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

                       AMENDMENT NO. 1 TO THE 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, 2000

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

         For transition period from _______________ to _________________

                        Commission file number 000-30244

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

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

4201 Yale Boulevard, NE Suite G, Albuquerque, NM            87107
    (Address of principal executive offices)             (Zip code)

                    Issuer's telephone number (505) 344-9643

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

     Title of each class               Name of each exchange on which registered
     -------------------               -----------------------------------------
Common Stock, $0.001 par value                           OTC

         Securities registered under Section 12(g) of the Exchange Act:
                                      None

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
$2,496,018.

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 $305,833 on April 10, 2001.

The number of shares of Common Stock outstanding as of April 10, 2001 was
25,946,419.
<PAGE>
                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

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

A.  CORE BUSINESS

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

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

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

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

     *    Billing address must be used as shipping address to verify the age of
          recipient.
     *    Billing addresses outside the United States or within the state of New
          Mexico are prohibited.
     *    Purchaser must be 18 years of age.
     *    Purchaser agrees not to resell or retail any part of their order.
     *    Limit of 10 cartons per customer per order.

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

Orders placed Monday-Thursday before 2pm Mountain Standard Time are shipped the
next day. Orders received Friday-Sunday are shipped on Monday. All orders are
shipped via United States Postal Service 2-3 day priority mail. This has proven
to be the most cost effective method of shipping.

B. CYCO.NET

This site is a lighthearted destination that presents the Internet to
individuals through quick wit, interesting links and other standard Internet
offerings (i.e. stock quotes, horoscopes, etc.). The goal of this site is to
provide the Internet User with a starting point for their daily excursions into
the World Wide Web. It is intended to put the most interesting of the millions
of sites on the web at site visitors' fingertips. The focus is to provide a
virtual atmosphere of sophistication, intelligence and cunning.

The site is formatted as a weekly, soon to be daily, magazine or "e-zine".
Content varies according to the weekly topic - i.e., interviews, short comical
lists, photographs and stories. Topics vary, and can consist of anything from
contemporary entertainment venues, travel destinations, fashions, sports or
financial markets. The goal is to provide the user information across a wide
range of interests, with striking and informative links relating to the current
topic.

The home page consists of a photograph reflecting the current topic.
Superimposed on the photograph are links to various sites on the Internet. Links
are of three types. First, there are standard links provided by most every
launch site, including news, horoscopes and stock quotes. These links are
provided for the convenience of the viewer, and are not considered the main draw
of the site.

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Secondly, are the temporary, topic specific links. Temporary links relate
directly to the topic and will change accordingly. Examples of these links
include historical and cultural information, available activities, photographs,
travel information or discussion groups. For example, when the topic was the Taj
Mahal, the site linked to an Intel site that had a virtual tour of the
structure, a short history of the Taj Mahal, a picture galleries and information
of the surrounding area. Effort is made to provide viewers instant and concise
information they might not search for on their own.

Last, there are the topic specific e-commerce links. These links take the viewer
to sites that provide products and services directly related to the current
subject. The site will provide links to vendors like Amazon.com, where the
viewer can buy a book for more information, or to Abercrombie & Kent, a travel
web site, in order to purchase an airline ticket or book a cruise on a ship.

In effort to attract loyal viewers, CYCO.NET does not require registration
information or fees to access the site. The Company believes such barriers
inhibit users to peruse the site in depth. Reason being, many people are
reluctant to provide personal data over the Internet.

Cyco.net will focus on maximizing the number of hits or visitors a day. As more
and more customers visit Cyco.net, the Company will position itself to take
advantage of the audience that Cyco.net is attracting. This will be accomplished
by building e-businesses, which will sell products and services to the Cyco.net
visitors. Every Cyco.net visitor is a potential customer for a plethora of
products and services that will be provided by the site, it's owned companies,
affiliates and advertisers.

In the future, we intend to seek revenue through advertising on the Cyco.net
site. To date, we have not had any revenue from advertising. No assurance can be
given that any arrangements will be established, or that, if established, the
marketing and operating arrangements proposed to be utilized by us can be
successfully implemented.

We see an advantage in targeting the tobacco and spirits companies as our major
advertisers. With regard to the tobacco and spirits companies, these advertisers
are quickly losing their current mediums, including billboard advertisements and
as major sports sponsors. The only current advertising medium in the United
States for the Tobacco and Spirit industries are print ads and the Internet.
Many of the larger Internet sites, like Yahoo, do not accept advertising from
tobacco and spirit companies because of the unhealthy stigma associated with
these products. Tobacco and spirit companies are shunned by current major
Internet operators, which we believe leaves significant amounts of advertising
dollars on the table. Cyco.net hopes to, one day, be able to capitalize on these
advertising dollars. Investors should be aware, however, of the rising
anti-alcohol and tobacco sentiment in the United States. This sentiment may
cause some Internet users to ban or boycott companies that promote products from
these industries, including Cyco.net. Further, this sentiment may cause
advertisers outside the tobacco and spirits industries to avoid advertising with
companies that promote these products.

Cyco.net has affiliated itself via links, with several larger e-commerce sites
such as Amazon.com, Lobster.net and Tavalo.com. Being an affiliate entitles us
to a commission on sales derived from visitors of Cyco.net. If a user goes to
Amazon.com, from the link on Cyco.net, and makes a purchase, then we are
entitled to a percentage of that sale. At this time, no revenues have been
realized from any affiliate programs. Such affiliate programs are not unique to
Cyco.net. Currently Amazon.com has over 500,000 affiliates.

C.  INDUSTRY ANALYSIS

The Internet is a virtual world. In this world a complete society exists. People
work, play, learn, communicate and shop all at the touch of a button from their
home or office. The Internet gives almost unfettered access to communication,
information and products to the user. At the same time, the Internet gives
advertisers almost unlimited access to the consumer. The Internet has become an
open market where anyone can locate almost any product they want.

