UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---




FORM 10-Q/A






|  |                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------
|x | Quarterly Report Pursuant to Section 13
	or 15(d) of the Securities Exchange Act of 1934 
	 For the quarterly period ended June 30, 2001
| 
| 
|o | Transition Report Pursuant to Section 13
	or 15(d) of the Securities 
	 Exchange Act of 1934                                            



---

Commission File Number: 0-29625



---

High Speed Net Solutions, Inc.

(Exact Name of Registrant as Specified in
its Charter)




|                                                                       |  |                                                        |  |                                                   
|---------------------------------------------------------------------- |  | ------------------------------------------------------ |  | --------------------------------------------------
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Florida(State or other Jurisdiction of Incorporation or
	Organization) |  | 7389(Primary Standard Industrial Classification
	Code) |  | 65-0185306(I.R.S. Employer
	Identification Number)






---

434 Fayetteville Street Mall, Suite 600

Raleigh, North Carolina 27601


(919) 807-5600


(Address, Including Zip Code, and Telephone
Number, Including Area Code


of Registrants Principal Executive
Offices)




---

Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports),  
x Yes  
o No; and (2) has
been subject to such filing requirements for the past
90 days  
x Yes  
o No

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest
practicable date:




| |  |                               |  |                                  
| |  | ----------------------------- |  | ---------------------------------
| |  | Class                         |  | Outstanding as of August 31, 2001
| |  | Common stock, par value $.001 |  | 35,735,789                       
| |  | per share                     |  |                                  






---






---



HIGH SPEED NET SOLUTIONS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

TABLE OF CONTENTS




|         |  |                                                                                               |                                                                                                             |          |    |   |    | 
|-------- |  | --------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | -------- | -- | - | -- | 
|         |  |                                                                                               |                                                                                                             | Page No.
|         |  |                                                                                               |                                                                                                             |         
|PART I   |  | FINANCIAL INFORMATION                                                                         |                                                                                                             |          | 1  |  
|        
|        
|        
|        
|Item  1. |  | Financial Statements (Unaudited)                                                              |                                                                                                             |          | 1  |  
|        
|        
|        
|        
|         |  |                                                                                               | Consolidated Balance Sheets as of June 30,
        2001 (Unaudited) and December 31, 2000                   |          |    | 1 |   
|        
|        
|        
|        
|         |  |                                                                                               | Consolidated Statements of Operations for the
        Three Months Ended June 30, 2001 and 2000 (Unaudited) |          |    | 2 |   
|        
|        
|        
|        
|         |  |                                                                                               | Consolidated Statements of Operations for the Six
        Months Ended June 30, 2001 and 2000 (Unaudited)   |          |    | 3 |   
|        
|        
|        
|        
|         |  |                                                                                               | Consolidated Statements of Shareholders
        Equity                                                     |          |    | 4 |   
|        
|        
|        
|        
|         |  |                                                                                               | Consolidated Statements of Cash Flows for the Six
        Months Ended June 30, 2001 and 2000 (Unaudited)   |          |    | 5 |   
|        
|        
|        
|        
|         |  |                                                                                               | Notes to Consolidated Financial Statements                                                                  |          |    | 6 |   
|Item  2. |  | Managements Discussion and Analysis of
        Financial Condition and Results of Operations |                                                                                                             |          |    |  
|        
|        
|        
|        
|         |  |                                                                                               |                                                                                                             |          |    |   | 18 | 
|        
|        
|        
|        
|Item  3. |  | Quantitative and Qualitative Disclosures About
        Market Risk                            |                                                                                                             |          | 28 |  
|        
|        
|        
|        
|        
|PART II  |  | OTHER INFORMATION                                                                             |                                                                                                             |          | 29 |  
|        
|        
|        
|        
|Item  1. |  | Legal Proceedings                                                                             |                                                                                                             |          | 29 |  
|        
|        
|        
|        
|Item  2. |  | Changes in Securities and Use of Proceeds                                                     |                                                                                                             |          | 30 |  
|        
|        
|        
|        
|Item  3. |  | Defaults Upon Senior Securities                                                               |                                                                                                             |          | 31 |  
|        
|        
|        
|        
|Item  4. |  | Submission of Matters to a Vote of Security
        Holders                                   |                                                                                                             |          | 31 |  
|        
|        
|        
|        
|Item  5. |  | Other Information                                                                             |                                                                                                             |          | 31 |  
|        
|        
|        
|        
|Item  6. |  | Exhibits and Reports on Form 8-K                                                              |                                                                                                             |          | 32 |  




i



---



PART I.

FINANCIAL INFORMATION


Item  1.  Financial Statements

HIGH SPEED NET SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS




|                                                         |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |             |            |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ---------- | ----------------- | ---------- | - | --------- | ----------- | ---------- | -
|                                                         |                                                                                                                                                                                             | June 30, 2001                                         |            | December 31, 2000
|                                                         |                                                                                                                                                                                             |                                                       |            |                  
|                                                         |                                                                                                                                                                                             | (Unaudited)                                           |            |                  
|                                                        
|                                                        
|                                                        
|                                                        
|Assets                                                   |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            
|                                                        
|                                                        
|                                                        
|                                                        
|Current assets:                                          |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Cash                                                                                                                                                                                        |                                                       | $          | 143,567           |            |   | $         | 208,495     |           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Accounts receivable                                                                                                                                                                         |                                                       |            | 43,888            |            |   |           | 32,744      |           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Other current assets                                                                                                                                                                        |                                                       |            | 84,553            |            |   |           | 39,153      |           
|                                                         |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            
|                                                         |                                                                                                                                                                                             | Total current assets                                  |            |                   | 272,008    |   |           |             | 280,392    |  
|                                                        
|                                                        
|                                                        
|                                                        
|Receivable from related party                            |                                                                                                                                                                                             |                                                       |           |                   |            |   | 134,677   |            
|                                                        
|                                                        
|                                                        
|                                                        
|Capitalized software development costs                   |                                                                                                                                                                                             |                                                       | 95,808     |                   |            |   |          |            
|                                                        
|                                                        
|                                                        
|                                                        
|Equipment, software and furniture, net                   |                                                                                                                                                                                             |                                                       | 1,096,503  |                   |            |   | 991,202   |            
|                                                        
|                                                        
|                                                        
|                                                        
|Goodwill, net of accumulated amortization of
	$3,436,072 |                                                                                                                                                                                             |                                                       | 24,059,898 |                   |            |   |          |            
|                                                         |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            
|                                                         |                                                                                                                                                                                             | Total assets                                          |            | $                 | 25,524,217 |   |           | $           | 1,406,271  |  
|                                                         |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            
|Liabilities and shareholders equity
	(deficit)          |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            
|                                                        
|                                                        
|                                                        
|                                                        
|Accounts payable and accrued expenses                    |                                                                                                                                                                                             | $                                                     | 4,285,046  |                   |            | $ | 1,282,157 |            
|                                                        
|                                                        
|                                                        
|                                                        
|Accrued salaries and related costs                       |                                                                                                                                                                                             |                                                       | 261,867    |                   |            |   | 721,956   |            
|                                                        
|                                                        
|                                                        
|                                                        
|Preferred stock dividends payable                        |                                                                                                                                                                                             |                                                       | 223,441    |                   |            |   |          |            
|                                                        
|                                                        
|                                                        
|                                                        
|Notes payable, current portion                           |                                                                                                                                                                                             |                                                       | 229,215    |                   |            |   | 229,215   |            
|                                                        
|                                                        
|                                                        
|                                                        
|Capital lease obligations, current portion               |                                                                                                                                                                                             |                                                       | 385,156    |                   |            |   | 339,724   |            
|                                                        
|                                                        
|                                                        
|                                                        
|Loans payable to related party                           |                                                                                                                                                                                             |                                                       |           |                   |            |   | 1,435,000 |            
|                                                         |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            
|                                                         |                                                                                                                                                                                             | Total current liabilities                             |            |                   | 5,384,725  |   |           |             | 4,008,052  |  
|                                                        
|                                                        
|                                                        
|                                                        
|Capital lease obligations, less current portion          |                                                                                                                                                                                             |                                                       | 146,709    |                   |            |   | 117,966   |            
|                                                        
|                                                        
|                                                        
|                                                        
|Notes payable, less current portion                      |                                                                                                                                                                                             |                                                       | 100,000    |                   |            |   | 100,000   |            
|                                                        
|                                                        
|                                                        
|                                                        
|Deferred software royalty revenue                        |                                                                                                                                                                                             |                                                       |           |                   |            |   | 1,834,065 |            
|                                                        
|                                                        
|                                                        
|                                                        
|Redeemable common stock (87,498 shares)                  |                                                                                                                                                                                             |                                                       | 576,000    |                   |            |   |          |            
|                                                        
|                                                        
|                                                        
|                                                        
|Shareholders equity (deficit):                          |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Preferred stock, Series A, $.001 par value;
	authorized 5,000,000 shares, 2,000 shares issued and outstanding
	(liquidation preference of $1,000 per share)                                 |                                                       |            | 2,000,000         |            |   |           |            |           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Preferred stock, Series B, $.001 par value;
	authorized 6,500 shares, 6,000 and 4,000 shares issued and
	outstanding, respectively                                                          |                                                       |            | 6                 |            |   |           | 4           |           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Common stock, $.001 par value; authorized
	50,000,000 shares; 34,837,282 shares issued and outstanding at
	June  30, 2001 and 9,584,938 shares issued and outstanding
	at December 31, 2000 |                                                       |            | 34,837            |            |   |           | 9,585       |           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Additional paid-in capital                                                                                                                                                                  |                                                       |            | 49,882,792        |            |   |           | 19,729,222  |           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Stock subscription receivable                                                                                                                                                               |                                                       |            | (100,000          | )          |   |           |            |           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Deferred compensation                                                                                                                                                                       |                                                       |            | (753,120          | )          |   |           | (978,510    | )         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Accumulated deficit                                                                                                                                                                         |                                                       |            | (31,520,113       | )          |   |           | (23,414,113 | )         
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Treasury stock, at cost (38,500 shares)                                                                                                                                                     |                                                       |            | (227,619          | )          |   |           |            |           
|                                                         |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            
|                                                         |                                                                                                                                                                                             | Total shareholders equity (deficit)                  |            |                   | 19,316,783 |   |           |             | (4,653,812 | )
|                                                         |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            
|                                                         |                                                                                                                                                                                             | Total liabilities and shareholders equity
	(deficit) |            | $                 | 25,524,217 |   |           | $           | 1,406,271  |  
|                                                         |                                                                                                                                                                                             |                                                       |            |                   |            |   |           |            




The accompanying notes constitute an integral part of these
consolidated financial statements.

1



---






HIGH SPEED NET SOLUTIONS, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)




|                                                                 |                                                                      |                              |            |               |        |   |            |            |          |  
|---------------------------------------------------------------- | -------------------------------------------------------------------- | ---------------------------- | ---------- | ------------- | ------ | - | ---------- | ---------- | -------- | -
|                                                                 |                                                                      |                             
|                                                                 |                                                                      | Three Months Ended          
|                                                                 |                                                                      |                             
|                                                                 |                                                                      | June 30, 2001                |            | June 30, 2000
|                                                                 |                                                                      |                              |            |              
|Revenues:                                                        |                                                                      |                              |            |               |        |   |            |           
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Contracts and license fees                                           |                              | $          | 211,019       |        |   | $          | 390,571    |         
|                                                                
|                                                                
|                                                                
|                                                                
|Costs of revenues:                                               |                                                                      |                              |            |               |        |   |            |           
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Contracts and license fees                                           |                              |            | 102,484       |        |   |            | 157,210    |         
|                                                                 |                                                                      |                              |            |               |        |   |            |           
|Gross Profit                                                     |                                                                      |                              | 108,535    |               |        |   | 233,361    |           
|                                                                
|                                                                
|                                                                
|                                                                
|Selling, general and administrative expenses                     |                                                                      |                              | 1,841,989  |               |        |   | 1,551,396  |           
|                                                                
|                                                                
|                                                                
|                                                                
|Amortization expense                                             |                                                                      |                              | 2,291,331  |               |        |   |           |           
|                                                                
|                                                                
|                                                                
|                                                                
|Non-cash compensation                                            |                                                                      |                              | 57,806     |               |        |   | 823,999    |           
|                                                                
|                                                                
|                                                                
|                                                                
|Research and development                                         |                                                                      |                              | 115,657    |               |        |   | 378,656    |           
|                                                                 |                                                                      |                              |            |               |        |   |            |           
|Operating loss                                                   |                                                                      |                              | (4,198,248 | )             |        |   | (2,520,690 | )         
|                                                                
|                                                                
|                                                                
|                                                                
|Other income (expense):                                          |                                                                      |                              |            |               |        |   |            |           
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Gain on sale of stock of equity investee                             |                              |            |              |        |   |            | 117,188    |         
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Participation in loss of equity investee                             |                              |            |              |        |   |            | (1,010,479 | )       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Interest income (expense), net                                       |                              |            | (8,708        | )      |   |            | 20,021     |         
|                                                                 |                                                                      |                              |            |               |        |   |            |           
|                                                                 |                                                                      | Total other income (expense) |            |               | (8,708 | ) |            |            | (873,270 | )
|                                                                 |                                                                      |                              |            |               |        |   |            |           
|Loss from continuing operations                                  |                                                                      |                              | (4,206,956 | )             |        |   | (3,393,960 | )         
|                                                                
|                                                                
|                                                                
|                                                                
|Loss from operations of discontinued Rich Media
	Direct business |                                                                      |                              | (14,670    | )             |        |   |           |           
|                                                                
|                                                                
|                                                                
|                                                                
|Loss on disposal of Rich Media Direct business                   |                                                                      |                              | (215,500   | )             |        |   |           |           
|                                                                 |                                                                      |                              |            |               |        |   |            |           
|Net loss                                                         |                                                                      | $                            | (4,437,126 | )             |        | $ | (3,393,960 | )         
|                                                                 |                                                                      |                              |            |               |        |   |            |           
|Net loss applicable to common shareholders:                      |                                                                      |                              |            |               |        |   |            |           
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Net loss                                                             |                              | $          | (4,437,126    | )      |   | $          | (3,393,960 | )       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Preferred stock dividends                                            |                              |            | (43,597       | )      |   |            |           |         
|                                                                 |                                                                      |                              |            |               |        |   |            |           
|Net loss applicable to common shareholders                       |                                                                      | $                            | (4,480,723 | )             |        | $ | (3,393,960 | )         
|                                                                 |                                                                      |                              |            |               |        |   |            |           
|Per share amounts (basic and diluted):                           |                                                                      |                              |            |               |        |   |            |           
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Loss applicable to common shareholders from
	continuing operations   |                              | $          | (0.12         | )      |   | $          | (0.35      | )       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Loss applicable to common shareholders from
	discontinued operations |                              |            | (0.01         | )      |   |            |           |         
|                                                                 |                                                                      |                              |            |               |        |   |            |           
|Net loss                                                         |                                                                      | $                            | (0.13      | )             |        | $ | (0.35      | )         
|                                                                 |                                                                      |                              |            |               |        |   |            |           
|Weighted average shares of common stock
	outstanding             |                                                                      |                              | 33,905,419 |               |        |   | 9,561,860  |           
|                                                                 |                                                                      |                              |            |               |        |   |            |           




