UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

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

                   For the fiscal year ended December 31, 2001

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

         For transition period from _______________ to _________________

                        Commission file number 000-30244
                                 CYCO.NET, INC.
                 (Name of small business issuer in its charter)

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

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

           Issuer's telephone number                        (505) 344-9643

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

None

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

Title of each class
Common Stock, $0.001 par value

      Check  whether  the issuer (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. [x]Yes [ ] No

      Check if there is no disclosure  of delinquent  filers in response to Item
405 of  Regulation  SB  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]

      The registrant's  operating  revenues for its most recent fiscal year were
$4,213,321.

      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 March 10,
2002.

      The number of shares of Common Stock  outstanding as of March 18, 2002 was
26,496,419.


<PAGE>


                                     PART I


ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW

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

CORE BUSINESS

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

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

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

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

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

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

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

         o  Purchaser must be 18 years of age.

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

         o  Limit of 10 cartons per customer per order.

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

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


                                       1
<PAGE>

CYCO.NET

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

      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.

      Second,  there 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,  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.

      Lastly,  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.  We believe  such  barriers  inhibit an
in-depth use of the site.

      Cyco.net will focus on maximizing the number of hits or visitors a day. As
more and more customers  visit Cyco.net,  we intend to position  ourself to take
advantage of the audience that Cyco.net is  attracting.  We intend to accomplish
this by building  e-businesses,  which will sell  products  and  services to the
Cyco.net  visitors.  Every  Cyco.net  visitor is a potential  customer  for many
products  and  services  that will be  provided  by the site or  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
dollars worth of advertising  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.




                                       2
<PAGE>

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




                                       3
<PAGE>

GROWTH

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

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


GOVERNMENT REGULATION


EXCISE TAXES

      Cigarettes are generally subject to substantial  federal,  state and local
excise taxes in the United  States.  The Quil ruling by the U.S.  Supreme  Court
states that a state  cannot  place undue  burden on a company that does not have
physical operations in that state. In addition,  a moratorium has been placed on
taxing internet sales for at least 2 more years. 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.  The federal
excise tax on  cigarettes  is currently  $0.39 per pack of 20  cigarettes.  When
combined with state and local taxes, taxes may be as high as $1.87 per pack.


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.


EMPLOYEES

      Cyco.net,  Inc. currently has three full-time  employees and one part time
employee.


COMPANY HISTORY

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

      On July 22, 1999, AVE, Inc. acquired  Cyco.net,  Inc. of Albuquerque,  New
Mexico in a transaction  accounted for as a recapitalization  of Cyco.net,  Inc.
Cyco.net  was  established  in December  1998 to develop a network of  web-based
companies.  Under the terms of the  agreement,  AVE,  Inc.  changed  its name to
Cyco.net,  Inc. Mr. R. Gene  Klawetter,  former  Chairman  and CEO of AVE,  Inc.
became a director of Cyco.net,  Inc. George Sullivan,  former AVE Vice President
of Operations resigned, as did Henri Hornby, former Director of AVE, Inc. In the
transaction,  Cyco.net,  Inc.  shareholders  received  2.08  shares  of AVE (now


                                       4
<PAGE>

Cyco.net) for each share of Cyco.net,  Inc. stock.  This provided the former AVE
shareholders  with 15% ownership  interest in the surviving company and Cyco.net
shareholders with 85% ownership interest of the surviving company.


RISKS RELATED TO OUR BUSINESS

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


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

      We have  historically lost money. In the years ended December 31, 2001 and
2000,  we had net losses of $118,488 and $218,189,  respectively.  Future losses
are likely to occur.  Accordingly,  we may experience  significant liquidity and
cash flow problems because historically our operations have not been profitable.
No assurances can be given that we will be successful in reaching or maintaining
profitable operations.


WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS

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


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

      Our  independent  auditors  have added an  explanatory  paragraph to their
audit opinions  issued in connection  with the years ended December 31, 2001 and
2000 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, 2001 WERE NOT SUFFICIENT TO SATISFY OUR CURRENT LIABILITIES

      We had a working capital  deficit of $146,329 at December 31, 2001,  which
means that our current  liabilities  exceeded our current assets on December 31,
2001 by $146,329. 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, 2001 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


                                       5
<PAGE>

in our common stock to sell shares to third  parties or to otherwise  dispose of
them. This could cause our stock price to decline. Penny stocks are stock:

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

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

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

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

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


WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL

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


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


                                       6
<PAGE>

enforcement  could  adversely  affect sales  because the absence of excise taxes
makes the prices of our products less expensive than some  competitors'  prices.
The cost burden of  reporting  to every  state tax  authority  could  affect the
profitability of Cyco.net.


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

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


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

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


ITEM 2.  DESCRIPTION OF PROPERTY

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


ITEM 3.  LEGAL PROCEEDINGS

      None.


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

      None.


                                       7
<PAGE>



                                     PART II


ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

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

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

                                               BID PRICE PER SHARE
                                            -------------------------
                                                HIGH          LOW
                                            ----------    -----------
      January 4, 1999 - March 31, 1999        $0.8125       $0.1563
      April 1, 1999 - June 30, 1999           $0.7188       $0.1250
      July 1, 1999 - September 30, 1999       $0.7813       $0.2000
      October 1, 1999 - December 31, 1999     $0.1500       $0.0200

      January 3, 2000 - March 31, 2000        $0.6000       $0.1250
      April 3, 2000 - June 30, 2000           $0.1800       $0.1000
      July 3, 2000 - September 29, 2000       $0.1300       $0.1000
      October 2, 2000 - December 29, 2000     $0.1000       $0.1000

      January 2, 2001 - March 30, 2001        $0.1000       $0.0200
      April 2, 2001 - June 29, 2001           $0.1200       $0.0200
      July 2, 2001 - September 28, 2001       $0.1200       $0.0600
      October 1, 2001 - December 31, 2001     $0.1000       $0.0600

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

      As of March 18,  2002,  Cyco.net  believes  there were  approximately  509
holders of record of our common stock.