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Key Market

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

Sources of Supply

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

Industry

Cyco.net operates in the on-line segment of the cigarette industry. The
cigarette industry's total shipments in the United States are set forth below:

                               UNITS SHIPPED     % INCREASE/
                  YEAR         (IN BILLIONS)     % (DECREASE)
                  ----         -------------     ------------
                  2000         419.8              0.1
                  1999         419.3             (0.9)
                  1998         460.8               --

According to the industry leader, Philip Morris, the 0.1% increase in the U.S.
industry's cigarette shipments in 2000 was primarily attributable to
wholesalers' decisions to rebuild inventories after the January 1, 2000 federal
excise tax increase. Philip Morris estimates that, after adjusting for this and
other factors, U.S. industry volume declined approximately 1.0% to 2.0% in 2000.
Cyco.net expects the U.S. industry volume to continue a gradual decline for the
next several years. Cyco.net believes this decline is primarily attributable to
a rising anti-smoking sentiment in the U.S., along with higher excise and other
taxes on cigarettes. Cyco.net is not aware of any available sources regarding
the size of the on-line segment of the cigarette industry. Cyco.net believes,
however, that on-line sales comprise a small fraction of the overall industry.

Competition

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

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

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<PAGE>
buy-down promotions prevents Cyco.net from offering its products for the lowest
possible prices.

Growth

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

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

D. GOVERNMENT REGULATION

Excise Taxes

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

Sales Taxes

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

Other Regulations

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

E.  RISKS RELATED TO OUR BUSINESS

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

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

We have historically lost money. In the years ended December 31, 2000 and 1999,
we had net losses of $218,189 and $140,442, respectively. Future losses are
likely to occur. Accordingly, we may experience significant liquidity and cash
flow problems because historically our operations have not been profitable. No
assurances can be given that we will be successful in reaching or maintaining
profitable operations.

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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, 2000 and 1999
financial statements, which states that Cyco.net's ability to continue as a
going concern depends upon its ability to secure financing, increase ownership
equity and attain profitable operations. Our ability to obtain additional
funding will determine our ability to continue as a going concern. Our financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. We expect to be able to continue operations for 12 months with
the cash currently on hand and anticipated from our operations.

WE ARE SUBJECT TO A WORKING CAPITAL DEFICIT, WHICH MEANS THAT OUR CURRENT ASSETS
ON DECEMBER 31, 2000 WERE NOT SUFFICIENT TO SATISFY OUR CURRENT LIABILITIES

We had a working capital deficit of $41,004 at December 31, 2000, which means
that our current liabilities exceeded our current assets on December 31, 2000 by
$41,004. 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 30, 2000 were not sufficient to satisfy all of our current liabilities
on that date.

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

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

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

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

     *    With a price of less than $5.00 per share;
     *    That are not traded on a "recognized" national exchange;
     *    Whose prices are not quoted on the Nasdaq automated quotation system
          (Nasdaq listed stock must still have a price of not less than $5.00
          per share); or
     *    In issuers with net tangible assets less than $2.0 million (if the
          issuer has been in continuous operation for at least three years) or
          $5.0 million (if in continuous operation for less than three years),
          or with average revenues of less than $6.0 million for the last three
          years.

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

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WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL

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

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

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

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

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

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

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

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

If one or more states or any foreign country successfully asserts that Cyco.net
should collect sales or other taxes on the sale of products, net sales and
results of operations could be harmed. Cyco.net does not currently collect sales
or other similar taxes for shipments of goods into any state. However, one or
more local, state or foreign jurisdictions may seek to impose sales tax

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collection obligations on us. If Cyco.net becomes obligated to collect sales
taxes, it will need to update its system that processes customer orders to
calculate the appropriate sales tax for each customer order and to remit the
collected sales taxes to the appropriate authorities. These upgrades will
increase operating expenses. In addition, customers may be discouraged from
purchasing products from Cyco.net because they have to pay sales tax. This may
discourage customers from buying our products and cause a reduction of sales.

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

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

F. EMPLOYEES

Cyco.Net, Inc. currently has three full-time employees and one part time
employee. As business increases, it is anticipated that additional employees
will be added.

G. COMPANY HISTORY

AVE, Inc., acquired Cyco.net, Inc. of Albuquerque, New Mexico in a transaction
accounted for as a recapitalization of Cyco.net, Inc. on July 22, 1999. 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.

On July 28, 1999, amended Articles of Incorporation were filed with the
Secretary of State of Nevada to change the name of AVE, Inc. to Cyco.net, Inc.
Concurrently, a request was submitted to NASD to change AVE's listing symbol
from AVEN to CYKE.

Cyco.net, Inc. has been de-listed from NASD Bulletin Board for failure to comply
with the registration requirements. To be re-listed, Form 10 must be completed
and the Company must comply with all comments by the governing body. Also, Form
10KSB for the fiscal year ending December 31, 1999 and Form QSB for September
30, 1999, March 31, 2000 and June 30, 2000 must be filed.

ITEM 2. DESCRIPTION OF PROPERTY.

The Company operated from leased office space at 600 Central Avenue SW, 3rd
floor, Albuquerque, New Mexico until August of 2000. The lease was month to
month. There are no outstanding obligations with regard to the lease. The
Company moved its business operations to 4201 G. Yale Boulevard, NE,
Albuquerque, NM 87107 effective August of 2000. The Company has a two year
lease, with a basic monthly rental payment of $1,664 until August of 2001, after
which payments will increase to $1,703 per month for the remainder of the lease.

ITEM 3. LEGAL PROCEEDINGS.

None

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

None

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                                     PART II

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

Cyco.Net, Inc. is currently de-listed.  No market information is available.

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

The private securities litigation reform act of 1995 ("the act') provides a safe
harbor for forward looking statements made by of on behalf of the company. All
statements in this "management's discussion and analysis of financial condition
and results of operations" and elsewhere in this report, other than statements
of historical facts, which address activities, events and or developments that
the company expects or anticipates will or may occur in the future, including
such things as future capital expenditures, growth, product development, sales,
business strategy and other such matters are forward-looking statements. These
forward-looking statements are based largely on managements expectations and
assumptions and are subject to a number of risks and uncertainties, many of
which are beyond our control. Actual results could differ materially from the
forward-looking statements set forth herein as a result of a number of factors,
including, but not limited to intense competition in various aspects of its
business and other risks described in the company's reports on file with the
securities and exchange commission. In light of these risks and uncertainties,
all of the forward-looking statements made herein are qualified by these
cautionary statements and there can be no assurance that the actual results or
developments anticipated will be realized. The company undertakes no obligation
to update or revise any of the forward-looking statements contained herein.