The accompanying notes constitute an integral part of these
consolidated financial statements.

2



---



HIGH SPEED NET SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)




|                                                                        |                                                                             |                              |            |               |         |   |            |            |           | 
|----------------------------------------------------------------------- | --------------------------------------------------------------------------- | ---------------------------- | ---------- | ------------- | ------- | - | ---------- | ---------- | --------- | 
|                                                                        |                                                                             |                             
|                                                                        |                                                                             | Six Months Ended            
|                                                                        |                                                                             |                             
|                                                                        |                                                                             | June 30, 2001                |            | June 30, 2000
|                                                                        |                                                                             |                              |            |              
|Revenues:                                                               |                                                                             |                              |            |               |         |   |            |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Contracts and license fees                                                  |                              | $          | 507,179       |         |   | $          | 670,346    |          
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Costs of revenues:                                                      |                                                                             |                              |            |               |         |   |            |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Contracts and license fees                                                  |                              |            | 235,756       |         |   |            | 287,362    |          
|                                                                        |                                                                             |                              |            |               |         |   |            |           
|Gross Profit                                                            |                                                                             |                              | 271,423    |               |         |   | 382,984    |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Selling, general and administrative expenses                            |                                                                             |                              | 3,607,288  |               |         |   | 2,893,056  |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Amortization expense                                                    |                                                                             |                              | 3,436,072  |               |         |   |           |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Non-cash compensation                                                   |                                                                             |                              | 772,262    |               |         |   | 823,999    |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Research and development                                                |                                                                             |                              | 217,386    |               |         |   | 773,913    |           
|                                                                        |                                                                             |                              |            |               |         |   |            |           
|Operating loss                                                          |                                                                             |                              | (7,761,585 | )             |         |   | (4,107,984 | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Other income (expense):                                                 |                                                                             |                              |            |               |         |   |            |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Gain on sale of stock of equity investee                                    |                              |            |              |         |   |            | 3,244,767  |          
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Participation in loss of equity investee                                    |                              |            |              |         |   |            | (2,082,693 | )        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Interest income (expense), net                                              |                              |            | (12,073       | )       |   |            | 49,974     |          
|                                                                        |                                                                             |                              |            |               |         |   |            |           
|                                                                        |                                                                             | Total other income (expense) |            |               | (12,073 | ) |            |            | 1,212,048 | 
|                                                                        |                                                                             |                              |            |               |         |   |            |           
|Loss from continuing operations                                         |                                                                             |                              | (7,773,658 | )             |         |   | (2,895,936 | )         
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Loss from operations of discontinued Rich Media
        Direct business |                                                                             |                              | (49,988    | )             |         |   |           |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Loss on disposal of Rich Media Direct business                          |                                                                             |                              | (215,500   | )             |         |   |           |           
|                                                                        |                                                                             |                              |            |               |         |   |            |           
|Net loss                                                                |                                                                             | $                            | (8,039,146 | )             |         | $ | (2,895,936 | )         
|                                                                        |                                                                             |                              |            |               |         |   |            |           
|Net loss applicable to common shareholders:                             |                                                                             |                              |            |               |         |   |            |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Net loss                                                                    |                              | $          | (8,039,146    | )       |   | $          | (2,895,936 | )        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Preferred stock dividends                                                   |                              |            | (66,854       | )       |   |            |           |          
|                                                                        |                                                                             |                              |            |               |         |   |            |           
|Net loss applicable to common shareholders                              |                                                                             | $                            | (8,106,000 | )             |         | $ | (2,895,936 | )         
|                                                                        |                                                                             |                              |            |               |         |   |            |           
|Per share amounts (basic and diluted):                                  |                                                                             |                              |            |               |         |   |            |           
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Loss applicable to common shareholders from
        continuing operations   |                              | $          | (0.29         | )       |   | $          | (0.30      | )        
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Loss applicable to common shareholders from
        discontinued operations |                              |            | (0.01         | )       |   |            |           |          
|                                                                        |                                                                             |                              |            |               |         |   |            |           
|Net loss                                                                |                                                                             | $                            | (0.30      | )             |         | $ | (0.30      | )         
|                                                                        |                                                                             |                              |            |               |         |   |            |           
|Weighted average shares of common stock
        outstanding             |                                                                             |                              | 27,405,009 |               |         |   | 9,561,860  |           
|                                                                        |                                                                             |                              |            |               |         |   |            |           




The accompanying notes constitute an integral part of these
consolidated financial statements.

3



---



HIGH SPEED NET SOLUTIONS, INC.




CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY







|                                  |                                                                                    |                 |       |          |  |              |           |            |  |              |       |          |  |                 |   |            |  |      |            |            |  |   |        |        |  |   |            |            |   |   |          |          |   |   |          |          |  
|--------------------------------- | ---------------------------------------------------------------------------------- | --------------- | ----- | -------- |  | ------------ | --------- | ---------- |  | ------------ | ----- | -------- |  | --------------- | - | ---------- |  | ---- | ---------- | ---------- |  | - | ------ | ------ |  | - | ---------- | ---------- | - | - | -------- | -------- | - | - | -------- | -------- | -
|                                  |                                                                                    |                 |       |          |  |              |           |            |  |              |       |         
|                                  |                                                                                    | Preferred Stock |       |          |  |              |           |            |  |              |       |         
|                                  |                                                                                    |                 |       |          |  |              |           |            |  |              |       |         
|                                  |                                                                                    |                 |       |          |  |              |           |            |  |              |       |         
|                                  |                                                                                    | Series A        |       | Series B |  | Common Stock |           |            |  | Stock        |       |         
|                                  |                                                                                    |                 |       |          |  |              |           | Additional |  | Subscription |       | Deferred
|                                  |                                                                                    | Shares          |       | Amount   |  | Shares       |           | Amount     |  | Shares       |       | Amount   |  | Paid-in Capital |   | Receivable |  | Comp
|                                  |                                                                                    |                 |       |          |  |              |           |            |  |              |       |          |  |                 |   |            |  |     
|                                 
|                                 
|                                 
|                                 
|Balance at December  31, 2000     |                                                                                    |                 |      |          |  | $            |          |            |  |              | 4,000 |          |  | $               | 4 |            |  |      | 9,584,938  |            |  | $ | 9,585  |        |  | $ | 19,729,222 |            |   | $ |         |          |   | $ | (978,510 | )       
|                                 
|                                 
|                                 
|                                 
|                                  | Impact of reverse acquisition                                                      |                 |       | 2,000    |  |              |           | 2,000,000  |  |              |       | 2,000    |  |                 |   | 2          |  |      |            | 23,392,035 |  |   |        | 23,392 |  |   |            | 25,678,327 |   |   |          |         |   |   |          |         |  
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock options granted for services                                          |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            |           |  |   |        |       |  |   |            | 866,533    |   |   |          |         |   |   |          |         |  
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock sold for cash                                                         |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            | 1,052,749  |  |   |        | 1,052  |  |   |            | 2,837,805  |   |   |          | (100,000 | ) |   |          |         |  
|                                 
|                                 
|                                 
|                                 
|                                  | Preferred stock dividends                                                          |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            |           |  |   |        |       |  |   |            |           |   |   |          |         |   |   |          |         |  
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in partial settlement of loss
	contingency                     |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            | 550,000    |  |   |        | 550    |  |   |            | 419,436    |   |   |          |         |   |   |          |         |  
|                                 
|                                 
|                                 
|                                 
|                                  | Deferred compensation recognized in connection
	with the issuance of stock options |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            |           |  |   |        |       |  |   |            | 240,500    |   |   |          |         |   |   |          | (240,500 | )
|                                 
|                                 
|                                 
|                                 
|                                  | Amortization of deferred compensation                                              |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            |           |  |   |        |       |  |   |            |           |   |   |          |         |   |   |          | 133,074  |  
|                                 
|                                 
|                                 
|                                 
|                                  | Reversal of deferred compensation of forfeited
	options                            |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            |           |  |   |        |       |  |   |            | (332,816   | ) |   |          |         |   |   |          | 332,816  |  
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in settlement of amounts due
	to related parties               |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            | 250,000    |  |   |        | 250    |  |   |            | 435,565    |   |   |          |         |   |   |          |         |  
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in partial settlement of
	vendor liability                     |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            | 5,560      |  |   |        | 6      |  |   |            | 7,722      |   |   |          |         |   |   |          |         |  
|                                 
|                                 
|                                 
|                                 
|                                  | Stock option exercise                                                              |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            | 2,000      |  |   |        | 2      |  |   |            | 498        |   |   |          |         |   |   |          |         |  
|                                 
|                                 
|                                 
|                                 
|                                  | Net loss for the period                                                            |                 |       |         |  |              |           |           |  |              |       |         |  |                 |   |           |  |      |            |           |  |   |        |       |  |   |            |           |   |   |          |         |   |   |          |         |  
|                                  |                                                                                    |                 |       |          |  |              |           |            |  |              |       |          |  |                 |   |            |  |      |            |            |  |   |        |        |  |   |            |            |   |   |          |          |   |   |          |         
|Balance June 30, 2001 (Unaudited) |                                                                                    |                 | 2,000 |          |  | $            | 2,000,000 |            |  |              | 6,000 |          |  | $               | 6 |            |  |      | 34,837,282 |            |  | $ | 34,837 |        |  | $ | 49,882,792 |            |   | $ | (100,000 | )        |   | $ | (753,120 | )       
|                                  |                                                                                    |                 |       |          |  |              |           |            |  |              |       |          |  |                 |   |            |  |      |            |            |  |   |        |        |  |   |            |            |   |   |          |          |   |   |          |         

[Additional columns below]




[Continued from above table, first column(s) repeated]




|                                  |                                                                                    |             |             |            |   |               |          |          |   |   |            |            |  
|--------------------------------- | ---------------------------------------------------------------------------------- | ----------- | ----------- | ---------- | - | ------------- | -------- | -------- | - | - | ---------- | ---------- | -
|                                  |                                                                                    |             |             |            |   | Total        
|                                  |                                                                                    | Accumulated |             | Treasury   |   | Shareholders
|                                  |                                                                                    | Deficit     |             | Stock      |   | Equity       
|                                  |                                                                                    |             |             |            |   |              
|                                 
|                                 
|                                 
|                                 
|Balance at December  31, 2000     |                                                                                    | $           | (23,414,113 | )          |   | $             |         |          |   | $ | (4,653,812 | )         
|                                 
|                                 
|                                 
|                                 
|                                  | Impact of reverse acquisition                                                      |             |             |           |   |               |          | (227,619 | ) |   |            | 27,474,102 |  
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock options granted for services                                          |             |             |           |   |               |          |         |   |   |            | 866,533    |  
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock sold for cash                                                         |             |             |           |   |               |          |         |   |   |            | 2,738,857  |  
|                                 
|                                 
|                                 
|                                 
|                                  | Preferred stock dividends                                                          |             |             | (66,854    | ) |               |          |         |   |   |            | (66,854    | )
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in partial settlement of loss
	contingency                     |             |             |           |   |               |          |         |   |   |            | 419,986    |  
|                                 
|                                 
|                                 
|                                 
|                                  | Deferred compensation recognized in connection
	with the issuance of stock options |             |             |           |   |               |          |         |   |   |            |           |  
|                                 
|                                 
|                                 
|                                 
|                                  | Amortization of deferred compensation                                              |             |             |           |   |               |          |         |   |   |            | 133,074    |  
|                                 
|                                 
|                                 
|                                 
|                                  | Reversal of deferred compensation of forfeited
	options                            |             |             |           |   |               |          |         |   |   |            |           |  
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in settlement of amounts due
	to related parties               |             |             |           |   |               |          |         |   |   |            | 435,815    |  
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in partial settlement of
	vendor liability                     |             |             |           |   |               |          |         |   |   |            | 7,728      |  
|                                 
|                                 
|                                 
|                                 
|                                  | Stock option exercise                                                              |             |             |           |   |               |          |         |   |   |            | 500        |  
|                                 
|                                 
|                                 
|                                 
|                                  | Net loss for the period                                                            |             |             | (8,039,146 | ) |               |          |         |   |   |            | (8,039,146 | )
|                                  |                                                                                    |             |             |            |   |               |          |          |   |   |            |           
|Balance June 30, 2001 (Unaudited) |                                                                                    | $           | (31,520,113 | )          |   | $             | (227,619 | )        |   | $ | 19,316,783 |           
|                                  |                                                                                    |             |             |            |   |               |          |          |   |   |            |           




The accompanying notes constitute an integral part of these
consolidated financial statements.