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


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

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


PLAN OF OPERATION

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

         o  Locating appropriate facilities in which to ship product.

         o  Launching an affiliate  program to build  traffic to its  e-commerce
            sites.



                                       8
<PAGE>

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

         o  Continue funding efforts.

         o  Maintain  and add  features to the  Cyco.net  site,  i.e.,  location
            cameras providing live feed from worldwide locations of interest.

         o  Pursue   advertising   contracts   from  major  tobacco  and  spirit
            manufacturers.

         o  Hire  additional  employees,  as  needed.  The  hiring of one to two
            additional full-time employees is projected in the next 12 months.

      Furthermore,  Cyco.net  plans to identify  other niches in  e-commerce  to
expand and  diversify  its business to reduce  dependence  on a single sector of
product.


RESULTS OF OPERATIONS


YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000

      Revenues for the year ended December 31, 2001 were $4,213,321  compared to
2,496,018 for the comparable period in the prior year.  Cyco.net's  revenues for
the current year are attributable to the sale of cigarettes on the Internet.

      Cost of goods sold was $3,936,327, or 93.4% of revenues for the year ended
December 31, 2001  compared to  $2,380,213,  or 95.4% of revenues,  for the same
period last year. The decrease in the cost of goods sold, expressed as a percent
of revenues,  was due to an increase in sales of discount  cigarette brands that
have  higher  profit  margins.  Included  in the cost of goods sold for the year
ended December 31, 2001, was the cost of the product of $3,572,456, the shipping
costs of  $234,167,  the  credit  card  processing  fees of  $125,105  and other
miscellaneous  costs of $4,599.  Cost of goods sold for the prior year included,
the cost of the product of  $2,184,829,  the  shipping  costs of  $119,897,  the
credit card processing fees of $62,737 and other miscellaneous costs of $12,750.

      General and  administrative  expenses for the year ended December 31, 2001
were $395,329 or 9.4% of revenues,  compared to $308,449,  or 12.4% of revenues,
for the same period last year.  During the year ended  December  31,  2001,  the
major   components  of  general  and   administrative   expenses   consisted  of
approximately   $19,068  in  advertising,   $258,445  in  payroll,   $36,794  in
professional fees, $25,018 in rent, $21,686 in amortization and depreciation and
$34,318 in miscellaneous other expenses.  Included in general and administrative
expenses  during  the  same  period  last  year  were  approximately  $7,488  in
advertising,  $109,425 in payroll,  $133,769 in  professional  fees,  $12,894 in
rent, $5,415 in amortization and depreciation and $39,458 in miscellaneous other
expenses.

      Cyco.net  had a net loss for the year ended  December 31, 2001 of $118,488
compared  to a net  loss of  $218,189  for  the  same  period  last  year.  This
improvement is due primarily to increased  revenues in the current year compared
to the prior year. In addition,  during the prior year, Cyco.net realized a loss
of $25,492 from the sale of securities it had acquired for a cost of $50,000.


FINANCIAL RESOURCES AND LIQUIDITY

      For the year ended December 31, 2001,  cash used in operations was $2,781,
cash used in  investing  activities  was  $36,126,  and cash  used in  financing
activities  was $712.  This resulted in a net decrease in cash of $39,619 in the
year ended December 31, 2001. Cash used in operations  consisted mainly of a net
loss of $118,488 and an increase in deferred offering costs, which was partially
offset by amortization and depreciation expenses of $21,687, common stock issued
for services of $110,800, a decrease in receivables of $38,381 and a increase in
accounts  payable  and  accrued  expenses  of  $28,908.  Cash used in  investing
activities  consisted mainly of fees incurred in the development of its Internet
websites. As of December 31, 2001, Cyco.net had cash-on-hand of $5,219.

      Prior to the fourth  quarter of 2000,  Cyco.net  was able to meet its cash
requirements partially from the sale of cigarettes, with the balance of its cash
needs coming from the sale of  securities  in private  transactions.  During the
fourth quarter of 2000 and the year ended  December 31, 2001,  Cyco.net was able
to meet its cash needs solely through the sales of cigarettes.  Cyco.net expects
to  experience  an increase in its product sales that will be sufficient to meet
its current operating  expenses and without factoring in any spending to enhance
growth.  However,  Cyco.net  will need to raise  additional  capital  to finance
growth,  including  locating  new  facilities  to  ship  product,  launching  an
affiliate  program,  advertising,  enhancing  its website and hiring  additional


                                       9
<PAGE>

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

      Pursuant to the Equity Line of Credit, Cyco.net may, at its discretion for
up to 2 years,  periodically  issue and sell up to  40,000,000  shares of common
stock for a total  purchase  price of $5.0  million.  If  Cyco.net  requests  an
advance under the Equity Line of Credit,  Cornell  Capital  Partners,  L.P. will
purchase  shares of common stock for 82% of the lowest  closing bid price on the
Over-the-Counter  Bulletin Board or other  principal  market on which our common
stock is traded for the 5 days  immediately  following the notice date.  Cornell
Capital  Partners,  L.P.  intends to sell any shares  purchased under the Equity
Line of Credit at the market price. The  effectiveness of the sale of the shares
under the Equity Line of Credit is  conditioned  upon Cyco.net  registering  the
shares of common stock with the  Securities  and Exchange  Commission.  Cyco.net
filed a  Registration  Statement on Form SB-2 with the  Securities  and Exchange
Commission on September  13, 2001. On December 12, 2001,  Form SB-2 was amended.
The  Registration  Statement  is currently  pending  before the  Securities  and
Exchange Commission.