The following discussion should be read in conjunction with the financial
statements and notes thereto included herein.

A. Plan of Operation

In the next 12 months, the Company plans to tend to sales growth and gain
additional traffic to its e-commerce sites by:

     *    Promoting our affiliate program to build traffic to its e-commerce
          sites.
     *    Advertising through print ads, e-newsletters and e-mails to target
          markets.
     *    Continue funding efforts
     *    Maintain and add features to the Cyco.net site, i.e. location cameras
          providing live feed from worldwide locations of interest.
     *    Pursue advertising contracts from major tobacco and spirit
          manufacturers.
     *    Hire additional employees, as needed. The hiring of 1-2 additional
          full-time employees is projected in the next 12 months.

Furthermore, the Company plans to identify other niches in e-commerce to expand
and diversify it's business to reduce dependence on a single sector or product.

B. Financial Condition

Prior to October 2000, the Company was able to meet its cash requirements
partially from the sale of cigarettes, with the balance of cash needs being met
with the sales of stock pursuant to Rule 504, which is disclosed herein below.
Since October 2000, the Company has been able to meet its cash needs solely
through the sales of cigarettes.

Revenues for the year ended December 31, 2000 were $2,496,018 compared to $9,671
for the comparable period in the prior year. Cyco.net's business operations
commenced on January 1, 2000. As a result, Cyco.net had little revenues for the
year ended December 31, 1999. Cyco.net's revenues for the current year are
attributable to the sale of cigarettes on the internet.

                                       9
<PAGE>
The web sites, Cycocigs.com and Aabakismokes have produced the following
revenues from the sale of cigarettes:

                                        Revenue    Cost of Goods    Gross Profit
                                        -------    -------------    ------------
Two months ended December 1999         $  9,671      $  8,321          $ 1,350
Three months ended March 2000           101,866        93,467            8,399
Three months ended June 2000            586,448       536,668           49,780
Three months ended September 2000       828,361       777,079           51,282
Three months ended December 2000        979,343       895,296           84,047

It is anticipated that the sales will continue to increase. However, sales could
be adversely affected by any FDA or Congressional regulations, or any decisions
made by tobacco companies, prohibiting or limiting the sale of cigarettes over
the Internet. Additionally, further legal judgments against tobacco companies,
or an increase in anti-tobacco sentiment among the public, could lower cigarette
sales for the Company.

Cost of sales was $2,302,510, or 92.2% of revenues, for the year ended December
31, 2000 compared to $8,321 for the comparable period in the prior year. Cost of
sales consist of the cost of cigarettes shipped during the period.

General and administrative expenses for the year ended December 31, 2000 were
$386,152 compared to $141,689 in the comparable period of the prior year. During
the year ended December 31, 2000, the major components of general and
administrative expenses were approximately $7,489 in advertising, $76,453 in
credit card processing fees, $109,424 in payroll, $142,106 in professional fees,
$12,460 in rent, $5,208 in amortization and $33,012 in miscellaneous other
expenses. Included in general and administrative expenses during the same period
last year were $2,177 in advertising, $1,820 in credit card processing fees,
$82,269 in professional fees, $32,730 in payroll, $7,817 in rent and $14,876 in
miscellaneous other expenses.

Cyco.net had a net loss of $218,189 for the year ended December 31, 2000
compared to a net loss of $140,442 in the comparable period in the prior year.
This increase is primarily attributable to higher general and administrative
expenses.

C. Liquidity and Capital Resources

Cash on-hand at December 31, 2000 was $44,838. Net cash used in operations was
$45,808, cash provided by investing activities was $20,909 and cash provided by
financing activities was $59,000, resulting in a net increase in cash of $34,101
for the year ended December 31, 2000.

The Company received $62,000 in proceeds from stock issuance.

Proceeds from the sale of securities available for sale were $24,508. The
Company carried the shares of Prime Co. stock at a book value of $50,000. These
sales resulted in a realized loss of $25,492.

On December 2, 1999 the Company executed a promissory note with Francisco Urrea
in the amount of $18,000. The funds were used for ongoing business operations.
This note was repaid in the third quarter of 2000.

On August 2, 1999, the Company entered in to a Line of Credit Agreement with GMF
Holdings and May Davis Group whereby the Company shall be entitled to $890,000
in credit. If the Company chooses to draw down on the equity line, debentures
will be issued. This transaction was entered into in reliance upon the
provisions of Rule 504 Exemption of the Securities Act of 1933, as amended, and
the regulations promulgated thereunder (the "Securities Act") and or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in the Debentures to
be made hereunder. At this time, no debentures have been issued.

This Agreement provides that the stock must be trading on the OTC and provides
for incremental advances based upon the 30 day average daily trading.

                                       10
<PAGE>
The following chart discloses the incremental advances:

30 day Average Daily Trading
          Amount

  From            To            Maximum Advance
--------       --------         ---------------
$ 25,000   -   $ 50,000            $100,000
$ 50,000   -   $100,000            $200,000
$100,000   -   $200,000            $300,000
$200,000   -   $300,000            $500,000
$300,000   -   $400,000            $600,000
$400,000   -   $500,000            $700,000


Because the Company is currently de-listed, no advances may be made on this Line
of Credit. The original Commitment Period was for a 12 month duration, expiring
in August 2000, however, the expiration date was amended by agreement of the
parties to August 2001.

The line of credit agreement provides for debentures convertible at 75% of the
average closing bid price for a period of five days prior to conversion.
Management estimates the price per share of common stock in the recent market,
discounted to 75%, to be $0.03 per share. If there were full payout under the
line of credit agreement and full conversion of the debentures to common stock,
approximately 29.7 million shares would be issued. The authorized capital stock
of the Company consists of 30 million shares of common stock and presently
approximately 26 million shares are outstanding. Thus, full payout and
conversion under the line of credit agreement would be approximately 114% of the
total outstanding common shares.