4



---



HIGH SPEED NET SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)




|                                                                                                                           |                                               |                  |            |               |   |   |            |            |  
|-------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | ---------------- | ---------- | ------------- | - | - | ---------- | ---------- | -
|                                                                                                                           |                                               |                 
|                                                                                                                           |                                               | Six Months Ended
|                                                                                                                           |                                               |                 
|                                                                                                                           |                                               | June 30, 2001    |            | June 30, 2000
|                                                                                                                           |                                               |                  |            |              
|Operating activities                                                                                                       |                                               |                  |            |               |   |   |            |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Loss from continuing operations                                                                                            |                                               | $                | (7,773,658 | )             |   | $ | (2,895,936 | )         
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Adjustments to reconcile loss to net cash used in
	operating activities:                                                   |                                               |                  |            |               |   |   |            |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Gain on sale of investment in equity investee |                  |            |              |   |   |            | (3,244,767 | )
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Loss on investment in equity investee         |                  |            |              |   |   |            | 2,082,693  |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Non-cash compensation                         |                  |            | 772,262       |   |   |            | 823,999    |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Common stock issued for services              |                  |            | 7,728         |   |   |            |           |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Depreciation                                  |                  |            | 289,848       |   |   |            | 175,756    |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Amortization                                  |                  |            | 3,436,072     |   |   |            |           |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Changes in operating assets and liabilities, net
	of acquisition between High Speed Net Solutions, Inc. and
	Summus, Ltd.: |                                               |                  |            |               |   |   |            |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accounts receivable                           |                  |            | 600           |   |   |            | (280,164   | )
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Other current assets                          |                  |            | (41,405       | ) |   |            | 20,815     |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accounts payable and accrued expenses         |                  |            | 115,455       |   |   |            | 433,839    |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accrued salaries and related costs            |                  |            | 94,467        |   |   |            | 74,889     |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Deferred software royalty revenue             |                  |            |              |   |   |            | (658,331   | )
|                                                                                                                           |                                               |                  |            |               |   |   |            |           
|Net cash used in continuing operations                                                                                     |                                               |                  | (3,098,631 | )             |   |   | (3,467,207 | )         
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Net cash used in discontinued operations                                                                                   |                                               |                  | (10,623    | )             |   |   |           |           
|                                                                                                                           |                                               |                  |            |               |   |   |            |           
|Net cash used in operating activities                                                                                      |                                               |                  | (3,109,254 | )             |   |   | (3,467,207 | )         
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Investing activities                                                                                                       |                                               |                  |            |               |   |   |            |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Proceeds from sale of investment in equity
	investee                                                                       |                                               |                  |           |               |   |   | 4,057,500  |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Cash acquired in business combination                                                                                      |                                               |                  | 82,311     |               |   |   |           |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Capitalized software development costs                                                                                     |                                               |                  | (95,808    | )             |   |   |           |           
|                                                                                                                           |                                               |                  |            |               |   |   |            |           
|Net cash (used in) provided by investing
	activities                                                                       |                                               |                  | (13,497    | )             |   |   | 4,057,500  |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Financing activities                                                                                                       |                                               |                  |            |               |   |   |            |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Proceeds from sale of common stock                                                                                         |                                               |                  | 2,739,357  |               |   |   |           |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Proceeds from loan with related party                                                                                      |                                               |                  | 540,000    |               |   |   |           |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Principal payments on capital lease obligations
	and notes                                                                 |                                               |                  | (121,534   | )             |   |   | (139,562   | )         
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Cash payments on loss contingency accrual                                                                                  |                                               |                  | (100,000   | )             |   |   |           |           
|                                                                                                                           |                                               |                  |            |               |   |   |            |           
|Net cash provided by (used in) financing
	activities                                                                       |                                               |                  | 3,057,823  |               |   |   | (139,562   | )         
|                                                                                                                           |                                               |                  |            |               |   |   |            |           
|Net (decrease) increase in cash                                                                                            |                                               |                  | (64,928    | )             |   |   | 450,731    |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Cash at beginning of period                                                                                                |                                               |                  | 208,495    |               |   |   | 647,704    |           
|                                                                                                                           |                                               |                  |            |               |   |   |            |           
|Cash at end of period                                                                                                      |                                               | $                | 143,567    |               |   | $ | 1,098,435  |           
|                                                                                                                           |                                               |                  |            |               |   |   |            |           
|Supplemental disclosures of cash flow
	information                                                                         |                                               |                  |            |               |   |   |            |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Cash paid for interest                                                                                                     |                                               | $                | 12,703     |               |   | $ | 4,646      |           
|                                                                                                                           |                                               |                  |            |               |   |   |            |           




The accompanying notes constitute an integral part of these
consolidated financial statements.

5



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements

1.  Basis of Presentation




The condensed consolidated financial statements of High Speed
Net Solutions, Inc. and its subsidiaries included in this
Form 10-Q are unaudited. In the opinion of management, such
financial statements contain all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the
financial position of High Speed Net Solutions, Inc. and its
subsidiaries as of June 30, 2001, the results of its
operations for the three and six month periods ended
June 30, 2000 and 2001, its shareholders equity as of
June 30, 2001, and cash flows for the six month periods
ended June 30, 2000 and 2001.







As disclosed in Note 2 below, High Speed Net Solutions, Inc.
(HSNS) and Summus, Ltd. effected a business
combination (the Combination) whereby HSNS, as the
legal acquirer, purchased substantially all of the assets and
operations of Summus, Ltd., effective February 16, 2001.
This transaction was recorded as a business combination under
the guidance of Accounting Principles Board Opinion No. 16,
Business Combinations (APB 16).







The transaction was accounted for as a reverse
acquisition in which Summus, Ltd. is treated as the
accounting acquirer; HSNS, the acquired corporation. Summus,
Ltd. was considered the accounting acquirer in the transaction
because Summus, Ltd. received shares of HSNSs common stock
and other securities, to be distributed to the Summus, Ltd.
shareholders, representing the largest portion (53.1%) of the
voting interests in the combined company (the post-Combination
combined company being, for clarity of reference, referred to as
the Company). In reaching this conclusion, the
Company determined that there was not sufficient other evidence
to indicate that HSNS should be deemed the acquirer, taking into
consideration that: (i) the terms of the Asset Purchase
Agreement provided for the Board of Directors of the Company to
consist of an equal number of representatives of both Summus,
Ltd. and HSNS, with a Summus, Ltd. director serving as Chairman
of the Board; (ii) senior management of the Company was to
consist of representatives of each of the companies in roughly
equal numbers; (iii) post-Combination, the Companys
primary business focus was to be that of Summus, Ltd. at the
time of the closing of the transaction; and (iv) the terms
of the voting trust agreement with Dr. Bjorn Jawerth
(entered into in connection with and upon the closing of the
transaction) provided for the release of the shares of common
stock of HSNS subject to the voting arrangements set forth
therein in increments over roughly a one-year period following
the closing of the transaction.







In view of the reverse acquisition accounting associated with
the Combination, the accompanying comparative financial
statements as of December 31, 2000, and for the six months
ended June 30, 2000, reflect the financial position,
results of operations and cash flows of Summus, Ltd. rather than
the previously reported financial information of HSNS. The
condensed consolidated balance sheet of the Company as of
December 31, 2000 has been derived from the audited balance
sheet of Summus, Ltd. as of that date.







The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim
financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X.
Certain information and note disclosures normally included in
the Companys annual financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted. These unaudited condensed
consolidated financial statements should be read in conjunction
with a reading of the financial statements and accompanying
notes included in Summus, Ltd.s audited financial
statements for the year ended December 31, 2000, which were
filed with the Securities and Exchange Commission in the
Companys annual report on Form 10-K for the year
ended December 31, 2000. The Form 10-K, as amended, is
available through the Internet in the SECs EDGAR database
at www.sec.gov or from the Company upon request.




The accompanying unaudited condensed consolidated financial
statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the
financial statements at June 30, 2001, the Company had an
accumulated

6



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)




1.  Basis of
Presentation  (continued)







deficit of $31,520,113 and a deficiency in working capital.
Additionally, for the three months ended June 30, 2001, the
Company incurred a significant net loss and experienced negative
cash flows from operations. These factors, among others,
indicate the Company may be unable to continue as a going
concern for a reasonable period of time. As a result of these
matters, the Companys auditors have issued their opinion
on the December 31, 2000 financial statements including a
going concern explanatory paragraph. The financial statements
presented herein do not include any adjustments relating to the
recoverability of assets and classification of liabilities that
might be necessary should the Company be unable to continue as a
going concern.




The Companys continuation as a going concern is dependent
on its ability to generate sufficient cash flow to meet its
obligations on a timely basis, to obtain additional financing or
refinancing as required, and ultimately to attain profitability.
Management anticipates that it will be able to attract
additional capital to continue to fund operations. However,
there can be no assurance that managements plans will be
executed as anticipated.

Operating results for the three and six months ended
June 30, 2001, are not necessarily indicative of the
results that may be expected for the year ended
December 31, 2001.

2.  Business Combination




On February 16, 2001, pursuant to the terms of an asset
purchase agreement, as amended (the Asset Purchase
Agreement), HSNS and Summus, Ltd. effected a business
combination (the Combination) whereby HSNS, as the
legal acquirer, purchased substantially all the assets and
operations of Summus, Ltd. This transaction was recorded as a
business combination under APB 16 because, among other reasons,
(i) HSNS acquired all the operating assets and liabilities
of Summus, Ltd., (ii) the Company was to carry on all of
the activities of the previously separate and independent
enterprises (i.e., HSNS and Summus, Ltd.), and
(iii) Summus, Ltd. is to be liquidated following its
distribution of the equity securities of HSNS received in the
transaction.







From Summus, Ltd.s perspective, the primary business
purpose of entering into the transaction with HSNS was to
provide a vehicle for raising capital. Summus, Ltd. was at a
stage in its development where it required additional financing
or needed to combine with another entity in order to finance its
business and realize its other objectives. The business
combination with HSNS became the most logical course of action
to provide financing to Summus, Ltd. and accomplish other key
objectives in view of, among other things, the following:






| |   |                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Summus, Ltd. already had a substantial equity interest in HSNS.
	In fact, the Combination provided both companies the opportunity
	to capitalize on investments they previously made in each other.
	Prior to the Combination, Summus, Ltd. owned approximately 27.6%
	of HSNS and HSNS owned approximately 14% of Summus, Ltd.                                                 
|
|
|
| |  | HSNS had had success in raising equity capital through private
	placements or other types of fund-raising, notwithstanding its
	own limited financial resources and unprofitable operations.
	This caused Summus, Ltd.s management to believe that the
	Company (that is, the post-Combination combined company) would
	be able to continue to have success in raising capital.
|
|
|
| |  | HSNS was in the process of seeking to register its common stock
	under Section  12 of the Securities Exchange Act of 1934
	and then seeking to have such stock made eligible for quotation
	on the OTC Bulletin Board®. This offered the potential for
	future liquidity in such stock.                                                                                         
|

7



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)






2.  Business Combination  (continued)







| |   |                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The consideration to be received in connection with the business
	combination was deemed to represent the highest value among the
	options considered and, thus, in the best interests of Summus,
	Ltd. and its shareholders, and allowed Summus, Ltd. to maintain
	continuity in management and strategic direction.
|
|
|
| |  | The combination of the two companies offered the potential to
	create more growth opportunities for the Company based on the
	expected enhanced access to capital resources.                                                                                                                                         
|




In addition, Summus, Ltd. evaluated potential financing
alternatives other than via a business combination with HSNS.
Nearly every institutional investor contacted declined to make
an investment in Summus, Ltd. due to its significant ownership
interest in HSNS, a publicly-held company.