RECENT SALES OF UNREGISTERED SECURITIES

      In August 2001,  Cyco.net entered into the Equity Line of Credit Agreement
with  Cornell  Capital  Partners,  L.P.  pursuant  to which  it may  issue up to
40,000,000  shares of common stock at an 18% discount to the  prevailing  market
price of the common stock.  In August 2001,  Cyco.net  issued  500,000 shares of
common  stock to Persia  Consulting  Group  for  consulting  services  valued at
$40,000 or $0.08 per share.  Cyco.net  also issued 50,000 shares of common stock
to David Gonzalez for consulting  services  valued at $4,000 or $0.08 per share.
Cyco.net  issued  options to Lynnette  Budagher to  purchase  750,000  shares of
common stock at an exercise price of $0.06 per share.

      In April 2001,  Cyco.net had the  following  equity  transactions,  all of
which were  valued at the fair market  value of the common  stock on the date of
the transaction:

         o  Cyco.net issued  3,500,000 shares of common stock valued at $70,000,
            one-half to Richard Urrea and one-half to Daniel Urrea.

         o  Cyco.net  issued 500,000 shares of common stock valued at $10,000 to
            Brent Wolford as compensation for enhancements made to its website.

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

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

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



                                       10
<PAGE>

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


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


      During the period from May 1999 through July 1999, Cyco.net issued 977,600
shares of its $0.001 par value common stock for cash aggregating $42,000.  These
shares were issued as  follows:  Max  Sonnenberg  purchased  104,000  shares for
$5,000;  Larry  Minarsich  purchased  208,000  shares for  $10,000;  Doug Fenton
purchased 41,600 shares for $2,000;  Daniel Behles purchased  104,000 shares for
$5,000;  Charles  Elias and Joseph Elias  purchased  104,000  shares for $5,000;
Dennis Chavez purchased 208,000 shares for $10,000; and Con Queso, LLC purchased
208,000 shares for $5,000.  In addition, during the period from May 1999 through
July 1999, Cyco.net issued 457,600 shares of its $.001 par value common stock to
various  individuals  in exchange for services  valued at $18,500.  These shares
were  issued as  follows:  Con  Queso,  LLC  received  145,000  shares for legal
services valued at $3,500; Leon Palmisano received 208,000 shares for consulting
valued at  $10,000;  and Paul  Roney  received  104,000  shares  for aid in fund
raising valued at $5,000.

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


             Name           # of shares            Name            # of shares
             ----           -----------            ----            -----------
      Francisco Urrea, Jr.   2,496,000     Nunzio DeSantis Family
      Richard Urrea          2,496,000       Trust                  2,496,000
      MAU, LLC               2,496,000     Brent Wolford            2,080,000
      Daniel Urrea           2,496,000     Trey Urrea                 416,000


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


RECENT ACCOUNTING PRONOUNCEMENTS

      In December  1999, the  Securities  and Exchange  Commission  issued Staff
Accounting  Bulletin No. 101 ("SAB 101"). SAB 101 provides  guidance on applying
accounting  principles  generally  accepted  in the United  States of America to
revenue  recognition  in financial  statements and is effective in the Company's
fourth quarter of 2000. The  implementation of SAB 101 did not have an impact on
the Company's operating results.

      In July 2001, the Financial  Accounting Standards Board (FASB) issued SFAS
141, Business  Combinations,  and SFAS 142, Goodwill and Intangible Assets. SFAS
141 is effective for all business  combinations  completed  after June 30, 2001.
SFAS 142 is effective for the year beginning  January 1, 2002;  however  certain
provisions  of that  Statement  apply to goodwill  and other  intangible  assets
acquired  between July 1, 2001,  and the effective date of SFAS 142. The Company
does not believe the adoption of these  standards will have a material impact on
its financial statements.

      In July  2001,  the  FASB  issued  SFAS  No.  143,  Accounting  for  Asset
Retirement  Obligations.  This  statement  addresses  financial  accounting  and
reporting for obligations  associated with the retirement of tangible long-lived
assets and the associated asset retirement  costs. This Statement applies to all
entities.  It applies to legal  obligations  associated  with the  retirement of
long-lived  assets that result from the acquisition,  construction,  development
and  (or) the  normal  operation  of a  long-lived  asset,  except  for  certain


                                       11
<PAGE>

obligations  of lessees.  This  Statement is effective for financial  statements
issued for fiscal years beginning after June 15, 2002. The Company is evaluating
the impact of the  adoption  of this  standard  and has not yet  determined  the
effect of adoption on its financial position and results of operations.

      In  August  2001,  the  FASB  issued  SFAS  No.  144,  Accounting  for the
Impairment or Disposal of Long-Lived Assets.  This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes  FASB Statement No. 121,  Accounting for the Impairment of Long-Lived
Assets  and for  Long-Lived  Assets to Be  Disposed  Of. The  provisions  of the
statement  are  effective  for  financial  statements  issued for  fiscal  years
beginning  after  December 15, 2001. The Company is evaluating the impact of the
adoption of this standard and has not yet  determined  the effect of adoption on
its financial position and results of operations.