D.  Inflation and Seasonality

The Company believes that inflation affects the Company's business to no greater
or lesser extent than the general economy. The Company has experienced a slow
down in sales after the New Year, when people begin resolutions to quit smoking.
This seasonal aspect could affect the Company's financial condition or results
of operations should people quit smoking as a result of the New Years
resolutions.

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

                                       11
<PAGE>
                                    PART III

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

The present directors and executive officer of the Company, their age, positions
held in the Company and duration as such, are listed below. Each director will
serve until the annual meeting of shareholders, or until his or her respective
successor has been elected and duly qualified. Officers hold office at the
pleasure of the Board of Directors, absent any employment agreement. Presently
no officers of the Company have an employment agreement.

Franciso Urrea Jr. a Director is the father of the CEO Richard A. Urrea, CFO
Daniel R. Urrea and Chief Council Matthew Urrea.

Name                    Age      Position Held and Tenure
----                    ---      ------------------------
Richard Urrea            36      President/CEO
                                 (since January 1, 1999)

Daniel Urrea             29      Chief Financial Officer
                                 (since January 1, 1999)

Brent Wolford            24      Chief Technical Officer
                                 (since January 1, 1999)

Matthew Urrea            33      Chief Council
                                 (since January 1, 1999)

Francisco Urrea, Jr.     71      Director
                                 (since January 1, 1999)


The following is a brief account of the business experience of each director and
executive officer of the Company during at least the past five years.

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

FRANCISCO URREA, JR. was the founder of numerous public companies including
Diagnostek, Inc., a prescription benefits management and hospital pharmacy
management company (New York Stock Exchange), Nuclear Pharmacy Incorporated, a

                                       12
<PAGE>
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 associated with the CYCO.NET since inception in December
of 1998. 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 of 1996 Mr. Urrea worked with Equinox
International.

 An international marketing and distribution company, where he was involved in
sales and talent recruiting activities. In the Spring of 1995, Mr. Urrea
received a Bachelors in Business Administration with a concentration in Finance
from the Anderson Schools of Management at the University of New Mexico. Mr.
Urrea has also spent several months out of the country where he studied business
and other cultures.

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

MATTHEW URREA is a tax lawyer with a private law practice in Albuquerque. He
received his Master of Laws in Taxation from New York University School of Law
(May 1993), his Juris Doctor from the University of New Mexico School of Law
(May 1992), and his Bachelors of Business Administration in Finance from the
University of New Mexico's Anderson School of Management (May 1989). From 1993
until April 1996, Mr. Urrea was an associate with the law firm of
Miller,Stratvert, Torgerson & Schlenker, P.A. in Albuquerque, New Mexico where
he practiced primarily in the area of taxation, including individual, estate and
business tax planning, business entity formation, mergers, sales, acquisitions
and reorganizations of business entities, international tax planning, and
like-kind exchanges. Mr. Urrea has lectured before professional and civic groups
on various tax subjects and is a member of the New Mexico, American, and
Albuquerque Bar Associations.

                                       13
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.

The following table sets forth information regarding compensation authorized for
the Company's Chief Executive Officer and such compensation as has been
authorized board members since January, 1999. The CEO's total annual salary does
not exceed $100,000 nor does that of any other board member.

<TABLE>
<CAPTION>
                                         SUMMARY COMPENSATION TABLE

                                                                Long Term Compensation
                               Annual Compensation                       Awards            Payouts
      (a)         (b)       (c)      (d)         (e)               (f)           (g)         (h)         (i)
                                                               Restricted    Securities
   Name and                                                      Stock       Underlying      LTIP     All Other
   Principle              Salary    Bonus     Other Annual      Award(s)    Options/SARs   Payouts   Compensation
   Position      Year       ($)      ($)    Compensation ($)       ($)           (#)         ($)          ($)
-------------    ----    -------    -----   ----------------   ----------   ------------   -------   ------------
<S>              <C>     <C>        <C>     <C>                <C>          <C>            <C>       <C>
Richard Urrea    1999    $28,666
President/CE     2000    $70,099

Daniel Urrea     1999    $10,000
      CFO        2000    $29,999

Brent Wolford    1999    $ 7,000
      CTO        2000    $ 9,000
</TABLE>

                                       14
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth the names of persons who own of record, or were
known by the Company to own beneficially, more than 5 percent of its issued and
outstanding common stock, and the beneficial ownership of stock as of December
31, 2000 by officers and directors of the Company and all officers and directors
as a group. Except as otherwise noted, each person listed below is the sole
beneficial owner of the shares and has sole investment and voting power of such
shares. No person listed below has any option, warrant or other rights to
acquire additional securities of the Company, except as may be otherwise noted.

<TABLE>
<CAPTION>
(1)                  (2)                                (3)                       (4)
                     Name and Address                   Amount and Nature of
Title of Class       Of Beneficial Owner                Beneficial Owner          Percent of Class
--------------       -------------------                ----------------          ----------------
<S>                  <C>                                <C>                       <C>
                     Richard Urrea                      2,496,000 $0.001 Par      11.4
Common               600 Alcalde SW #4D
                     Albuquerque, NM 87104

                     Matthew Urrea                      2,496,000 $0.001 Par      11.4
Common               2213 Matthew NW
                     Albuquerque, NM 87110

                     Daniel Urrea                       2,496,000 $0.001 Par      11.4
Common               3009 Charleston NE
                     Albuquerque, NM 87110

                     Nunzio P De Santis                 2,496,000 $0.001 Par      11.4
Common               600 Central Ave. SW, 3rd Floor
                     Albuquerque, NM 87102

                     Francisco Urrea Jr.                2,184,000 $0.001 Par      10.0
Common               3009 Charleston NE
                     Albuquerque, NM 87110

                     Brent Wolford                      2,080,000 $0.001 Par      9.5
Common               2601 Silver Avenue SE #8
                     Albuquerque, NM 87106

                     Con Queso, LLC                     1,353,600 $0.001 Par      6.2
Common               P.O. Box 7460
                     Albuquerque, NM 87194

                     Henri Hornby                       1,082,540 $0.001 Par      4.9
Common               3653 Hemlock Court
                     Reno, NV 89509

No. Shares & %                                          Total shares              53.7
owned by directors                                      11,752,000
& officers as a
whole
</TABLE>

                                       15
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

At December 31, 2000, the Company had a receivable with companies owned by an
officer of the Company of $23,994.