Based on the foregoing, Summus, Ltd. concluded that the
acquisition of HSNS was the most practical solution to its
financing and growth needs.







Prior to the closing of the Combination, Summus, Ltd. was the
largest shareholder of HSNS. It owned 8,217,781 shares (33.2%)
of HSNSs common stock, approximately 27.6% on a fully
diluted basis. Immediately after the closing, Summus,
Ltd.s ownership interest in the Company increased to
20,593,352 shares (55.5%) of the Companys common stock on
an as-converted basis, approximately 53.1% on a fully-diluted
basis.







The Asset Purchase Agreement contemplates that Summus, Ltd. will
liquidate following the completion of its distribution of the
Companys securities received in the transaction to the
shareholders of Summus, Ltd. On March 13, 2001, Summus,
Ltd. distributed certain of the shares of the Companys
common stock received in the transaction to the shareholders of
Summus, Ltd. in accordance with their pro rata interests; the
balance of such shares was distributed in mid-July 2001.







The consideration paid by HSNS to acquire the assets of Summus,
Ltd. is described below:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | HSNS issued to Summus, Ltd. for distribution to the shareholders
	of Summus, Ltd. a total of 20,218,733 shares of HSNS common
	stock and 6,000 shares of Series B preferred stock. As a
	shareholder of Summus, Ltd., HSNS was entitled to receive
	3,604,445 of the total number of shares of common stock issued
	in the transaction. However, under the terms of the Asset
	Purchase Agreement these shares were canceled, resulting in a
	net issuance of 16,614,288 shares of HSNS common stock. In
	addition, the Asset Purchase Agreement provided for the
	cancellation of 8,217,781 shares of HSNS common stock owned by
	Summus, Ltd. prior to the parties execution of the
	agreement.
|
|
|
| |  | HSNS issued to Summus, Ltd. 6,000 shares of newly created
	Series B preferred stock, of which 2,000 shares were
	deposited with an escrow agent as security for any
	indemnification obligations of Summus, Ltd. and its shareholders
	under the Asset Purchase Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                        
|
|
|
| |  | HSNS issued to Summus, Ltd. warrants to purchase a total of 500
	shares of its Series B preferred stock, exercisable for a
	period of 5 years from February 16, 2001. The exercise
	price of the warrants is $5,500.00 per share of Series B
	preferred stock ($5.50 per share of the Companys common
	stock on an as-converted basis).                                                                                                                                                                                                                                                                                                                                                          
|




The Company previously reported that the total number of shares
of HSNS common stock issued in the transaction was 20,197,797.
Upon distributing the balance of the shares of HSNS common stock
to the shareholders of Summus, Ltd., the Company established
that the aggregate number of shares of HSNS common stock
distributed was 20,218,733, with the difference (20,936 shares)
being attributable to a Summus, Ltd. stock option exercised
immediately prior to the closing of the transaction. The Company
used the total number of shares of HSNS common stock actually
issued and distributed in the transaction in determining the
purchase price and the resulting goodwill in connection with the
transaction.




8



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)






2.  Business Combination  (continued)








In addition to the items described above, the terms of the Asset
Purchase Agreement provided for HSNSs assumption of
approximately $2.8 million of liabilities of Summus, Ltd.
to third parties. All amounts owed by and between HSNS and
Summus, Ltd. were cancelled upon the closing of the Combination.







All outstanding HSNS options at the date of the Combination were
treated as replacement options since the Combination was
accounted for as a reverse acquisition with Summus, Ltd. as the
accounting acquirer. In accordance with FASB Interpretation
No. 44, Accounting for Certain Transactions
Involving Stock Compensation (FIN 44), the
fair values of the vested and unvested HSNS options of $4.4
million and $2.3 million, respectively, were included as
components of the consideration paid in the transaction. The
fair values of these options were determined using the
Black-Scholes option-pricing model.







Since HSNS was the legal acquirer while Summus, Ltd. was the
accounting acquirer, it was necessary to issue new HSNS stock
options to the existing Summus, Ltd. option holders to reflect
the new capitalization resulting from the asset acquisition. The
number of options issued was determined by comparing the total
consideration received by Summus, Ltd. in the transaction to the
outstanding equity of Summus, Ltd. prior to the transaction.
Since Summus, Ltd. was the accounting acquirer, no value was
ascribed to these options.







In connection with the Combination, the Company entered into a
three-year employment agreement with Dr. Bjorn Jawerth.
Under this employment agreement, in exchange for
Dr. Jawerths covenant not to compete with the Company
for a period of 18 months from and after the termination of
his employment with the Company, the Company issued options to
Dr. Jawerth to purchase 166,667 shares of common stock at
$0.50 per share and 333,333 shares of common stock at $3.75 per
share. Non-cash compensation expense of $541,688 was recorded
upon the issuance of these options as of February 16, 2001,
the closing date of the Combination. The issuance of these
options was in lieu of a $500,000 cash payment provided for in
Dr. Jawerths employment agreement.







Under the Asset Purchase Agreement HSNS agreed to use reasonable
commercial efforts to assist Dr. Jawerth in the private
sale of up to 1,666,667 shares of HSNS common stock held by
Dr. Jawerth (representing $2.5 million in value) at a
per share price of not less than $1.50 per share. The Asset
Purchase Agreement does not stipulate a date or time period by
which such sale is to occur. Under the terms of
Dr. Jawerths employment agreement, the Company is
obligated to issue to Dr. Jawerth options, with an exercise
price of $1.50 per share, exercisable for three times the number
of shares of common stock sold in the private sale. The options
will be exercisable during the second through the fifth year
after the options are issued. Non-cash compensation will be
recorded upon the issuance of these options. The non-cash
compensation will be determined under the provisions of APB 25,
pursuant to which the compensation cost will be based on the
difference between the stock option exercise price of $1.50 per
share and the traded value of the HSNS common stock on the date
the options are issued.







During the term of the employment agreement, Dr. Jawerth
will receive a base salary of $350,000 (which is subject to an
annual increase of at least 10%) plus other benefits including
severance benefits.







Purchase accounting was applied to the assets and liabilities of
HSNS based upon their fair market values on the acquisition
date. The fair market value of HSNS was determined by applying a
discount to the traded value of the Companys shares of
unrestricted common stock reflecting (1) the limited public
float of the common stock and (2) the thinly traded volume
of HSNSs common stock. The discount applied was similar in
proportion to the discount HSNS realized in connection with cash
sales of its common stock to third parties. Additionally, since
the Company, on a post-Combination basis, assumed the
outstanding stock options of HSNS, the fair value of these
options was included in determining the valuation of HSNS. The
value of the consideration described above totaled
$23.5 million. The fair value of the HSNS net liabilities
on the date of the Combination totaled approximately
$4.0 million, resulting in goodwill valued at approximately
$27.5 million.




9



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)






2.  Business Combination  (continued)








The goodwill recorded in connection with the transaction
represented the excess of the purchase price over the fair value
of net assets acquired in accordance with APB 16. The goodwill
is not associated with specific cash flows of the HSNS assets or
operations acquired. Rather, the goodwill is considered to be
enterprise level goodwill associated with the combined value of
the companies resulting from the Combination. The financial
forecast of the Company demonstrates a sufficient amount of cash
flow to fully realize the amount of recorded goodwill.
Additionally, the market capitalization of the Company of
$94.1 million at June 30, 2001 does not indicate
impairment of the carrying value of the goodwill. Accordingly,
the Companys management believes that the amount of
goodwill recorded by the Company in connection with the
acquisition of HSNS was determined in accordance with the
guidance of APB 16 and is recoverable.







The accompanying consolidated financial statements include the
results of operations of Summus, Ltd. for all periods and the
results of operations of HSNS from the date of the Combination.







The following information reflects unaudited pro forma operating
results for the six months ended June 30, 2001 and
June 30, 2000, as though the Combination had been completed
as of the beginning of 2000:







|                                   |  |                  |             |      |  |   |             |  
|---------------------------------- |  | ---------------- | ----------- | ---- |  | - | ----------- | -
|                                   |  |                 
|                                   |  | Six Months Ended
|                                   |  | June 30,        
|                                   |  |                 
|                                   |  | 2001             |             | 2000
|                                   |  |                  |             |     
|Revenues                           |  | $                | 507,179     |      |  | $ | 670,346     |  
|                                  
|                                  
|                                  
|                                  
|Net loss                           |  | $                | (11,205,804 | )    |  | $ | (10,948,849 | )
|                                  
|                                  
|                                  
|                                  
|Loss per share (basic and diluted) |  | $                | (0.34       | )    |  | $ | (0.50       | )




3.  Significant Accounting Policies

Principles of Consolidation




The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Douglas May &
Company, Inc. Significant intercompany accounts and transactions
have been eliminated in consolidation. The results of Douglas
May & Company, Inc. have been presented as discontinued
operations for the three and six months ended June 30, 2001
(see Note 9).




Use of Estimates

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

Equipment and Furniture

Equipment and furniture are stated at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets (generally three to seven years)
beginning when the assets are placed in service.

Stock-Based Compensation

The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based
Compensation.As permitted by the provisions of SFAS
No. 123, the Company continues to follow Accounting
Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employeesand
related interpretations for its stock-based awards.

10



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)






3.  Significant Accounting Policies 
(continued)





In accordance with APB 25, the Company has valued employee stock
awards and stock issued to employees for services performed
based on the traded value of the Companys common stock, or
its estimated fair value prior to it becoming traded, at the
measurement date of the stock options and awards.

Non-cash compensation related to the issuance of fully-vested
stock options with exercise prices below the fair market value
of the underlying stock plus the amortization of deferred
compensation arising from stock option issuances totaled $57,806
in the three months ended June 30, 2001.

The Company accounts for stock-based amounts issued to
non-employees of the Company, primarily consultants, at fair
value in accordance with the provisions of SFAS No. 123.

Income Taxes

Income taxes are accounted for using the liability method in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income
Taxes.Under SFAS 109, deferred tax assets or
liabilities are computed based upon the difference between the
financial statement and income tax basis of assets and
liabilities using the enacted marginal tax rate applicable when
the related asset or liability is expected to be realized or
settled. Deferred income tax expenses or benefits are based on
the changes in the asset or liability from period to period. If
available evidence suggests that it is more likely than not that
some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the
deferred tax assets to the amount that is more likely than not
to be realized. Future changes in such valuation allowance would
be included in the provision for deferred income taxes in the
period of change.

Revenue Recognition




The Company recognizes revenue on time and materials consulting
projects at the time services are rendered based upon the terms
of individual contracts.







The Company follows the provisions of AICPA Statement of
Position (SOP) 97-2, Software Revenue
Recognition, as amended by AICPA Statement of
Position 98-9 Modification of SOP No. 97-2
Software Revenue Recognition with Respect to Certain
Transactions.




Revenues from software license fees and hardware sales are
generally recognized upon delivery provided that a contract has
been executed, the vendor fee is fixed or determinable, no
significant vendor obligations or uncertainties surrounding
customer acceptance remain, and collection of the resulting
receivable is deemed probable.




Deferred revenue is recorded for amounts received for which the
Company has not yet completed its contractual obligations.
Deferred revenue related to software agreements is used to
offset capitalized software costs related to the software
agreements.




Loss Per Share

Loss per share has been calculated in accordance with Statement
of Financial Accounting Standards (SFAS)
No. 128, Earnings Per Share.Basic loss
per share was computed by dividing the net loss for each period
presented by the weighted average number of shares of common
stock outstanding for such period. Although the Company has
potential common stock equivalents related to its outstanding
stock options, warrants and preferred stock, these potential
common stock equivalents were not included in diluted loss per
share for each period presented because the effect would have
been antidilutive.

11



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)






3.  Significant Accounting Policies 
(continued)





Software Development Costs

Capitalization of software development costs begins with the
establishment of technological feasibility of new or enhanced
software products. Technological feasibility of a computer
software product is established when the Company has completed
all planning, designing, coding and testing that is necessary to
establish that the software product can be produced to meet
design specifications including functions, features and
technical performance requirements. All costs incurred prior to
establishing technological feasibility of a software product are
charged to research and development expense as incurred.

Valuation of Long-Lived Assets

The Company periodically reviews its long-lived assets,
including goodwill, to determine if events or changes in
circumstances indicate that the carrying amount of an asset may
be impaired and not recoverable. Adjustments will be made if the
sum of the expected future undiscounted cash flows is less than
the carrying value of the asset.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board
issued Statement No. 133 Accounting for Derivative
Instruments and Hedging Activities(SFAS 133), which is required to be adopted
for fiscal years beginning after June 15, 2000.
SFAS 133 establishes accounting and reporting standards for
derivative instruments including certain derivative instruments
embedded in other contracts and for hedging activities. The
Company adopted this statement in the first quarter of 2001.
Because of the Companys minimal use of derivatives,
management does not anticipate that the adoption of this
statement will have a significant effect on the operations or
financial position of the Company.