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.


                                       12
<PAGE>


                                    PART III


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

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

      NAME                      AGE     POSITION
      -----------------------   ------- ---------------------------------------
      Richard Urrea             37      Chief Executive Officer and President
      Daniel Urrea              30      Chief Financial Officer
      Brent Wolford             25      Chief Technical Officer
      Matthew Urrea             34      Chief Counsel
      Francisco Urrea, Jr.      72      Director


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

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

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

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


                                       13
<PAGE>

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,
New Mexico.  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.


FAMILY RELATIONSHIPS

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


ITEM 10.  EXECUTIVE COMPENSATION

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

<TABLE>
<CAPTION>

                                       ANNUAL COMPENSATION                    LONG-TERM COMPENSATION
                          ---------------------------------------------  ---------------------------------
                                                                                 AWARDS           PAYOUTS
                                                                         ----------------------  ---------
                                                            OTHER        RESTRICTED
                                                            ANNUAL         STOCK      OPTIONS/     LTIP      ALL OTHER
NAME AND                           SALARY     BONUS      COMPENSATION     AWARD(S)      SARS      PAYOUTS   COMPENSATION
PRINCIPAL POSITION         YEAR       ($)       ($)           ($)            ($)         (#)        ($)         ($)
------------------         ----       ---       ---           ---            ---         ---        ---         ---
<S>                    <C>      <C>         <C>           <C>        <C>              <C>       <C>          <C>

Richard Urrea,             2001    $75,600      --            --         $35,000(1)       --        --           --
Chief Executive Officer    2000    $70,999      --            --              --)         --        --           --
and President              1999    $28,666      --            --              --          --        --           --

Daniel Urrea,              2001    $40,000      --            --         $35,000(1)       --        --           --
Chief Financial Officer    2000    $29,999      --            --              --)         --        --           --
                           1999    $10,000      --            --              --          --        --           --

Brent Wolford,             2001    $24,000      --            --         $10,000(1)       --        --           --
Chief Technical Officer    2000     $9,000      --            --              --          --        --           --
                           1999     $7,000      --            --              --          --        --           --

</TABLE>

_______________

      (1) These  represent  1,750,000  shares of common  stock issued to each of
Richard Urrea and Daniel Urrea and 500,000 shares issued to Brent Wolford. These
shares were valued at $0.02 per share on the date of grant.




                                       14
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

      The following table sets forth, as of December 31, 2001,  information with
respect to the beneficial  ownership of our common stock by (i) persons known by
us to beneficially  own more than five percent of the outstanding  shares,  (ii)
each director, (iii) each executive officer and (iv) all directors and executive
officers as a group.

                                                          Common Stock
                                                       Beneficially Owned
                                                -------------------------------
Name/Address                                        Number          Percent(1)
-----------------------------------------       ----------------  -------------
Richard Urrea                                     4,246,000           16.2%
600 Alcalde SW #4D
Albuquerque, NM 87104

Matthew Urrea                                     2,496,000            9.4%
2213 Matthew NW
Albuquerque, NM 87110

Daniel Urrea                                      4,246,000           16.2%
3009 Charleston NE
Albuquerque, NM 87110

Nunzio P De Santis                                2,496,000            9.4%
600 Central Ave. S.W., 3rd Floor
Albuquerque, NM 87102

Francisco Urrea Jr.                               2,184,000            8.2%
3009 Charleston NE
Albuquerque, NM 87110

Brent Wolford                                     2,580,000            9.7%
2601 Silver Avenue SE #8
Albuquerque, NM 87106

Con Queso, LLC(2)                                 1,353,600            5.1%
P.O. Box 7460
Albuquerque, NM 87194

Henri Hornby                                      1,082,540            4.1%
3653 Hemlock Court
Reno, NV 89509

All Officers and Directors                       15,752,000           59.4%

____________________________________

(1)      Applicable  percentage  of ownership is based on  26,496,419  shares of
         common  stock  outstanding  as of  December  31,  2001,  together  with
         applicable  options  for  each  shareholder.  Beneficial  ownership  is
         determined in accordance with the rules of the Commission and generally
         includes voting or investment power with respect to securities.  Shares
         of common stock  subject to options that are currently  exercisable  or
         exercisable  within  60 days of  December  31,  2001 are  deemed  to be
         beneficially  owned by the person  holding such options for the purpose
         of computing the  percentage  of ownership of such person,  but are not
         treated as  outstanding  for the purpose of  computing  the  percentage
         ownership of any other person. The common stock is the only outstanding
         class of equity securities of Cyco.net.

(2)      The individual who has beneficial ownership of these shares is Victoria
         Dever.




                                       15
<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      During the years ended December 31, 2001 and 2000, Cyco.net paid Francisco
Urrea Jr., $3,500 and $6,500  respectively for consulting and paid Brent Wolford
$24,000 and $9,000 respectively for website consulting.

      At December 31, 2001,  Cyco.net had a non-interest  bearing loan to Daniel
Urrea, our Chief Financial Officer, of $2,500.

      At December 31, 2001, Cyco.net had a non-interest  bearing loan to Richard
Urrea, our Chief Executive Officer and President,  of $16,900.  In addition,  in
the second and third quarters of 1999, Cyco.net extended a non-interest  bearing
loan of $11,700 to Richard Urrea, our Chief Executive Officer and President.  In
December 2000, Richard Urrea repaid $6,400 of this loan.