At December 31, 1999, the Company had an outstanding non-interest bearing loan
from an officer $18,000. The loan was repaid during the year ended December 31,
2000.

For the year ended December 31, 2000, the Company has included $2,000 due to
related parties in accounts payable and accrued expenses.

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

a)   Exhibits

     2.1  Acquisition Agreement between Ave and DMI

     2.2  Majority Written Consent of Directors of Ave Inc. dated July 9, 1999

     2.3  Letter of Intent between Ave and CyCo.Net dated July 9, 1999

     2.4  Stock Specimen

     2.5  Board of Directors Resolution dated January 5, 1998

     2.6  Resolution of the Directors of Walsh Communications Group dated May 4,
          1990 to change name to Ave, Inc.

     2.7  Certificate of Amendment to Change name to Ave, Inc. dated 5/7/90

     2.8  Certificate of Agreement of Merger of DeLuxe Onyx Company dated
          January 23, 1987

     2.9  Certificate and Agreement of Merger of DeLuxe dated 1/23/87

     2.10 Certificate Amending Certificate of Incorporation dated January 23,
          1987

     2.11 Majority Written Consent of Directors of Ave, Inc. Dated January 20,
          1998

     3.   Ave, Inc. By Laws

     10.0 Line of Credit Agreement dated August 9, 1999


     10.1 Amendment to Line of Credit Agreement dated August 9, 1999


     21.1 Articles of Incorporation of Cyco.Net, Inc. the Wholly Owned
          Subsidiary Cyco.Net, Inc. (formerly Ave, Inc.)

     21.2 Certificate of Amendment to Articles of Cyco.Net, Inc. to change name
          from Ave, Inc. to Cyco.Net, Inc.

                                       16
<PAGE>
     21.3 Certificate of Amendment of Cyco.Net, Inc.

     21.4 Organizational Minutes of Cyco.Net, Inc.

     21.5 By-Laws of Cyco.Net, Inc.

     27.  Financial Data Schedule

     99.0 Promissory note from Cyco.Net, Inc. to Francisco Urrea Jr.


b)   No reports on Form 8K were filed under the Securities Exchange Act of 1934
     during the quarter ended December 31, 2000.

                                       17
<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 17, 2002                    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 17, 2002                    By: /s/ RICHARD URREA
                                            ------------------------------------
                                            Richard Urrea, President and
                                            Chief Executive Office
                                            (Principal Executive Officer)


Date: April 17, 2002                    By: /s/ DANIEL URREA
                                            ------------------------------------
                                            Daniel Urrea
                                            Chief Financial Officer
                                            (Principal Accounting Officer)


Date: April 17, 2002                    By: /s/ FRANCISCO URREA, JR.
                                            ------------------------------------
                                            Francisco Urrea, Jr.
                                            Director

                                       18
<PAGE>
                                 CYCO.NET, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


         Report of Independent Auditors                                  F-2

         Consolidated Financial Statements:

         Consolidated Balance Sheet                                      F-3

         Consolidated Statements of Operations                           F-4

         Consolidated Statement of Stockholders' (Deficit)Equity         F-5

         Consolidated Statements of Cash Flows                           F-6

         Notes to Consolidated Financial Statements                   F-7 - F-12

                                      F-1
<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, 2000,  and the related  consolidated  statements of  operations,
stockholders'  (deficit) equity,  and cash flows for the year then ended and for
the period from  January 25,  1999  (inception)  to  December  31,  1999.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates 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,  2000,  and the results of its  operations,  and its cash flows for the year
then ended and the period  from  January 25, 1999  (inception)  to December  31,
1999, 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
financial statements,  the Company has suffered recurring losses from operations
and has a working capital deficit.  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.



Denver, Colorado
April 8, 2001

                                      F-2
<PAGE>
                                 CYCO.NET, INC.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2000

                                     ASSETS
CURRENT ASSETS
  Cash                                                                $  44,838
  Receivables                                                            70,377
  Inventory                                                               5,776
  Prepaid expenses                                                        1,905
                                                                      ---------
     Total current assets                                               122,896
                                                                      ---------

PROPERTY AND EQUIPMENT, net of
  accumulated depreciation of $207                                        3,392
                                                                      ---------

OTHER ASSETS
  Intangible assets - net of accumulated
    amortization of $5,208                                               19,792
  Other receivables - related parties                                    23,994
                                                                      ---------

                                                                      $ 170,074
                                                                      =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable and accrued expenses                               $ 163,900
                                                                      ---------

STOCKHOLDERS' EQUITY
  Common Stock, $0.001 par value,
    30,000,000 shares authorized,
    21,946,419 issued and outstanding                                    21,946
  Additional paid in capital                                            342,859
  Accumulated (deficit)                                                (358,631)
                                                                      ---------
                                                                          6,174
                                                                      ---------

                                                                      $ 170,074
                                                                      =========

          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                                 CYCO.NET, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                               YEAR ENDED     PERIOD ENDED
                                                              DECEMBER 31,    DECEMBER 31,
                                                                  2000            1999
                                                              ------------    ------------
<S>                                                           <C>             <C>
Revenues                                                      $  2,496,018    $      9,671

Cost of goods sold                                               2,302,510           8,321
                                                              ------------    ------------

Gross profit                                                       193,508           1,350

General and administrative expenses                                386,152         141,689
                                                              ------------    ------------

(Loss) from operations                                            (192,644)       (140,339)

Other income (expense)
  Interest expense                                                     (53)           (103)
  Loss on sale of available for sale securities                    (25,492)             --
                                                              ------------    ------------
                                                                   (25,545)           (103)
                                                              ------------    ------------