On June 29, 2001, the Financial Accounting Standards Board
(FASB) unanimously approved the issuance of
Statements of Financial Accounting Standards (SFAS)
No. 141, Business Combinations and
No. 142, Goodwill and Other Intangible
Assets. SFAS 141 eliminates the pooling-of-interests
method of accounting for business combinations except for
qualifying business combinations that were initiated prior to
July 1, 2001. SFAS 141 also includes new criteria to
recognize intangible assets separately from goodwill. The
requirements of SFAS 141 are effective for any business
combination accounted for by the purchase method that is
completed after June 30, 2001. Under SFAS 142, goodwill and
intangible assets with indefinite lives are no longer amortized
but are reviewed annually, or more frequently if impairment
indicators arise, for impairment. Separable intangible assets
that are not deemed to have an indefinite life will continue to
be amortized over their useful lives. The amortization
provisions of SFAS 142 requiring non-amortization of goodwill
and indefinite-lived intangible assets apply to goodwill and
indefinite-lived intangible assets acquired after June 30,
2001. With respect to goodwill and intangible assets acquired
prior to July 1, 2001, the Company will adopt SFAS 142 in
the fiscal year beginning January 1, 2002, and therefore
cease all amortization of goodwill as of January 1, 2002.
The effect of adopting SFAS 142 by the Company beginning
January 1, 2002 will result in not recording amortization
of approximately $9.2 million in 2002 of the goodwill
resulting from the business combination between HSNS and Summus,
Ltd. on February 16, 2001 that otherwise would have been
recorded.




4.  Deferred Software Royalty Revenue

In February 1999, Summus, Ltd. entered into a Marketing
License Agreement (MLA) with HSNS. In consideration
for its grant to HSNS of the right to resell certain stand-alone
software products specified in the MLA over the three-year term
of the agreement, Summus, Ltd. received prepaid software royalty
payments in the aggregate amount of $3,000,000, consisting of
cash payments of $2,250,000 and 1,500,000

12



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)






4.  Deferred Software Royalty Revenue 
(continued)





shares of HSNS common stock valued at $750,000. The value
assigned to the 1,500,000 common shares was based on a
discounted value of HSNSs common stock taking into
consideration the restricted nature of these shares. This amount
was classified as deferred revenue in Summus, Ltd.s
balance sheet.




In mid-February 2000, Summus, Ltd. and HSNS entered into
several agreements (i.e., a master agreement, software license
agreement, software maintenance agreement, revenue sharing
agreement and software escrow agreement) that superseded the MLA
in its entirety. Under these agreements, Summus, Ltd. granted to
HSNS a non-exclusive license to use a suite of software products
referred to as MaxxSystem. The terms of the software
license agreement provided for HSNSs payment of a one-time
license fee of $1 million (against which HSNS received a
credit of $1 million, under the terms of the master
agreement, in recognition of payments HSNS had made under the
MLA), and a revenue-based fee of the greater of (i) 10% of
the gross revenues generated by HSNS with MaxxSystem, or (ii)
$.03 multiplied by the number of rich media messages delivered
to recipients (against which HSNS also received a credit of
$1 million, under the terms of the master agreement, in
recognition of payments made under the MLA). HSNS received an
additional credit of approximately $200,000 for other fees due
Summus, Ltd. under the software license agreement and/or the
software maintenance agreement.







The payments received by Summus, Ltd. under the MLA, in the
aggregate amount of $3 million, were credited against the
capitalized software development costs of the software covered
by the MLA and the software license agreement. Summus, Ltd.
applied $507,604 and $658,332 of its deferred revenue balance
against such costs during 1999 and 2000, respectively.







On February 16, 2001, HSNS and Summus, Ltd. consummated the
Combination under the terms of the Asset Purchase Agreement. See
Note 2. As of the closing date of the Combination, Summus,
Ltd. had not delivered to HSNS all of the MaxxSystem suite of
software products specified in the software license agreement
and, therefore, was not able to recognize any revenue associated
with such agreement. Upon the closing of the Combination, the
agreements between Summus, Ltd. and HSNS entered into in
mid-February 2000 were made null and void. As a result, the
deferred revenue associated with the mid-February 2000
agreements has been recorded as a reduction to the goodwill
resulting from the Asset Purchase Agreement.




5.  Common Stock




Subsequent to the Combination between HSNS and Summus, Ltd. (see
Note 2), HSNS has issued 1,052,749 shares of its
unregistered common stock and warrants to purchase an additional
2,131,198 shares of common stock for gross proceeds of
$2,738,857. The warrants have exercise prices ranging from $3.50
to $5.25 per share, a term of five years and cannot be exercised
within five months of the date of issuance.




6.  Preferred Stock

Series A Preferred Stock




The Company has 2,000 shares of Series A preferred stock
outstanding on June 30, 2001. The holders of the
Series A preferred stock are entitled to receive cumulative
cash dividends at a rate of 8% per annum of the initial
liquidation preference of $1,000 per share (the
Liquidation Preference). The Company, at its
election, can provide for the payment of dividends on the
Series A preferred stock through the issuance of additional
shares of Series A preferred stock having an aggregate
initial liquidation preference equal to the amount of cash
dividends otherwise payable. Dividends are cumulative from the
date of issuance and are payable, when, as and if declared by
the Board of Directors, on March 31 and September 30
of each year, commencing on September 30, 2000. As of
June 30, 2001, cumulative dividends accrued were $223,441.




13



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)






6.  Preferred Stock  (continued)





The holders of the outstanding shares of Series A preferred
stock are not entitled to vote on matters submitted to the
Companys shareholders for voting. However, approval of
holders of a majority of the outstanding shares of Series A
preferred stock is required prior to the issuance of a new
series of preferred stock that ranks senior to the Series A
preferred stock.

Each share of the Series A preferred stock is convertible
at the option of the holder, at any time after the date of
issuance, into shares of common stock equal to the Liquidation
Preference divided by the initial conversion price of $14.24.
The conversion price is subject to adjustment in accordance with
the Companys articles of incorporation.

Series B Preferred Stock




During February 2001, HSNS amended its bylaws to provide
for the authorization of 6,500 shares of Series B preferred
stock. HSNS issued 6,000 shares of Series B preferred stock
(2,000 of which are being held in escrow) in connection with the
Summus, Ltd. asset acquisition. See Note 2. Each share of
Series B preferred stock:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | will be automatically converted into 1,000 shares of common
	stock, subject to adjustment for stock dividends, stock splits
	and the like, after HSNSs charter is amended to increase
	the number of authorized shares of common stock to at least
	60 million shares. Until then, the Series B preferred
	stock will not be convertible. Under the terms of the Asset
	Purchase Agreement, HSNS is required to seek shareholder
	approval to amend its charter to increase the number of
	authorized shares of common stock so that there will be
	sufficient shares of common stock available and reserved for
	issuance upon conversion of the Series B preferred stock;
|
|
|
| |  | is entitled to receive dividends and participate in
	distributions upon liquidation, pro rata,with the common
	stock on an as-converted basis; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
|
| |  | will vote equally with the common stock on an as-converted basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           




The above rights apply even if there are insufficient authorized
shares of common stock to permit conversion of the shares of
Series B preferred stock. There are no other preferences or
privileges associated with the Series B preferred stock.







7.  Settlements of Contractual Disputes and
Litigation




In June 2001, the Company entered into an agreement of
settlement and compromise whereby it issued 250,000 shares of
its restricted common stock in full satisfaction of a $435,815
payable to related parties. Under the terms of the agreement,
the Company agreed to register the resale of the shares issued
upon the Companys filing of a registration statement under
the Securities Act of 1933.

On June 29, 2001, the Company entered into a settlement
agreement and voting agreement with William R. Dunavant and his
counsel. Under the terms of such agreements:



| |   |                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | the Company issued an aggregate of 475,000 shares of common
	stock to Mr.  Dunavant and his counsel which were valued at
	$352,688. Such amount was determined by applying a discount to
	the traded value of the Companys stock on the date of the
	revised settlement;         
|
|
| |  | Mr. Dunavant agreed to certain resale restrictions with
	respect to all but 350,000 shares of common stock held by him
	(an aggregate of 2,450,000 shares), specifically, to limit his
	public resale of such shares to 30,000 shares per calendar month
	until February 15, 2002;

14



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)






7.  Settlements of Contractual Disputes and
Litigation  (continued)







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Company agreed to prepare and proceed diligently to complete
	and file a registration statement with the SEC registering the
	resale of all of the shares held by Mr. Dunavant, his
	spouse and his counsel, with Mr. Dunavant and his counsel
	having a right to seek an immediate hearing for emergency
	injunctive relief if such registration statement is not filed
	before July 31, 2001, unless counsel to the Company advised
	the Company (as counsel has) that it is in the best interests of
	the Company and its shareholders to delay the filing of such
	registration statement;
|
| |  | Mr. Dunavant, his spouse and his counsel agreed, for a
	two-year period from the date of the agreements, to vote the
	shares held by them in favor of and for the election of Board
	nominees by the Company and to vote such shares in a manner
	consistent with the recommendation of the Board with respect to
	certain extraordinary transactions (such as a tender offer, an
	exchange offer, merger or other business combination); and                                                                                                                                                     
|
| |  | the Company, on the one hand, and Mr. Dunavant and his
	counsel, on the other, executed mutual general releases with
	respect to any and all claims against each other, except with
	respect to the obligations and liabilities under such agreements.                                                                                                                                                                                                                                                                                                                                            




At the meeting of the Companys Board of Directors held on
July 20, 2001, counsel to the Company advised the Board
that, in counsels opinion, it was in the best interests of
the Company and its shareholders to delay the filing of a
registration statement with the SEC to register the resale of
all the shares of common stock held by Mr. Dunavant, his
spouse and his attorney. Counsels views on this subject
took cognizance of, among other things, the critical importance
to the Company of:






| |   |                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | becoming timely in its reporting obligations under the
	Securities Exchange Act of 1934, as amended (at the time, the
	Companys quarterly report on Form 10-Q for the first
	quarter of 2001, to have been filed on or before May 15,
	2001, had not yet been filed); and                                 
|
|
|
| |  | clearing its Form 10 at the earliest opportunity possible,
	since the clearance of the Form 10 is a prerequisite to
	having the Companys common stock made eligible for
	quotation on the OTC Bulletin Board® and thereby
	potentially opening up greater opportunities for the Company to
	raise capital.
|




The Company and its counsel, in accordance with the
June 29, 2001 settlement agreement, have kept
Mr. Dunavant, through his counsel, apprised of the
Companys contemplated timing with respect to the filing of
the registration statement in view of these considerations.
Further, the Company has initiated the process by which all of
its shareholders with registration rights, including
Mr. Dunavant, have been sent a notice seeking an indication
from such shareholders of their desire to have their shares
subject to such registration rights covered by the registration
statement, the number of such shares and their intended plan of
distribution. The Company currently anticipates that it will
file the registration statement with the SEC within a matter of
days after clearing the Form 10.




9.  Subsequent Events




The AIC Litigation




On March 30, 2001, Analysts International Corporation
(AIC) filed a civil summons and complaint in General
Court of Justice, District Court Division, County of Wake, North
Carolina, against High Speed Net Solutions, Inc. The complaint
alleged that the Company breached certain contracts with AIC,
dated December 9, 1999, February 11, 2000,
April 25, 2000, May 9, 2000, and May 23, 2000,
under which AIC provided the Company with computer programming
services. AIC requested that the court enter judgment in its
favor for $358,426, plus pre-judgment interest from
September 26, 2000, on certain invoices at the rate of 18%
per annum, post-judgment interest at the rate of 8% per annum,
reasonable costs of AIC and other relief the court deems
equitable.

15



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)






9.  Subsequent Events  (continued)








The Company and AIC entered into a settlement agreement and
release, dated August 7, 2001, under which the Company has
agreed to pay the sum of $358,426, plus interest accruing at the
rate of 8% per annum from March 31, 2000 (the
Indebtedness) according to the following payment
schedule: (i) $20,000 upon execution of the settlement
agreement; (ii) $5,000 per month for a period of six
months, commencing one month after execution of the settlement
agreement; and (iii) $10,000 per month until the balance of
the Indebtedness is paid in full. The Company also executed a
consent order in favor of AIC providing for AICs entry of
a judgment by consent in the amount of the Indebtedness, less
any payments made under the settlement agreement, in the event
the Company defaults on its obligations under the settlement
agreement.







Divestiture of Rich
Media Direct (RMD) Business, including Douglas May
& Co., Inc.







Upon the consummation of the Combination, the Company determined
to revise its business plan to focus primarily on Summus,
Ltd.s business operations at the time of the transaction.
The Company chose to focus primarily on Summus, Ltd.s
business plan because management perceived it had the potential
to create greater shareholder value compared to the scope of
HSNSs business operations. In addition, the Company did
not expect to have the fund-raising capacity to continue to fund
the business plans of both Summus, Ltd. and HSNS, as previously
envisioned. In connection with the Companys change in
business plan, the Company did not establish a plan to divest
itself of its rich media direct (RMD) business
(including Douglas May & Co.s operations) but began to
undertake a management review to determine the appropriate
course of action for this portion of its business given the
existing and anticipated funding constraints.