      In April  2001,  Cyco.net  issued a total of  4,000,000  shares  of common
stock,  consisting of 1,750,000  shares to Richard  Urrea,  our Chief  Executive
Officer and President;  1,750,000  shares to Daniel Urrea,  our Chief  Financial
Officer; and 500,000 shares to Brent Wolford, our Chief Technical Officer. These
shares were issued as bonus compensation.  On the date of grant, the shares were
valued at $0.02 per share or a total of $80,000.

      In December  1999,  Cyco.net  borrowed  $18,000 from  Francisco  Urrea,  a
director of Cyco.net.  This loan accrued  interest at 7% per year and was repaid
in June 2000.


                                       16
<PAGE>


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

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

<TABLE>
<CAPTION>

EXHIBIT NO.           DESCRIPTION                                              LOCATION
--------------------  -------------------------------------------------------  ----------------------------------------------
<S>                <C>                                                     <C>

2.1                   Acquisition Agreement between Ave and DMI                Incorporated by reference to Exhibit 2.1 to
                                                                               the Company's Annual Report on Form 10-KSB as
                                                                               filed with the Securities and Exchange
                                                                               Commission on April 16, 2001

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

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

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

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

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

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

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

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

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

                                       17
<PAGE>




EXHIBIT NO.           DESCRIPTION                                              LOCATION
--------------------  -------------------------------------------------------  ----------------------------------------------
3.9                   By-Laws of Cyco.net, Inc.                                Incorporated by reference to Exhibit 21.5 to
                                                                               the Company's Annual Report on Form 10-KSB as
                                                                               filed with the Securities and Exchange
                                                                               Commission on April 16, 2001

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

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

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

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

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

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

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

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

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

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



                                       18
<PAGE>


EXHIBIT NO.           DESCRIPTION                                              LOCATION
--------------------  -------------------------------------------------------  ----------------------------------------------
10.8                  Warrant dated as of August 2001 given by Cyco.net to     Incorporated by reference to Exhibit 10.7 to
                      Cornell Capital Partners, L.P.                           the Company's 10-QSB for the quarter ended
                                                                               September 30, 2001 filed with the Securities
                                                                               and Exchange Commission on November 12, 2001

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

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

23.1                  Consent of Stark Winter Schenkein & Co., LLP             Provided herewith

</TABLE>


      (b) No reports on Form 8-K were filed under the Securities Exchange Act of
1934 during the quarter ended September 30, 2001.



                                       19
<PAGE>



                                 CYCO.NET, INC.
                                TABLE OF CONTENTS

                                                                         Page
                                                                         ----

Report of Independent Auditors                                              1

Consolidated Balance Sheet                                                  2

Consolidated Statements of Operations                                       3

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

Consolidated Statements of Cash Flows                                       5

Notes to Consolidated Financial Statements                               6-16



                                      F-i

<PAGE>



REPORT OF INDEPENDENT AUDITORS


Shareholders and Board of Directors
Cyco.Net, Inc.


We have audited the accompanying  consolidated balance sheet of Cyco.Net, Inc as
of December 31, 2001,  and the related  consolidated  statements of  operations,
stockholders'  (deficit) equity,  and cash flows for each of the two years ended
December 31, 2001.  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, 2001, and the results of its operations,  and its cash flows for each of the
two years ended  December 31, 2001, in  conformity  with  accounting  principles
generally accepted in the United States of America.

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


Stark, Winter, Schenkein & Co, LLC
/s/ Stark Winter Schenkein & Co., LLP

Denver, Colorado
February 13, 2001

                                      F-1


<PAGE>




                                 CYCO.NET, INC.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2001

                               ASSETS
CURRENT ASSETS
  Cash                                                         $ 5,219
  Receivables                                                   31,996
  Inventory                                                      9,264
                                                      -----------------
   Total current assets                                         46,479
                                                      -----------------

PROPERTY AND EQUIPMENT, net of
  accumulated depreciation of $1,390                             4,335
                                                      -----------------

OTHER ASSETS
  Deferred offering costs                                       80,581
  Intangible assets - Domain name and website,
    net of accumulated amortization of $25,712                  33,288
  Other receivables - related parties                           24,706
   Deposit                                                       1,905
                                                      -----------------
                                                               140,480
                                                      -----------------

                                                             $ 191,294
                                                      =================

                     LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
  Accounts payable and accrued expenses                      $ 191,808
  Accounts payable - related party                               1,000
                                                      -----------------
                                                               192,808
                                                      -----------------

STOCKHOLDERS' (DEFICIT)
   Common Stock, $0.001 par value,
     100,000,000 shares authorized,
     26,496,419 issued and outstanding                          26,496
   Additional paid in capital                                  449,109
   Accumulated (deficit)                                      (477,119)
                                                      -----------------
                                                                (1,514)
                                                      -----------------

                                                             $ 191,294
                                                      =================

          See accompanying notes to consolidated financial statements.