Net (loss)                                                        (218,189)       (140,442)

Other comprehensive (loss)
  Unrealzed (loss) on available for sale securities                     --          (4,688)
                                                              ------------    ------------

Comprehensive (loss)                                          $   (218,189)   $   (145,130)
                                                              ============    ============

Per share information:
Net (loss) per common share (basic and diluted)               $      (0.01)   $      (0.01)
                                                              ============    ============


Weighted average shares outstanding (basic and diluted)         20,619,849      17,366,281
                                                              ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                                 CYCO.NET, INC.
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
      FOR THE PERIOD FROM JANUARY 25, 1999 (INCEPTION) TO DECEMBER 31, 2000


<TABLE>
<CAPTION>
                                                              Common Stock       Additional                   Other
                                                         ----------------------    Paid in    Accumulated  Comprehensive
                                                           Shares      Amount      Capital      Deficit       (Loss)        Total
                                                         ----------   ---------   ---------    ----------    ---------    ---------
<S>                                                     <C>          <C>         <C>          <C>           <C>          <C>
Shares issued at inception for services
  at $.001 per share                                     14,976,000   $   7,200   $      --    $       --    $      --    $   7,200
Reclassification of paid in capital                              --       7,776      (7,776)           --           --           --

Shares issued for cash at $.05 per share                    208,000         208       4,792            --           --        5,000

Shares issued for services at $.05 per share                145,600         146       3,354            --           --        3,500

Shares issued for cash at $.10 per share                    769,600         770      36,230            --           --       37,000

Shares issued for services at $.10 per share                312,000         312      14,688            --           --       15,000

Shares issued in conjunction with a
  recapitalization                                        2,909,219       2,908      43,597            --      (37,500)       9,005

Shares issued for a receivable at $.10 per share            150,000         150      14,850            --           --       15,000

Shares issued for cash at $.50 per share                     20,000          20       9,980            --           --       10,000

Shares issued for cash at $.20 per share                     50,000          50       9,950            --           --       10,000

Shares issued for cash at $.05 per share                    200,000         200       9,800            --           --       10,000

Shares issued for cash at $.075 per share                   200,000         200      14,800            --           --       15,000

Unrealized loss on available for sale securities                 --          --          --            --       (4,688)      (4,688)

Net (loss) for the period ended, December 31, 1999               --          --          --      (140,442)          --     (140,442)
                                                         ----------   ---------   ---------    ----------    ---------    ---------

Balance at December 31, 1999                             19,940,419      19,940     154,265      (140,442)     (42,188)      (8,425)

Shares issued for cash at $.05 per share                    200,000         200       9,800            --           --       10,000

Shares issued for cash at $.10 per share                    520,000         520      51,480            --           --       52,000

Shares issued for services at $.10 per share              1,036,000       1,036     102,564            --           --      103,600

Shares issued in exchange for domain name
  at $.10 per share                                         250,000         250      24,750            --           --       25,000

Change in unrealized net (loss) due to sale
  of securities                                                  --          --          --            --       42,188       42,188

Net (loss) for the year ended, December 31, 2000                 --          --          --      (218,189)          --     (218,189)
                                                         ----------   ---------   ---------    ----------    ---------    ---------

Balance at December 31, 2000                             21,946,419   $  21,946   $ 342,859    $ (358,631)   $      --    $   6,174
                                                         ==========   =========   =========    ==========    =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                                   CYCO.NET, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                           YEAR ENDED     PERIOD ENDED
                                                                           DECEMBER 31,   DECEMBER 31,
                                                                               2000           1999
                                                                            ---------      ---------
<S>                                                                         <C>            <C>
Cash flows from operating actvities:
Net (loss)                                                                  $(218,189)     $(140,442)
Adjustments to reconcile net (loss) to net cash (used in)
 operating activities:
   Loss on sale of available for sale securities                               25,492             --
   Amortization                                                                 5,208             --
   Depreciation                                                                   207             --
   Write off  of note payable                                                 (10,000)            --
   Common stock issued for services                                           103,600         40,700
   Common stock issued in conjunction with a recapitalization                      --         46,505
   Available for sale securities received as payment for license rights            --        (50,000)
   Isuace of stock in exchange for a subscription receivable                       --        (15,000)
Changes in assets and liabilities:
   (Increase) in receivables                                                  (43,770)       (26,607)
   (Increase) in inventory                                                     (4,719)        (1,057)
   (Increase) decrease in prepaid expenses                                      2,295         (4,200)
   (Increase) in other receivables- related party                             (23,994)            --
   Increase  in accounts payable and accrued expenses                         118,062         45,838
                                                                            ---------      ---------
          Net cash (used in) operating activities                             (45,808)      (104,263)
                                                                            ---------      ---------
Cash flows from investing activities:
   Proceeds from sale of available for sale securities                         24,508             --
   Acquisition of property and equipment                                       (3,599)            --
                                                                            ---------      ---------
          Net cash provided by  investing activities                           20,909             --
                                                                            ---------      ---------
Cash flows from financing activities:
   Proceeds from stock issuance                                                62,000         87,000
   Decrease in subscription receivable                                         15,000             --
   Increase  (decrease) in amounts due to related party                       (18,000)        18,000
   Proceeds from notes payable                                                     --         10,000
                                                                            ---------      ---------
          Net cash provided by  financing activities                           59,000        115,000
                                                                            ---------      ---------

          Net increase  in cash                                                34,101         10,737
Cash at beginning of year                                                      10,737             --
                                                                            ---------      ---------

Cash at end of year                                                         $  44,838      $  10,737
                                                                            =========      =========
Supplemental cash flow information:
Cash paid for income taxes                                                  $      --      $      --
                                                                            =========      =========
Cash paid for interest                                                      $      53      $     103
                                                                            =========      =========
Supplemental Disclosure Of Significant
  Non-Cash Financing and Investing Activities
Common stock issued in exchange for acquisition of of domain name           $  25,000      $      --
                                                                            =========      =========
Unrealized loss on available for sale securities                            $      --      $  (4,688)
                                                                            =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Cyco.Net, Inc. (the "Company") was incorporated on January 25, 1999 in the State
of New Mexico. The Company has a network of web-based businesses.  The Company's
primary  line of  business  is the  sale of  cigarettes  through  their  website
"Cycocigs.com".