On September 19, 2001, the Company and Douglas May entered
into a stock purchase agreement under which the Company sold and
transferred to Mr. May all of the Companys equity
interest in Douglas May & Co. and related rich media
direct assets. Under the terms of a share acquisition agreement,
the Company acquired all of the issued and outstanding shares of
capital stock of Douglas May & Co. from Mr. May in
June 2000. The date of the transaction, September 19,
2001, represents the measurement date, as defined by Accounting
Principles Board Opinion No. 30 (APB 30), for
the disposition of the Companys rich media direct
business. Although the measurement date of the disposition
occurred in the third quarter of 2001, the results of operations
of Douglas May & Co. have been presented as
discontinued operations in the Companys statement of
operations for the six months ended June 30, 2001 in
accordance with the guidance of APB 30. For the period
February 16, 2001 through June 30, 2001, the
operations of Douglas May & Co. reflected approximately
$267,000 in revenues and a net loss of $49,988. The carrying
value of the assets of Douglas May & Co. was
approximately $81,000 at June 30, 2001. The Company has
recorded a loss of $215,500 on this disposition for the six
months ended June 30, 2001.







As partial consideration for the sale, the Company has been
released from its obligations with respect to two allotments of
shares of the Companys common stock issued to Mr. May
under the terms of the June 2000 share acquisition
agreement, specifically:






| |   |                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | the obligation to repurchase one allotment of 87,498 shares of
	the Companys common stock for $576,000; and                                                                                                                                                         
|
|
|
| |  | the obligation to issue to Mr. May additional shares of the
	Companys common stock, which when combined with an
	original 50,000 share allotment, would provide a value of
	$500,000 as of the first anniversary of the date the Company
	acquired Douglas May & Co.
|




The release is expressly made conditional upon the Company not
filing (or having filed against it) a petition in bankruptcy for
a period of one year from the closing of the sale of Douglas May
& Co. to Mr. May.




16



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)






9.  Subsequent Events  (continued)








Under the terms of the stock purchase agreement, Mr. May
retains his option, issued under his now terminated employment
agreement with the Company, to purchase 150,000 shares of the
Companys common stock at an exercise price of $2.50 per
share, such options being exercisable over a ten-year term.







In connection with the sale of the Companys entire equity
interest in Douglas May & Co., the Company transferred
certain technology to Douglas May & Co., including specific
applications of the Companys MaxxSystem suite of software
products developed in connection with the Companys
previously planned rich media direct service
offering.







The Company also entered into a technology license agreement
(and a related source code escrow agreement) with a newly formed
corporation and wholly-owned subsidiary of Douglas May & Co.
Under the technology license agreement, the Company has granted
to this company a perpetual, non-exclusive, non-transferable
license with respect to some of the Companys core software
technology for image, video compression and video streaming. The
technology license agreement provides for the licensees
payment to the Company of royalties, payable on a quarterly
basis, equal to the greater of: (1) a percentage of the
net revenues derived from the sale or license of end
user products using or incorporating the licensed technology or
(2) specified minimum amounts. This royalty payment plan
will remain in effect each year the agreement remains in effect.
The agreement can be terminated by the licensee at any time
following the first to occur: (1) payment of $400,000 in
royalty payments to HSNS or (2) ninety days prior to the
second anniversary of the agreement, provided that $400,000 in
royalty payments have been earned by HSNS.




17



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial
Statements  (continued)




9.  Subsequent Events  (continued)









|         |                                                                                       
|-------- | --------------------------------------------------------------------------------------
|Item  2. | Managements Discussion and Analysis of Financial
	Condition and Results of Operations







Forward-Looking Statements







This Form 10-Q contains certain forward-looking statements
that we believe are within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are intended to be
covered by the safe harbors created by such acts. For this
purpose, any statements that are not statements of historical
fact may be deemed to be forward-looking statements, including
the statements under Managements Discussion and
Analysis of Financial Condition and Results of Operations
regarding our strategy, future operations, future expectations
or future estimates, financial position and objectives of
management. Those statements in this Form 10-Q containing
the words believes, anticipates,
plans, expects and similar expressions
constitute forward-looking statements, although not all
forward-looking statements contain such identifying words. These
forward-looking statements are based on our current expectations
and are subject to a number of risks, uncertainties and
assumptions relating to our operations, results of operations,
competitive factors, shifts in market demand and other risks and
uncertainties. The most important factors that could prevent us
from achieving our stated goals include, but are not limited to,
the following:






| |   |                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a lack of sufficient financial resources to implement the
	Companys business plan, which has resulted in the
	Companys receiving a going concern opinion
	from its independent auditors with respect to its audited
	financial statements as of and for the year ended December 
	31, 2000;
|
| |  | our ability to generate sufficient working capital to meet our
	operating requirements;                                                                                                                                                                                                        
|
| |  | our ability to develop and enter into strategic relationships
	with wireless service providers, semiconductor and device
	designers, wireless device manufacturers and content providers;                                                                                                      
|
| |  | timely deployment by wireless service providers, semiconductor
	and device designers, and wireless device manufacturers of our
	software in their networks and mobile information devices;                                                                                                     
|
| |  | the continued growth in demand for wireless and mobile usage;                                                                                                                                                                                                                                  
|
| |  | new product development and acceleration of commercial
	deployment of such products;                                                                                                                                                                                                           
|
| |  | technological competition, which creates the risk of the
	Companys technology being rendered obsolete or
	noncompetitive;                                                                                                                                                                     
|
| |  | the lack of patent protection with respect to the Companys
	technology; and                                                                                                                                                                                                                   
|
|
| |  | potential infringement of the patent rights of third parties.                                                                                                                                                                                                                                  
|

Although we believe that the assumptions underlying our
forward-looking statements are reasonable, any of the
assumptions could be inaccurate and actual results may differ
from those indicated by the forward-looking statements included
in this Form 10-Q. In light of the significant
uncertainties inherent in the forward-looking statements
included in this Form 10-Q, you should not consider the
inclusion of such information as a representation by us or
anyone else that we will achieve such results. Moreover, we
assume no obligation to update these forward-looking statements
to reflect actual results, changes in assumptions or changes in
other factors affecting such forward-looking statements.

Overview




On February 16, 2001, pursuant to the terms of an asset
purchase agreement, as amended (the Asset Purchase
Agreement) HSNS and Summus, Ltd. effected a business
combination whereby HSNS, as the legal acquirer, purchased
substantially all the assets and operations of Summus, Ltd. This
transaction was recorded as a business combination under the
guidance of Accounting Principles Board Opinion No. 16,
Business Combinations (APB 16) because,
among other reasons, (i) HSNS acquired all the operating
assets and liabilities of Summus, Ltd., (ii) the Company
was to carry on all of the activities of the previously separate
and independent enterprises (i.e., HSNS and Summus, Ltd.), and
(iii) Summus, Ltd. is to be liquidated following its
distribution of the equity securities of HSNS received in the
transaction.




18



---






The acquisition of the assets and operations of Summus, Ltd. was
accounted for as a reverse acquisition in which
Summus, Ltd. is treated as the accounting acquirer; HSNS, the
acquired corporation. Summus, Ltd. was considered the accounting
acquirer in the transaction because Summus, Ltd. received shares
of HSNSs common stock and other equity securities, to be
distributed to the Summus, Ltd. shareholders, representing the
largest portion (53.1%) of the voting interests in the Company
(i.e., the combined company). In reaching this conclusion, the
Company determined that there was not sufficient other evidence
to indicate that HSNS should be deemed the acquirer, taking into
consideration that: (i) the terms of the Asset Purchase
Agreement provided for the Board of Directors of the Company to
consist of an equal number of representatives of both Summus,
Ltd. and HSNS, with a Summus, Ltd. director serving as Chairman
of the Board; (ii) senior management of the Company was to
consist of representatives of each of the companies in roughly
equal numbers; (iii) post-combination, the Companys
primary business focus was to be that of Summus, Ltd. at the
time of the closing of the transaction; and (iv) the terms of
the voting trust agreement with Dr. Bjorn Jawerth (entered
into in connection with and upon the closing of the transaction)
provided for the release of the shares of HSNS common stock
subject to the voting arrangements set forth therein in
increments over roughly a one-year period following the closing
of the transaction.







As of February 16, 2001, for accounting purposes the
historical financial statements of the Company are those of
Summus, Ltd., not HSNS. For this reason, we have included in
this registration statement on Form 10 historical financial
statements of Summus, Ltd., as well as selected financial data
and managements discussion and analysis of and pertaining
to Summus, Ltd.







The HSNS  Summus,
Ltd. Business Combination







On February 16, 2001, pursuant to the terms of the Asset
Purchase Agreement, HSNS and Summus, Ltd. effected a business
combination whereby HSNS, as the legal acquirer, purchased
substantially all the assets and operations of Summus, Ltd. This
transaction was recorded as a business combination under
APB 16.







From Summus, Ltd.s perspective, the primary business
purpose of entering into the transaction with HSNS was to
provide a vehicle for raising capital. Summus, Ltd. was at a
stage in its development where it required additional financing
or needed to combine with another entity in order to finance its
business and realize its other objectives. The business
combination with HSNS became the most logical course of action
to provide financing to Summus, Ltd. and accomplish other key
objectives in view of, among other things, the following:






| |   |                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Summus, Ltd. already had a substantial equity interest in HSNS.
	In fact, the combination provided both companies the opportunity
	to capitalize on investments they previously made in each other.
	Prior to the combination, Summus, Ltd. owned approximately 27.6%
	of HSNS and HSNS owned approximately 14% of Summus, Ltd.                                                 
|
|
|
| |  | HSNS had had success in raising equity capital through private
	placements or other types of fund-raising, notwithstanding its
	own limited financial resources and unprofitable operations.
	This caused Summus, Ltd.s management to believe that the
	Company (that is, the post-combination combined company) would
	be able to continue to have success in raising capital.
|
|
|
| |  | HSNS was in the process of seeking to register its common stock
	under Section  12 of the Securities Exchange Act of 1934
	for purposes of having its stock made eligible for quotation on
	the OTC Bulletin Board. This offered the potential for future
	liquidity in such stock.                                                                                             
|
|
|
| |  | The consideration to be received in connection with the business
	combination was deemed to represent the highest value among the
	options considered and, thus, in the best interests of Summus,
	Ltd. and its shareholders, and allowed Summus, Ltd. to maintain
	continuity in management and strategic direction.                                                           
|
|
|
| |  | The combination of the two companies offered the potential to
	create more growth opportunities for the Company based on the
	expected enhanced access to capital resources.                                                                                                                                                                                                    
|

19



---






In addition, Summus, Ltd. evaluated potential financing
alternatives other than a business combination with HSNS. Nearly
every institutional investor contacted declined to make an
investment in Summus, Ltd. due to its significant ownership
interest in HSNS, a publicly-held company.







Based on the foregoing, Summus, Ltd. concluded that the
transaction with HSNS was the most practical solution to its
financing and growth needs.







Prior to the closing of the combination, Summus, Ltd. was the
largest shareholder of HSNS. It owned 8,217,781 shares (33.2%)
of HSNSs common stock, approximately 27.6% on a fully
diluted basis. Immediately after the closing, Summus,
Ltd.s ownership interest in the Company increased to
20,593,352 shares (55.5%) of the Companys common
stock on an as-converted basis, approximately 53.1% on a
fully-diluted basis.







The Asset Purchase Agreement contemplates that Summus, Ltd. will
liquidate following the completion of its distribution of the
Companys securities received in the transaction to the
shareholders of Summus, Ltd. On March 13, 2001, Summus,
Ltd. distributed certain of the shares of the Companys
common stock received in the transaction to the shareholders of
Summus, Ltd. in accordance with their pro rata interests; the
balance of such shares was distributed in mid-July 2001.







The consideration paid by HSNS to acquire the assets of Summus,
Ltd. is described below:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | HSNS issued to Summus, Ltd. for distribution to the shareholders
	of Summus, Ltd. a total of 20,218,733 shares of HSNS common
	stock and 6,000 shares of Series B preferred stock. As a
	shareholder of Summus, Ltd., HSNS was entitled to receive
	3,604,445 of the total number of shares of common stock issued
	in the transaction. However, under the terms of the Asset
	Purchase Agreement these shares were canceled, resulting in a
	net issuance of 16,614,288 shares of HSNS common stock. In
	addition, the Asset Purchase Agreement provided for the
	cancellation of 8,217,781 shares of HSNS common stock owned by
	Summus, Ltd. prior to the parties execution of the
	agreement.
|
|
|
| |  | HSNS issued to Summus, Ltd. 6,000 shares of newly created
	Series B preferred stock, of which 2,000 shares were
	deposited with an escrow agent as security for any
	indemnification obligations of Summus, Ltd. and its shareholders
	under the Asset Purchase Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                        
|
|
|
| |  | HSNS issued to Summus, Ltd. warrants to purchase a total of 500
	shares of its Series B preferred stock, exercisable for a
	period of 5 years from February 16, 2001. The exercise
	price of the warrants is $5,500.00 per share of Series B
	preferred stock ($5.50 per share of the Companys common
	stock on an as-converted basis).                                                                                                                                                                                                                                                                                                                                                          
|




In addition to the items described above, the terms of the Asset
Purchase Agreement provided for HSNSs assumption of
approximately $2.8 million of liabilities of Summus, Ltd.
to third parties. All amounts owed by and between HSNS and
Summus, Ltd. were cancelled upon the closing of the combination.