                                      F-2
<PAGE>




                                 CYCO.NET, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                  YEAR ENDED DECEMBER 31,
                                          --------------------------------------
                                               2001                 2000
                                               ----                 ----

Revenues                                  $ 4,213,321          $ 2,496,018
Cost of goods sold
   Product                                  3,572,456            2,184,829
   Shipping                                   234,167              119,897
   Credit card processing                     125,105               62,737
   Other                                        4,599               12,750
                                        -----------------    -----------------
                                            3,936,327            2,380,213
                                        -----------------    -----------------

Gross profit                                  276,994              115,805

General and administrative expenses           395,329              308,449
                                         -----------------    -----------------

(Loss) from operations                       (118,335)            (192,644)
                                         -----------------    -----------------

Other income (expense)
Interest expense                                 (153)                 (53)
Loss on sale of available for sale                  -              (25,492)
 securities                              -----------------    -----------------
                                                 (153)             (25,545)
                                         -----------------    -----------------

Net (loss)                                 $ (118,488)          $ (218,189)
                                         =================    =================

Per share information:
Net (loss) per common share (basic
 and diluted)                                 $ (0.00)             $ (0.01)
                                         =================    =================

Weighted average shares outstanding
 (basic and diluted)                       25,530,392           20,619,849
                                         =================    =================



          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>


<TABLE>
<CAPTION>

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


                                                                         Additional                     Other
                                                       Common Stock       Paid in     Accumulated   Comprehensive
                                                    Shares      Amount    Capital      (Deficit)        (Loss)           Total
                                                   --------   ---------  -----------  -----------   -------------     ----------
<S>                                           <C>          <C>       <C>           <C>             <C>              <C>

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


Shares issued fo services a $0.02 per share        4,000,000       4,000    76,000         -              -              80,000

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

  Net (loss) for the year ended, December 31,
   2001                                                 -            -        -         (118,488)         -            (118,488)
                                                  -----------  ---------- ----------   ----------    ------------    ------------
Balance at December 31, 2001                      26,496,419     $ 26,496 $449,109    $ (477,119)       $ -            $ (1,514)
                                                  ===========  ========== ==========   ==========    ============    ============
</TABLE>




          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>



                                   CYCO.NET, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                            YEAR ENDED
                                                            DECEMBER 31,
                                                   -----------------------------
Cash flows from operating actvities:                   2001            2000
                                                   -------------- --------------

Net (loss)                                         $   (118,488)  $    (218,189)

Adjustments to reconcile net (loss) to net
 cash (used in) operating activities:
   Loss on sale of available for sale securities              -          25,492
   Amortization                                          20,504           5,208
   Depreciation                                           1,183             207
   Write off  of note payable                                 -         (10,000)
   Common stock issued for services                     110,800         103,600
Changes in assets and liabilities:
   Decrease (increase) in receivables                    38,381         (43,770)
   (Increase) in inventory                               (3,488)         (4,719)
   (Increase) in deferred offering costs                (80,581)              -
   Decrease in deposit                                        -           2,295
   Increase  in accounts payable and accrued
    expenses                                             28,908         118,062
                                                  --------------  --------------
       Net cash (used in) operating activities           (2,781)        (21,814)
                                                  --------------  --------------

Cash flows from investing activities:
   Proceeds from sale of available for sale
    securities                                                -          24,508
   Acquisition of intangible assets                     (34,000)              -
   Acquisition of property and equipment                 (2,126)         (3,599)
                                                  --------------  --------------
       Net cash provided by (used in) investing
       activities                                       (36,126)         20,909
                                                  --------------  --------------

Cash flows from financing activities:
   Proceeds from stock issuance                               -          62,000
   (Decrease) in amounts due to related party              (712)        (41,994)
   Payment of subscription receivable                         -          15,000
                                                  --------------  --------------
       Net cash provided by (used in)
        financing activities                               (712)         35,006
                                                  --------------  --------------

       Net increase (decrease) in cash                  (39,619)         34,101
Beginning cash balance                                   44,838          10,737
                                                  --------------  --------------

Ending cash balance                                     $ 5,219        $ 44,838
                                                  ==============  ==============

Supplemental cash flow information:
Cash paid for income taxes                                  $ -             $ -
                                                  ==============  ==============
Cash paid for interest                                    $ 153            $ 53
                                                  ==============  ==============

Supplemental Disclosure Of Significant Non-Cash
 Financing and Investing Activities Common stock
 issued in exchange for acquisition of of domain
 name                                                       $ -        $ 25,000
                                                  ==============  ==============


          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>


                                 CYCO.NET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


ORGANIZATION

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


PRINCIPLES OF CONSOLIDATION

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


REVENUE RECOGNITION

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

Outbound shipping charges to customers are included in net sales and amounted to
$268,494 and $134,933 during December 31, 2001 and 2000, respectively.


CREDIT CARD COSTS

The Company  receives  payment for their product via credit  cards.  Credit card
costs are expensed in the period incurred.

INVENTORY

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


ADVERTISING

The Company  expenses all costs of  advertising as incurred.  Advertising  costs
included in general and administrative  expenses  aggregated $19,068 in 2001 and
$7,498 in 2000.


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, 2001. The
respective  carrying  value of certain  on-balance-sheet  financial  instruments
approximated  their fair values.  These financial  instruments  include cash and
cash equivalents,  receivables and accounts payable and accrued  expenses.  Fair
values  were  assumed  to  approximate   carrying  values  for  these  financial
instruments  because  they are short  term in  nature,  their  carrying  amounts
approximate fair values, or they are receivable or payable on demand.


PROPERTY AND EQUIPMENT

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


                                      F-6
<PAGE>



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, 2001 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  (loss) 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 (loss) per common share calculations are determined by dividing
net income (loss) by the weighted  average  number of common shares and dilutive
common  share  equivalents  outstanding.   During  the  periods  when  they  are
anti-dilutive,  common  stock  equivalents,  if any, are not  considered  in the
computation.


