company
recorded a loss on asset impairment related to this investment, in the amount of

                                                                              18

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

$4,500,000, which was charged to operations.

The purchase price was allocated as follows:

           Current assets                                 $     1,057
           Property and equipment                               9,613
           Current liabilities                               (242,238)
                                                          ------------
           Net liabilities acquired                       $  (231,568)
                                                          ============

The assets  acquired and  liabilities  assumed were  recorded at the  historical
basis of OSSI.  The  excess  of the  purchase  price  paid over the value of the
assets acquired of $4,731,568 has been recorded as goodwill.

The following unaudited summarized pro forma information assumes the acquisition
had occurred on January 1, 2003.

               Net sales                                  $    112,299
                                                          ============
               Net (loss)                                 $(5,061,684)
                                                          ============
               (Loss) per share:
                 basic and diluted                        $     (0.13)
                                                          ============


NOTE 13.  EXCLUSIVE PURCHASE AND SUPPLY AGREEMENT

Effective  October 27, 2003,  the Company  through its  wholly-owned  subsidiary
OSSI,  entered  into an  exclusive  purchase  and supply  agreement  for certain
specialized equipment, with the manufacturer,  a foreign entity. The term of the
agreement  extends  through  December 31, 2006 and  provides  for two  automatic
two-year extensions. The agreement calls for an annual minimum purchase quota of
(pound)160,000, denominated in UK Pounds.

NOTE 14.  SUBSEQUENT EVENTS

STOCK ISSUANCE

Subsequent  to December 31, 2003,  the Company  issued an aggregate of 5,525,000
shares of its common stock for cash and services, of which 4,550,000 shares were
issued for cash  proceeds of  $467,500,  and 975,000 were issued for services in
lieu of  cash.

EMPLOYMENT AGREEMENTS

                                                                              19

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

As a condition to the OSSI stock purchase agreement (Note 12), effective January
1,  2004,  the  Company  has   negotiated  an  employment   agreement  with  the
CEO/President  of OSSI. The agreement  provides for an annual salary of $225,000
through December 31, 2008.

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

DISTRIBUTOR AGREEMENT

Effective  January 1, 2004,  the Company,  through its  wholly-owned  subsidiary
OSSI, entered into an exclusive distributor agreement with inventors. As per the
terms of the  agreement,  OSSI is granted an  exclusive  license to  distribute,
promote, sell, install,  service and otherwise maintain and reproduce by its own
means,  certain  surveillance  equipment  to the  U.S.  government  as  well  as
non-exclusive  rights  to  certain  equipment  to  both  U.S.  governmental  and
commercial entities.  The term of the agreement extends to December 31, 2007 and
provides for an automatic  two-year renewal period.  The agreement calls for the
sale of a minimum of $2,200,000 in equipment and $600,000 in support contracts.

OPERATING LEASE

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

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

                                                                              20

<PAGE>

                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2003

Effective  April 1, 2004, the Company entered into an operating lease for office
space, continuing through March 31, 2006. Future minimum lease payments pursuant
to this agreement are as follows:

                             Year ended
                             December 31                  Amount
                             -----------              ----------
                                2004                  $   12,600
                                2005                      16,800
                                2006                       4,200
                                                      ----------
                                                      $   33,600
                                                      ==========

STANDBY EQUITY DISTRIBUTION AGREEMENT

On March 23,  2004,  the  Company  entered  into a Standby  Equity  Distribution
Agreement  ("Standby  Agreement")with  Cornell  Capital  Partners  (see Note 3),
pursuant to which the Company  may, at its  discretion,  periodically  issue and
sell to Cornell, up to $20,000,000 of the Company's common stock. This agreement
replaces  the  agreement  entered  into as of  September  2001.  As a  condition
precedent  to the  execution of the Standby  Agreement,  the Company and Cornell
entered into a Registration Rights Agreement,  whereby the Company has agreed to
provide  certain  registration  rights  under  the  Securities  Act of 1933,  as
amended,  relating  to the shares of common  stock  issuable  under the  Standby
Agreement.  The commitment  period for the Standby Agreement extends through the
earlier of such time as Cornell has made aggregate  advances (as defined in Note
3) of  $20,000,000  or two years  from the  effective  date of the  registration
statement.

The Company is obligated to pay a cash commitment fee to Cornell, equal to 5% of
each advance,  payable  directly from the gross proceeds of each advance,  to be
held in escrow pursuant the Escrow Agreement entered into with Cornell. Upon the
execution  of the Standby  Agreement,  as currently  proposed,  the Company will
issue 490,000  shares of its common stock to Cornell.  An additional  $10,000 of
the Company's common stock is issuable to Newbridge Securities Corporation, as a
placement fee, per the Placement Agent Agreement. The Company cannot predict the
number of shares to be issued , or the gross  proceeds  to be  derived  from the
sale of such shares pursuant to the Standby Agreement,  as the purchase price of
the shares will fluctuate based on the prevailing market conditions.

                                                                              21