The Company was in the development  stage from its inception on January 25, 1999
through December 31, 1999. The Company commenced operations on January 1, 2000.

During July 1999 the Company  completed  reorganization  with AVE, Inc. a Nevada
corporation,  whose net assets aggregated $46,505 on a historical cost basis. In
conjunction  therewith,  AVE, Inc.  issued  16,411,200  shares of its restricted
common stock for all of the issued and outstanding common shares of the Company.
This  reorganization was accounted for as though it were a  recapitalization  of
the  Company  and sale by the  Company of  2,909,219  shares of common  stock in
exchange for the net assets of AVE, Inc.

PRINCIPLES OF CONSOLIDATION

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

REVENUE RECOGNITION

The Company's primary source of revenue is the sale of cigarettes  through their
website  "Cycocigs.com".  The Company  records revenue from cigarette sales when
product is shipped.

The Company also  generates  revenue  through  online  advertising.  The Company
recognizes  revenue from this  service on a straight  line basis over the period
the ads are displayed on the website.

CREDIT CARD PROCESSING FEES

Credit card  processing fees are recorded at the time of remittance and included
in administrative expenses. An allowance for chargebacks is also recorded at the
time of remittance. To date chargebacks have not been significant.

INVENTORY

Inventory is stated at the lower of cost or market,  cost being  determined on a
first-in, first-out basis.

ADVERTISING COSTS

The Company  expenses all costs of  advertising as incurred.  Advertising  costs
included in selling,  general and administrative  expenses  aggregated $7,489 in
2000 and $2,178 in 1999.

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.

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, 2000. The
respective  carrying  value of certain  on-balance-sheet  financial  instruments
approximated  their fair values.  These financial  instruments  include cash and
cash equivalents,  accounts  receivable,  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.

                                      F-7
<PAGE>
                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

PROPERTY AND EQUIPMENT

Property  and  equipment  is stated at cost and is being  depreciated  using the
straight-line method over the asset's estimated economic life of 5 years.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company  periodically  reviews the carrying  amount of  property,  plant and
equipment and its identifiable  intangible  assets to determine  whether current
events or  circumstances  warrant  adjustments to such carrying  amounts.  If an
impairment  adjustment is deemed necessary,  such loss is measured by the amount
that the carrying  value of such assets  exceeds their fair value.  Considerable
management  judgement  is  necessary  to  estimate  the fair  value  of  assets,
accordingly, actual results could vary significantly from such estimates. Assets
to be disposed of are carried at the lower of their financial statement carrying
amount or fair value less costs to sell.  As of December  31, 2000 there were no
such impairments.

NET (LOSS) PER COMMON SHARE

The  Company  follows  Statement  of  Financial  Accounting  Standards  No. 128,
"Earnings Per Share" ("SFAS No. 128").  Basic  earnings per common share ("EPS")
calculations  are  determined  by  dividing  net income  (loss) by the  weighted
average number of shares of common stock  outstanding  during the year.  Diluted
earnings 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 SOP 98-1.  Product and website
development  costs include amounts incurred by the Company to develop,  enhance,
manage,  monitor and operate the  Company's  website.  External  direct costs of
materials and services consumed in developing or obtaining internal-use computer
software,  payroll and  payroll-  related  costs for  employees  who devote time
directly related to the internal-use  computer  software  project,  and interest
costs incurred while developing  internal-use computer software are capitalized.
Product development costs,  preliminary project and past implementation  product
costs are expensed as  incurred.  Internal  costs for upgrades and  enhancements
that result in probable additional functionality are capitalized.

On August 1, 2000 the  Company  issued  250,000  shares of its' $0.001 par value
common stock for the purchase of a domain name.  Amortization  is computed using
the straight-line method over a life of two years.  Accumulated  amortization of
the domain name at December 31, 2000 was $5,208.

STOCK-BASED COMPENSATION

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

USE OF ESTIMATES

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

SEGMENT INFORMATION

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

                                      F-8
<PAGE>
                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

RECLASSIFICATIONS

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

Concentrations

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

MARKETABLE SECURITIES

The Company's  marketable  securities consisted of common stock holdings and are
classified  as  available-for-sale  and are  reported at fair value.  Unrealized
gains and losses are  reported,  net of taxes,  as a component of  stockholders'
equity within  accumulated  other  comprehensive  income.  Unrealized losses are
charged  against  income when a decline in fair value is  determined to be other
than temporary. The specific identification method is used to determine the cost
of securities sold.

Marketable  securities,  which  have no readily  determinable  fair  value,  are
carried at the lower of cost or market.

RECENT PRONOUNCEMENTS

The  FASB  recently  issued   Statement  No  137,   "Accounting  for  Derivative
Instruments and Hedging  Activities-Deferral of Effective Date of FASB Statement
No. 133". The Statement defers for one year the effective date of FASB Statement
No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities".  The
rule now will apply to all fiscal  quarters of all fiscal years  beginning after
June 15,  2000.  In June 1998,  the FASB issued SFAS No.  133,  "Accounting  for
Derivative  Instruments and Hedging Activities".  The Statement will require the
Company  to  recognize  all  derivatives  on the  balance  sheet at fair  value.
Derivatives  that are not hedges must be adjusted to fair value through  income.
If the derivative is a hedge,  depending on the nature of the hedge,  changes in
the fair value of  derivatives  will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive  income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately  recognized in earnings.  The Company has not engaged in any hedging
activities since their inception on January 25, 1999.

During  December 1999, the  Securities  and Exchange  Commission  released Staff
Accounting  Bulletin No. 101, Revenue  Recognition in Financial  Statements (SAS
No.  101),  which  provides  guidance  on  the  recognition,   presentation  and
disclosure  of revenue in financial  statements.  SAB No. 101 did not impact the
Company's revenue recognition policies.