INTANGIBLES

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

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.  During the year ended  December
31, 2001 the Company  capitalized  $34,000 of costs  related to  development  of
their website.  Accumulated  amortization of these intangible assets at December
31, 2001 and 2000 was $25,712 and $5,208, respectively.


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.

The Company has issued its common stock as  compensation to  non-employees.  The
Company measures the amount of stock-based  compensation based on the fair value
of the equity  instrument  issued or the  services  or goods  provided as of the
earlier of (1) the date at which an agreement  is reached with the  non-employee
as to the  number of shares to be  issued  for  performance,  or (2) the date at
which the non-employees' performance is complete.


USE OF ESTIMATES

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


                                      F-7
<PAGE>



SEGMENT INFORMATION

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


RECLASSIFICATIONS

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


CONCENTRATIONS

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

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

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


RECENT PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB 101"). SAB 101 provides  guidance on applying  accounting
principles  generally  accepted  in the  United  States of  America  to  revenue
recognition  in financial  statements  and is effective in the Company's  fourth
quarter  of 2000.  The  implementation  of SAB 101 did not have an impact on the
Company's operating results.

In July 2001, the Financial  Accounting  Standards Board (FASB) issued SFAS 141,
Business Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is
effective for all business combinations  completed after June 30, 2001. SFAS 142
is effective for the year beginning January 1, 2002;  however certain provisions
of that Statement apply to goodwill and other intangible assets acquired between
July 1, 2001,  and the effective  date of SFAS 142. The Company does not believe
the adoption of these  standards  will have a material  impact on its  financial
statements.

In July 2001,  the FASB  issued SFAS No. 143,  Accounting  for Asset  Retirement
Obligations.  This statement  addresses  financial  accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs.  This Statement  applies to all entities.  It
applies to legal obligations associated with the retirement of long-lived assets
that result from the acquisition,  construction, development and (or) the normal
operation of a long-lived asset, except for certain obligations of lessees. This
Statement  is  effective  for  financial  statements  issued  for  fiscal  years
beginning  after June 15,  2002.  The  Company is  evaluating  the impact of the
adoption of this standard and has not yet  determined  the effect of adoption on
its financial position and results of operations.


                                      F-8
<PAGE>



In August 2001,  the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal of Long-Lived Assets. This statement addresses financial accounting and
reporting for the  impairment or disposal of  long-lived  assets and  supersedes
FASB Statement No. 121,  Accounting for the Impairment of Long-Lived  Assets and
for  Long-Lived  Assets to Be Disposed Of. The  provisions  of the statement are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001.  The Company is evaluating the impact of the adoption of this
standard  and has not yet  determined  the effect of adoption  on its  financial
position and results of operations.


NOTE 2.  GOING CONCERN

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

The Company has experienced losses from operations as a result of its investment
necessary to achieve its operating plan, which is long-range in nature.  For the
years ended  December  31, 2001 and 2000,  the Company  incurred net (losses) of
$118,488 and  $218,189,  respectively.  At December 31, 2001,  the Company had a
working capital (deficit) of $146,329 and stockholders' (deficit) of $1,514.

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.

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.  LOSS ON INVESTMENT

In conjunction with a recapitalization,  which occurred during 1999, the Company
acquired certain marketable  securities with a cost of $50,000 and a fair market
value of $12,500. The Company sold the securities during the year ended December
31, 2000 for $24,508, resulting in a realized loss of $25,492.


NOTE 4.  EQUITY LINE OF CREDIT

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

The  effectiveness  of the sale of the shares under the Equity Line of Credit is
conditioned  upon registering the shares of common stock with the Securities and
Exchange Commission (See Note 5).

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



                                      F-9
<PAGE>


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

COMMITMENT  PERIOD.  The  Company  may request an advance at any time during the
commitment  period.  The commitment period begins on the date the Securities and
Exchange  Commission first declares the registration  statement  effective.  The
commitment  period  expires  on the  earliest  to occur of (i) the date on which
Cornell  has made  advances  totaling  $5,000,000  or (ii) two  years  after the
effective  date of the  registration  statement.  As of the  date  of the  audit
report,  the  registration  statement  had not  being  deemed  effective  by the
Securities and Exchange Commission.

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

NUMBER OF SHARES TO BE ISSUED.  The Company  cannot predict the actual number of
shares  of common  stock  that will be issued  pursuant  to the  Equity  Line of
Credit,  in part,  because the purchase price of the shares will fluctuate based
on prevailing  market  conditions  and the Company has not  determined the total
amount of advances to be drawn. Nonetheless, the Company estimates the number of
shares of common stock that will be issued  using  certain  assumptions.  If the
Company issued 40,000,000 shares, the maximum number of shares being registered,
then these shares would represent 60.2% of the outstanding common stock.

REGISTRATION RIGHTS. The Company granted to Cornell certain registration rights.
The  registration  statement will register such shares upon  effectiveness.  The
cost of the registration will be borne by the Company.

NET  PROCEEDS.  The Company  cannot  predict the total  amount of proceeds to be
raised in this transaction,  in part, because the Company has not determined the
total  amount of the  advances to be drawn.  However,  the Company has  incurred
expenses of  approximately  $80,000  consisting  primarily of professional  fees
incurred in connection with registering the shares. In addition,  the Company is
obligated to pay a cash fee to Cornell Capital equal to 8.4% of each advance.