The recorded value of the combination was based on the equity
value of the shares of common stock and other equity securities
HSNS issued to Summus, Ltd. (for distribution to the Summus,
Ltd. shareholders) in the transaction. Since HSNSs common
stock was traded on the Pink Sheets®, the fair market value
of the shares of such stock (and other equity securities, on an
as-converted basis) issued in the transaction was more readily
determinable than the fair market value of the shares of common
stock of Summus, Ltd., a privately-held company, exchanged in
consideration for such shares of HSNS common stock and other
equity securities.







The value of the shares of the HSNS common stock and the other
equity securities issued in the transaction was based on the
traded value of such stock on February 16, 2001, the date
of closing of the combination, less a discount reflecting:
(1) the limited public float of the common stock and (2)
the thinly traded volume of HSNSs common stock. The
discount applied was similar in proportion to the discount HSNS
realized in connection with cash sales of its common stock to
third parties.







Another component of the value of the combination was the value
of the outstanding HSNS stock options. All outstanding HSNS
options on February 16, 2001 were treated as replacement
options since the




20



---






Accounting for Certain
Transaction Involving Stock Compensation








Since HSNS was the legal acquirer while Summus, Ltd. was the
accounting acquirer, it was necessary to issue new HSNS stock
options to the existing Summus, Ltd. option holders to reflect
the new capitalization resulting from the transaction. The
number of options issued was determined by comparing the total
consideration received by Summus, Ltd. in the transaction to the
outstanding equity of Summus, Ltd. prior to the transaction.
Since Summus, Ltd. was the accounting acquirer, no value was
ascribed to these options.







Purchase accounting was applied to the assets and liabilities of
HSNS based upon their fair market values as of February 16,
2001, the date of the combination. The value of the
consideration described above totaled $23.5 million. The fair
value of the HSNS net liabilities on the date of the combination
totaled approximately $4.0 million, resulting in goodwill
valued at approximately $27.5 million. The goodwill
recorded in connection with the transaction represented the
excess of the purchase price over the fair value of net assets
acquired in accordance with APB 16. The goodwill is not
associated with specific cash flows of the HSNS assets or
operations acquired. Rather, the goodwill is considered to be
enterprise level goodwill associated with the combined value of
the companies resulting from the combination. The financial
forecasts of the Company demonstrate a sufficient amount of cash
flow to fully realize the amount of recorded goodwill.
Additionally, the market capitalization of the Company of
$94.1 million on June 30, 2001 does not indicate
impairment of the carrying value of the goodwill. Accordingly,
the Companys management believes that the amount of
goodwill recorded by the Company in connection with the
acquisition of HSNS was determined in accordance with the
guidance of APB 16 and is recoverable.







Divestiture of Rich Media
Direct Business







Upon the consummation of the HSNS  Summus, Ltd.
business combination on February 16, 2001, the Company
determined to revise its business plan to focus primarily on
Summus, Ltd.s business operations at the time of the
transaction. The Company chose to focus primarily on Summus,
Ltd.s business plan because management perceived it had
the potential to create greater shareholder value compared to
the scope of HSNSs business operations. In addition, the
Company did not expect to have the fund-raising capacity to
continue to fund the business plans of both Summus, Ltd. and
HSNS, as previously envisioned. In connection with the
Companys change in business plan, the Companys
management began a review to determine the appropriate course of
action for its rich media direct business (including
the operations of Douglas May & Co.) in light of the
existing and anticipated funding constraints, but did not
establish a plan to divest itself of this business.







On September 19, 2001, the Company and Douglas May entered
into a stock purchase agreement under which the Company sold and
transferred to Mr. May all of the Companys equity
interest in Douglas May & Co. and related rich media direct
assets. The date of the transaction, September 19, 2001,
represents the measurement date, as defined by Accounting
Principles Board Opinion No. 30 (APB 30), for
the disposition of the Companys rich media direct
business. Although the measurement date of the disposition
occurred in the third quarter of 2001, the results of operations
of Douglas May & Co. have been presented as discontinued
operations in the Companys statement of operations for the
six months ended June 30, 2001 in accordance with the
guidance of APB 30. For the period February 16, 2001
through June 30, 2001, the operations of Douglas May &
Co. reflected approximately $267,000 in revenues and a net loss
of $49,988. The carrying value of the assets of Douglas May
& Co. was approximately $81,000 on June 30, 2001. The
Company has recorded a loss of $215,500 on this disposition for
the six months ended June 30, 2001.







Under the terms of the June 2000 share acquisition
agreement, the Company acquired all of the issued and
outstanding shares of capital stock of Douglas May & Co.
from Mr. May on July 10, 2000. As partial
consideration for the sale of Douglas May & Co. back to
Mr. May, the Company has been released from its




21



---













| |   |                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | the obligation to repurchase one allotment of 87,498 shares of
	the Companys common stock for $576,000; and                                                                                                                                                         
|
|
|
| |  | the obligation to issue to Mr. May additional shares of the
	Companys common stock, which when combined with an
	original 50,000 share allotment, would provide a value of
	$500,000 as of the first anniversary of the date the Company
	acquired Douglas May & Co.
|




The release is expressly made conditional upon the Company not
filing (or having filed against it) a petition in bankruptcy for
a period of one year from the closing of the sale of Douglas
May & Co. to Mr. May.







Under the terms of the stock purchase agreement, Mr. May
retains his option, issued under his now terminated employment
agreement with the Company, to purchase 150,000 shares of the
Companys common stock at an exercise price of $2.50 per
share, such options being exercisable over a ten-year term.







In connection with the sale of the Companys entire equity
interest in Douglas May & Co., the Company transferred
certain technology to Douglas May & Co., including specific
applications of the Companys MaxxSystem suite of software
products developed in connection with the Companys
previously planned rich media direct service
offering.







The Company also entered into a technology license agreement
(and a related source code escrow agreement) with a newly formed
corporation and wholly-owned subsidiary of Douglas May & Co.
Under the technology license agreement, the Company has granted
to this company a perpetual, non-exclusive, non-transferable
license with respect to some of the Companys core software
technology for image, video compression and video streaming. The
technology license agreement provides for the licensees
payment to the Company of royalties, payable on a quarterly
basis, equal to the greater of: (1) a percentage of the
net revenues derived from the sale or license of
end-user products using or incorporating the licensed technology
or (2) specified minimum amounts. This royalty payment plan
will remain in effect each year the agreement remains in effect.
The agreement can be terminated by the licensee at any time
following the first to occur of: (1) payment of $400,000 in
royalty payments to HSNS or (2) ninety days prior to the
second anniversary of the agreement, provided that $400,000 in
royalty payments have been received by HSNS.







The accompanying consolidated financial statements include the
results of operations of HSNS from the date of acquisition.
Because HSNS is the legal acquirer, the accompanying
consolidated financial statements include amounts related to the
legally issued shares of common stock, preferred stock and
treasury stock of HSNS.







Following the combination between HSNS and Summus, Ltd., the
Company is engaged in research and development contract work for
government agencies in the areas of complex imaging and object
recognition. Such contract work represented 60% and 76% of
Summus, Ltd.s revenues in the years ended
December 31, 2000 and 1999, respectively. Over the past ten
years, Summus, Ltd.s work in this area has led to the
development of:






| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | mine detection technologies (both land and sea);                                                                       
|
| |  | wireless sensor technologies such as automatic target
	recognition, de-noising and image compression and decompression;
|
| |  | side scan sonar 3D imaging;                                                                                            
|
| |  | missile imaging software (smart bomb technology); and                                                                  
|
| |  | 3D (simulation and mapping).                                                                                           

Our government contract work will continue to focus on solving
specific technical and scientific problems in the government
sector. The government contract work has led to the development
of software development kits that allow developers to create new
software products that are compatible with and complementary to
our

22



---







| |     |                                                                                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | automatic identification and reconstruction of distinctive
	geological and topographic information of the seafloor bottom
	from side scan sonar images; and
|
| | (2) | development of a computer model for the generation of synthetic
	side scan sonar images.                                                                   

In conjunction with the Companys government contract work,
the Company is currently exploring applications of its
technology in the medical sector. The Companys current
focus is on computerized cancer diagnosis products for the
anatomical pathological (AP) market. Specifically, the
Company is in the process of seeking to develop a computerized
post-screening software solution for cancer diagnosis from
prostate biopsy. A prototype version of the screening software
has been completed. No prediction can be presently made as to
the date by which this technology will be ready for commercial
deployment.




The core of the Companys business plan is to focus on the
emerging wireless and mobile Internet market. We are in the
process of developing multimedia technology to address the
bandwidth, error constraints, contention with voice and data
traffic, and power challenges associated with multimedia content
transmission over existing and future wireless networks. Our
technology is based on certain key mathematical theories and
tools, using advances and results from the fields of wavelets,
non-linear partial differential equations and dynamical systems,
and graph theory and topology. We use these tools to create
highly efficient algorithms for different types of information
processing with low computational complexity and low memory
usage.




Our strategy is to continue to work toward commercial release of
our BlueFuel product line currently under development. We
are currently focusing our product development resources on
porting BlueFuel to the Qualcomm BREW wireless platform.
This initial porting effort with provide the foundation for
future ports. This effort is expected to consume a significant
amount of the Companys technical and business development
resources through the remainder of 2001. In parallel with this
effort, we are dedicating additional resources to define,
develop and execute a beta/field trial for BlueFuel Video
(our video compression software for multimedia applications) to
support our internal development efforts and begin to develop
market awareness for BlueFuel. This beta/field trial is
planned for the fourth quarter of 2001. We recently announced
the successful demonstration of the BlueFuel Video
application on Qualcomms BREW platform.

We anticipate that the first version of the BlueFuel
Efficiency Engine (a multimedia operating system designed
to efficiently route, store and monitor multimedia traffic in a
network) will be available during the fourth quarter of 2001. We
are targeting commercial release of the BlueFuel Video
solution, including BlueFuel Player (player software),
BlueFuel Create (a content creation tool) and
BlueFuel Server (the server-side engine) in the first
quarter of 2002.

During the second half of 2001, we also intend to identify a
second major platform for BlueFuel Video and begin porting
efforts. This will require focused engineering resources to
execute. We are targeting commercial release of products on this
platform in the second quarter of 2002.

We have not, as yet, executed any product orders for the
BlueFuel product line currently under development.

In parallel with our product development efforts, we are seeking
to enter into business relationships and alliances with device
manufacturers, content providers and cellular carriers to extend
the reach of multimedia applications to wireless and mobile
devices. We are currently demonstrating our technology to a
number of wireless carriers, content providers and device
manufacturers.

We recently entered into a master porting agreement with Samsung
Electronics America, a subsidiary of Samsung Electronics Co.,
Ltd, a global leader in semiconductors, the consumer electronics
industry and digital convergence technology. The agreement
establishes the basic terms under which the Company may provide
a broad range of information processing technology and solution
ports to various Samsung product

23



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We recognize that a concern for our corporate viability and the
related concerns regarding our lack of financial resources and
ability to meet specific application demands and provide product
support may hamper our efforts to forge critical business
relationships and alliances. Nevertheless, management believes
that the attributes of our technology will provide opportunities
to enhance our product awareness and profile through such
relationships and alliances.

It is our intent to license our technology and provide a
framework to those with whom we enter into relationships and
alliances that will increase usage, sell devices and increase
their customer base. A specific area of focus will be to
identify targeted applications to drive market pull
for our products. This will entail working with select content
providers to develop applications that represent a high
likelihood of early adoption by end users. These applications
will be offered to wireless carriers and mobile virtual network
operators on a revenue-sharing basis. We believe that this
represents a significant opportunity for the Company to develop
an on-going service revenue model.

We anticipate that the various components of the
BlueFuelproduct line will be licensed separately or in
combination with one another, with pricing dependent on the
number of components licensed. Our present revenue model
contemplates that wireless carriers or service providers
licensing the BlueFuel product line would be assessed a
base fee plus a royalty for each subscriber that signs up to use
the service (e.g., by downloading BlueFuel Player or
accessing BlueFuelServer). A further charge would be
assessed if the service provider requires additional servers. In
some cases, we may effectively subsidize the rollout of the
BlueFuel product line through a revenue sharing
arrangement entered into with a handset manufacturer, content
creator and service provider.

Results of Operations

Three Months ended June 30, 2001 compared to
Three Months ended June 30, 2000




Revenues. Total revenues decreased $179,552 to $211,019
in the three months ended June 30, 2001, down 46.0% from
$390,571 in the three months ended June 30, 2000. The
decrease in these revenues was primarily due to a decrease in
providing contract services.







Costs of Revenues. Total costs of revenues decreased
$54,726 to $102,484 in the three months ended June 30,
2001, down 34.8% from $157,210 in the corresponding period of
the prior year. Costs of contracts and license fees for the
three months ended June 30, 2001 and 2000 were comprised
primarily of salaries and related costs of providing such
services.