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 a loss from operations as a result of its investment
necessary to achieve its operating plan, which is long-range in nature.  For the
periods  ended  December 31, 2000 and 1999,  the Company  incurred net losses of
$218,189 and  $140,442,  respectively.  At December 31, 2000,  the Company had a
working capital deficit of $41,004.

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

The Company is pursuing  financing  for its  operations  and seeking  additional
private placement investments. In addition, the Company has begun to operate its
website and generate significant revenues from the sale of its products.

                                      F-9
<PAGE>
                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

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. MARKETABLE SECURITIES

In  conjunction  with  the  recapitalization  described  in  Note 1 the  Company
acquired certain marketable  securities with a cost of $50,000 and an unrealized
loss  included in other  comprehensive  income of $37,500.  The Company sold the
securities  during the year ended December 31, 2000 for $24,508,  resulting in a
realized  loss  of  $25,492.  The  Company  had  no  investments  in  marketable
securities at December 31, 2000.

NOTE 4. STOCKHOLDERS' EQUITY

During  January 1999 the Company  issued  14,976,000  shares of common stock for
services valued at $7,200, which management believes is the fair market value of
the  services  provided.  During the period from May 1999  through July 1999 the
Company  issued  977,600  shares of its $0.001 par value common stock to various
investors for cash aggregating $42,000 and 457,600 shares of its $.001 par value
common stock to various individuals in exchange for services valued at $18,500.

During July 1999 the  Company  issued  2,909,219  shares of its $0.001 par value
common stock in conjunction with a recapitalization (see Note 1).

During the period from  August 1999  through  December  1999 the Company  issued
620,000  shares of its $0.001 par value  common stock to various  investors  for
cash  aggregating  $45,000 and a  receivable  of  $15,000.  The  receivable  was
collected during January 2000.

During the year ended  December 31, 2000,  the Company  issued 720,000 shares of
its $0.001 par value  common  stock to various  investors  for cash  aggregating
$62,000.

During the year ended December 31, 2000 the Company issued  1,036,000  shares of
its $0.001  par value  common  stock to  various  individuals  in  exchange  for
services  valued at  $103,600.  The Company  also issued  250,000  shares of its
$0.001 par value  common  stock in exchange  for the  acquisition  of a web site
valued at $25,000.

During the periods  covered by these  financial  statements  the Company  issued
shares of common stock for cash and non-cash consideration, 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 recission of the cash sales,  aggregating  2,167,600 shares of common stock,
if such  exemptions  were  found not to apply  and this  could  have a  material
negative impact on the Company.

NOTE 5. RELATED PARTY TRANSACTIONS

At December 31, 2000, the Company had a receivable  with  companies  owned by an
officer of the Company of $23,994.

At December 31, 1999, the Company had an outstanding  non-interest  bearing loan
from an officer $18,000.  The loan was repaid during the year ended December 31,
2000.

For the year ended  December  31, 2000,  the Company has included  $2,000 due to
related parties in accounts payable and accrued expenses.

                                      F-10
<PAGE>
                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

NOTE 6. INCOME TAXES

The Company  accounts for income taxes under  Statement of Financial  Accounting
Standards  No.  109,  "Accounting  for Income  Taxes"  ("SFAS No.  109"),  which
requires use of the  liability  method.  SFAS No. 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
                                                   --------          --------
Net operating loss carryforward:                   $358,000          $122,000
                                                   ========          ========

The net operating  loss carry forward will expire through 2020. The deferred tax
asset has been fully reserved at December 31, 2000.

The provision for income taxes differs from the amount  computed by applying the
statutory  federal  income tax rate of 34% to income  before income taxes due to
the  effect of the net  operating  loss.  The net  operating  loss  negates  any
provision for income taxes.

NOTE 7. STOCK BASED COMPENSATION

The Company has a  compensatory  stock option plan.  Under the plan, the Company
may grant options for up to 4,000,000 shares of common stock. The exercise price
of each option shall be determined by the  Compensation  Committee or by the CEO
with  reference to factors  such as current fair market value of the 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.

During 1999 the Company granted 600,000 options exercisable at $.10 per share to
officers of the  Company.  These  options are  exercisable  at any time  through
January 31, 2003. The Company has agreed,  to repurchase  these 600,000  options
for $60,000 upon the receipt of proceeds from a Regulation D, Rule 504 offering.

The  effect of  applying  SFAS No.  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. Had compensation cost for the
Company's  stock option plans been  determined  based upon the fair value at the
grant date for awards under the plans consistent with the methodology prescribed
under SFAS No. 123, the Company's net (loss) would be unchanged.

NOTE 8. COMMITMENTS

In  August  1999 the  Company  entered  into a line of  credit  agreement  ("the
agreement").  Pursuant to the terms of the  agreement  the Company may issue and
sell to an  investor  up to  $890,000  of  debentures.  The  investments  in the
debentures  may be made in  reliance  upon  the  provisions  of Rule  504 of the
Securities Act of 1933 and other exemptions from  registration of the Securities
Act as may be  available.  These  debentures  contain  a  beneficial  conversion
feature  in  that  they  are  convertible  at 75% of the  trading  price  of the
Company's common stock. The beneficial  conversion feature will be recognized at
the time the  instruments  are  issued  and the  value  of the  feature  will be
allocated to paid in capital.  As of the date of these  financial  statements no
debentures have been issued.

                                      F-11
<PAGE>
                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999

The Company leases office and warehouse  space under an operating lease expiring
during  April  2002.  The lease calls for  monthly  payments  of $1,664.  Rental
expense for the years ended  December 31, 2000 and 1999 were $12,460 and $7,605,
respectively.

Minimum  annual  future  rent  payments  related to the  operating  lease are as
follows:

          Year
          ----
          2001                $19,970
          2002                  6,810
                              -------
                              $26,780
                              =======

NOTE 9. SUBSEQUENT EVENT

During April 2001 the Company  authorized  the  issuance of 4,000,000  shares of
their $0.001 par value common stock to three members of their management team.

                                      F-12