NOTE  5.  STOCKHOLDERS' (DEFICIT)

During the year ended  December 31, 2000,  the Company  issued 720,000 shares of
its 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 common  stock to various  individuals  in exchange  for  services  valued at
$103,600.  These  shares were valued at their fair market  value on the date the
Company  agreed to issue the shares.  The Company also issued  250,000 shares of
its  common  stock in  exchange  for the  acquisition  of a web site  valued  at
$25,000.

During the year ended December 31, 2001 the Company issued  4,550,000  shares of
common stock to employees and  non-employees  in exchange for services valued at
$110,800.  These  shares were valued at their fair market  value on the date the
Company agreed to issue the shares.

During the years covered by these financial statements the Company issued shares
of common stock without  registration under the Securities Act of 1933. Although
the Company  believes  that the sales did not  involve a public  offering of its
securities  and that the Company did comply  with the "safe  harbor"  exemptions
from  registration,  it could  be  liable  for  recission  of the  sales if such
exemptions  were  found not to apply and this  could  have a  material  negative
impact on the Company.



                                      F-10
<PAGE>


The Company has filed a registration  statement with the Securities and Exchange
Commission  for the sale of up to  41,300,000  shares of their  common  stock by
certain persons who are, or will become,  stockholders  of the Company.  Of that
total, a single stockholder will sell up to 40,000,000 shares of common stock in
this  offering  that it will  receive  pursuant to an Equity Line of Credit (See
Note 4). The Company is not selling any shares of common stock in this  offering
and  therefore  will not receive any proceeds  from this  offering.  The Company
will,  however,  receive proceeds from the sale of common stock under the Equity
Line of  Credit.  The  Company  has  agreed to pay  Cornell a fee of 8.4% of the
proceeds received under the Equity Line of Credit.

The shares of common stock are being offered for sale on a "best  efforts" basis
by the  selling  stockholders  at  prices  established  on the  Over-the-Counter
Bulletin Board during the term of this offering.  There are no minimum  purchase
requirements.  These prices will fluctuate based on the demand for the shares of
common stock.

The  selling  stockholders  consist  of  Cornell,  which  intends  to sell up to
40,000,000 shares of common stock to be purchased under an Equity Line of Credit
Agreement, dated August 16, 2001. Other selling stockholders, who intend to sell
up to 1,300,000 shares of common stock purchased in private offerings.


NOTE 6.  RELATED PARTY TRANSACTIONS

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

During the years ended  December  31, 2001 and 2000 the Company paid $27,500 and
$15,500, respectively, in consulting fees to related parties.

At December 31, 2001, the Company has recorded receivables with Company officers
of $24,706.


NOTE 7.  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
                                          -----------     ----------

      Capital loss carryforward            $ 25,000        $ 10,000
      Net operating loss carryforward       450,000         175,000
                                           --------        --------
                                           $475,000        $185,000
                                           ========        ========

The capital loss  carryforward  will expire in 2004 and the net  operating  loss
carryforward will expire through 2021.

The  deferred tax asset has been fully  reserved as of December  31,  2001.  The
change in the  valuation  allowance  for the  deferred tax asset during the year
ended December 31, 2001 was $63,000.


NOTE 8.  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 common stock,
net book value per share,  regular or other remuneration  already being received
by the optionee.  The maximum term of the options is five years and they vest on
the date granted. All options outstanding at December 31, 2001 have been granted
to employees.




                                      F-11
<PAGE>

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

                                               Number        Weighted Average
                                             of Shares        Exercise Price
                                           -------------     -----------------
       Outstanding at December 31, 1999       600,000             $0.10
         Granted                                    -                 -
         Exercised                                  -                 -
         Forfeited                                  -
                                           ------------          ---------
       Outstanding at December 31, 2000       600,000              0.10
         Granted                              750,000              0.06
         Exercised                                  -                 -
         Forfeited                                  -
                                           ------------          ---------
       Outstanding at December 31, 2001     1,350,000             $0.08
                                           ============          =========

The option for 600,000  shares expires in 2005 and the option for 750,000 shares
expires in 2006.

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.  The fair  values of the
options  granted  during 2001 are  estimated at $0.06 on the date of grant using
the  Black-Scholes  option  pricing  model with the  following  assumptions:  no
dividend  yield,  volatility  of 458%, a risk-free  interest  rate of 6.0%,  and
expected lives of 5 years from date of vesting

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

                                                        December 31,
                                           -------------------------------------
                                                2001                   2000
                                           ----------------      ---------------

        Pro forma net (loss)                 $(163,488)             $(218,189)
                                           ================      ===============
        Pro forma (loss) per share -
          Basic and diluted                     $(0.01)                 $0.00
                                                =======                 =====

NOTE 9.  COMMITMENTS

The Company leases office and warehouse  space under an operating lease expiring
during  August  2002.  The lease  calls for monthly  payments of $1,664.  Rental
expense for the years ended  December 31, 2001 and 2000 were $19,970 and $12,460
respectively.  Minimum  annual future rent payments for the year ended  December
31, 2002 related to the operating lease are $13,624.



                                      F-12
<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 1, 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 1, 2002                By:  /s/ RICHARD URREA
                                         -------------------------------
                                               Richard Urrea
                                               President and Chief Executive
                                                Officer


Date:    April 1, 2002                By:  /s/ DANIEL URREA
                                         -------------------------------
                                               Daniel Urrea
                                               Chief Financial Officer


Date:    April 1, 2002                By:  /s/ FRANCISCO URREA, JR.
                                          ------------------------------
                                               Francisco Urrea, Jr.
                                               Director