Total gross profit decreased $124,826, or 53.5%, to $108,535 for
the three months ended June 30, 2001, compared with
$233,361 for the three months ended June 30, 2000. The
decrease was primarily attributable to less license fee income
in the three months ended June 30, 2001 compared to the
corresponding period of the prior year. License fee income
generates a higher gross profit percentage compared to contract
revenues.







Selling, General and Administrative Expenses. Selling,
general and administrative expenses consist primarily of
salaries, consulting fees, office operations, administrative and
general management activities, including legal, accounting and
other professional fees. Selling, general and administrative
expenses for the three months ended June 30, 2001, were
$1,841,989, compared to $1,551,396 for three months ended
June 30, 2000. The increase in selling, general and
administrative expenses resulted primarily from the business
combination between HSNS and Summus, Ltd.




Amortization Expense. Amortization expense for the three
months ended June 30, 2001, was $2,291,331. During the
three months ended June 30, 2000, there was no amortization
expense. The amortization expense recorded in the three months
ended June 30, 2001 related to the amortization of the
goodwill resulting from the business combination between HSNS
and Summus, Ltd.

Non-Cash Compensation. Non-cash compensation for the
three months ended June 30, 2001 was $57,806 compared to
$823,999 for the three months ended June 30, 2000. During
the three months ended

24



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Research and Development. Research and development costs
for the three months ended June 30, 2001, were $115,657
compared to $378,656 for the three months ended June 30,
2000. The decrease in these costs was due primarily to the
reduced staffing level in the first quarter of 2001 compared
with that during the comparable period in the prior year.







Gain on Sale of Stock of Equity Investee. Gain on the
sale of stock of equity investee for the three months ended
June 30, 2000 was $117,188. In 1999, Summus, Ltd. acquired
shares of HSNS common stock which it later sold to third
parties. During the three months ended June 30 2000,
Summus, Ltd. sold 100,000 shares of HSNS common stock for gross
proceeds of $200,000, resulting in a gain on sale of $117,188.







Participation in loss of Equity Investee. Participation
in loss of equity investee for the three months ended
June 30, 2000, was $1,010,479. In 1999, Summus, Ltd.
acquired a majority ownership interest in HSNS. Summus, Ltd.
accounted for its investment in HSNS using the equity method of
accounting. Under the equity method of accounting, Summus, Ltd.
adjusted its investment in HSNS for its share of HSNSs
losses subsequent to the date of Summus, Ltd.s initial
investment. During 2000, Summus, Ltd.s investment in HSNS
was reduced to zero as a result of Summus, Ltd.s sales of
shares of HSNS common stock and through Summus, Ltd.s
share of the losses of HSNS.




Net Interest Income (Expense). Net interest expense for
the three months ended June 30 2001, was $8,708, compared
to net interest income of $20,021 for the corresponding period
of the prior year. Net interest expense for the three months
ended June 30, 2001 related to interest costs associated
with capital lease obligations and note payable agreements. The
net interest income in the three months ended June 30,
2000, resulted from earnings on cash balances generated from the
sale of shares of HSNS common stock, net of interest costs on
capital lease obligations and note payable agreements.

Six Months ended June 30, 2001 compared to
Six Months ended June 30, 2000




Revenues. Total revenues decreased $163,167 to $507,179
in the six months ended June 30, 2001, down 24.3% from
$670,346 in the six months ended June 30, 2000. The
decrease in these revenues was primarily due to a decrease in
providing contract services.







Costs of Revenues. Total costs of revenues decreased
$51,606 to $235,756 in the six months ended June 30, 2001,
down 18.0% from $287,362 in the corresponding period of the
prior year. Costs of contracts and license fees for the six
months ended June 30, 2001 and 2000 were comprised
primarily of salaries and related costs of providing such
services.







Total gross profit decreased $111,561, or 29.1%, to $271,423 for
the six months ended June 30, 2001, compared with $382,984
for the six months ended June 30, 2000. The decrease was
primarily attributable to less license fee income in the six
months ended June 30, 2001 compared to the corresponding
period of the prior year. License fee income generates a higher
gross profit percentage compared to contract revenues.




Selling, General and Administrative Expenses. Selling,
general and administrative expenses consist primarily of
salaries, consulting fees, office operations, administrative and
general management activities, including legal, accounting and
other professional fees. Selling, general and administrative
expenses for the six

25



---











Amortization Expense. Amortization expense for the six
months ended June 30, 2001, was $3,436,072. During the six
months ended June 30, 2000, there was no amortization
expense. The amortization expense recorded in the six months
ended June 30, 2001 related to the amortization of the
goodwill resulting from the business combination between HSNS
and Summus, Ltd.

Non-Cash Compensation. Non-cash compensation for the six
months ended June 30, 2001 was $772,262 compared to
$823,999 for the six months ended June 30, 2000. During the
six months ended June 30, 2001, stock options were granted
to employees at prices below the fair value of the underlying
common stock resulting in total compensation of $879,688, of
which $664,438 was charged to expense during the six months
ended June 30, 2001. The remaining amount, $215,250, has
been classified as deferred compensation and will be charged to
expense as future vesting of the stock options occurs. The
remaining amount of non-cash compensation for the six months
ended June 30, 2001 of $107,824, reflects the amortization
for six months of deferred compensation resulting from stock
options granted during the year ended December 31, 2000, at
prices below the fair value of the underlying common stock. For
the six months ended June 30, 2000, amortization of
deferred compensation, resulting from the issuance of stock
options at prices below the fair value of the underlying common
stock, was $823,999. The decrease in amortization of deferred
compensation recorded in the six months ended June 30, 2001
as compared to the corresponding period in the prior year from
options granted in year 2000 is a result of the reversal of
deferred compensation from forfeited stock options during 2001,
plus a large number of fully vested options granted during the
six months ended June 30, 2000.




Research and Development. Research and development costs
for the six months ended June 30, 2001, were $217,386
compared to $773,913 for the six months ended June 30,
2000. The decrease in these costs was due primarily to the
reduced staffing level in the first half of 2001 compared to
that during the comparable period of the prior year.







Gain on Sale of Stock of Equity Investee. Gain on the
sale of stock of equity investee for the six months ended
June 30, 2000 was $3,244,767. In 1999, Summus, Ltd.
acquired shares of HSNS common stock which it later sold to
third parties. During the six months ended June 30 2000,
Summus, Ltd. sold 915,000 shares of HSNS common stock for gross
proceeds of $4,057,500, resulting in a gain on sale of
$3,244,767.







Participation in loss of Equity Investee. Participation
in loss of equity investee for the six months ended
June 30, 2000, was $2,082,693. In 1999, Summus, Ltd.
acquired a majority ownership interest in HSNS. Summus, Ltd.
accounted for its investment in HSNS using the equity method of
accounting. Under the equity method of accounting, Summus, Ltd.
adjusted its investment in HSNS for its share of HSNSs
losses subsequent to the date of Summus, Ltd.s initial
investment. During 2000, Summus, Ltd.s investment in HSNS
was reduced to zero as a result of Summus, Ltd.s sales of
shares of HSNS common stock and through Summus, Ltd.s
share of the losses of HSNS.




Net Interest Income (Expense). Net interest expense for
the six months ended June 30 2001, was $12,073, compared to
net interest income of $49,974 for the corresponding period of
the prior year. Net interest expense for the six months ended
June 30, 2001 related to interest costs associated with
capital lease obligations and note payable agreements. The net
interest income in the six months ended June 30, 2000,
resulted from earnings on cash balances generated from the sale
of shares of HSNS common stock, net of interest costs on capital
lease obligations and note payable agreements.




Loss from Discontinued Rich Media Direct Operations.The
Company recorded a loss from operations of its rich media
direct business of $49,988, as well as a loss on disposal
of this business segment of $215,500, for the six months ended
June 30, 2001. The Companys divestiture of this
business includes the sale of Douglas May & Co. to
Mr. May on September 19, 2001.




26



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Liquidity and Capital Resources




As of June 30, 2001, the Company had $143,567 of cash on
hand and negative working capital of approximately
$5.1 million. As of such date, the Company had
approximately $5.2 million of accounts payable, accrued
expenses, notes payable and capital lease obligations and was in
default of payment terms with several of its vendors. The
vendors for which more significant amounts are owed have been
contacted. The Company has been in discussions with such vendors
for purposes of seeking to negotiate down the amounts due,
extend the payment terms and/or satisfy amounts due through a
combination of cash and stock.







The Company entered into a settlement agreement and release,
dated August 7, 2001, with one of such vendors, Analysts
International Corporation (AIC), which provided the
Company with computer programming services during the 1999-2000
period. Under the terms of the settlement agreement, the Company
has agreed to pay the sum of $358,426, plus interest accruing at
the rate of 8% per annum from March 31, 2000 (the
Indebtedness) according to the following payment
schedule: (i) $20,000 upon execution of the settlement
agreement, (ii) $5,000 per month for a period of six
months, commencing one month after execution of the agreement,
and (iii) $10,000 per month until the balance of the
Indebtedness is paid in full.







As previously reported, in the first half of 2001 the Company
has taken steps to reduce its burn rate through a
reduction in personnel, termination of the lease of office space
and other expense reduction activities. The Company has also
focused its immediate attention on the operations and growth of
its wireless and mobile business.







As of June 30, 2001, the Company anticipated that the sale
of its equity securities would represent the primary source of
the Companys funding, as the Company has no credit
facilities. We cannot guarantee that we will continue to be able
to raise capital or that if we do so it will be on favorable
terms. We may have to sell equity at below market rates, and any
future sales of our capital stock to finance our business plan
will dilute our existing shareholders ownership. The
Companys continuation as a going concern depends on its
ability to generate sufficient cash flow to meet its obligations
on a timely basis, to obtain additional financing as may be
required and ultimately to attain profitability.







The success and growth of the Companys business,
post-combination, is dependent in large part on our ability to
partner and develop relationships within the wireless industry.
In order for the Company to execute on its business plan, the
Company anticipates that it will require approximately $15
million in working capital within the next twelve months, in
part to expand its operations to Europe and Asia, where the
wireless network infrastructure is currently more developed than
it is in North America. It is imperative that the Company market
and sell or license its products where the infrastructure is
capable of supporting our technology. This will represent a
significant cost to the Company but is critical to its future
success. By establishing operations in targeted areas around the
world, supported by the necessary marketing resources, the
Company will be able to work with local carriers, device
manufacturers and content providers and seek to shorten sales
cycles established with its targeted customer base.







Cash Flow used in Operating Activities. Net cash used in
operating activities was $3,109,254 in the six months ended
June 30, 2001, compared to $3,467,207 in the corresponding
period of the prior year. The decrease in net cash used in
operating activities was due primarily to the reduced staffing
level in the first half of 2001 compared with that during the
comparable period in the prior year.




Cash Flow from Investing Activities. Net cash used in
investing activities was $13,497 in the six months ended
June 30, 2001, compared to net cash provided by investing
activities of $4,057,500 in the corresponding period of the
prior year, representing the proceeds from Summus, Ltd.s
sale of 915,000 shares of common stock in HSNS, its equity
investee.

Cash Flow from Financing Activities. Net cash provided by
financing activities was $3,057,823 in the six months ended
June 30, 2001 compared to net cash used in financing
activities of $139,562 in the

27



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| |   |                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the sale of 1,052,749 share of the Companys common stock,
	along with warrants to purchase an additional 2,131,198 shares
	of common stock, at exercises prices ranging from $3.50 to $5.25
	per share (all such securities being restricted
	securities as defined in Rule 144) to accredited
	investors, generating aggregate proceeds of $2,738,857;
|
|
| |  | $500, representing proceeds from the exercise of stock options
	for 2,000 shares of common stock;                                                                                                                                                                                                                                                         
|
|
|
| |  | $540,000 representing the proceeds of a loan from HSNS extended
	under the terms of the Asset Purchase Agreement. Upon the
	closing the HSNS-Summus, Ltd. business combination, the
	indebtedness was cancelled in its entirety;                                                                                                                          
|
|
|
| |  | $121,534 in principal payments on capital lease obligations; and                                                                                                                                                                                                                                                                                          
|
|
|
| |  | $100,000 in cash payments in partial settlement of the Dunavant
	loss contingency.                                                                                                                                                                                                                                                                        
|

Net cash flow used in financing activities of $139,562 in the
six months ended June 30, 2000, represented cash payments
on capital lease and note agreements.




New Accounting Pronouncements







In June 1998, the FASB issued Statement of Financial
Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging
Activities. SFAS 133 requires that derivative instruments
be recognized as either assets or liabilities in the
consolidated balance sheet based on their fair values. Changes
in the fair values of such derivative instruments will be
recorded either in results of operations or in other
comprehensive income, depending on the intended use of the
derivative instrument. The initial application of SFAS 133 will
be reported as the effect of a change in accounting principle.
SFAS 133 is effective for all fiscal years beginning after
June 15, 2000. Because the Company has not historically
used derivative financial instruments, the Company does not
anticipate that SFAS 133 will have a material impact on its
consolidated financial statements.







On June 29, 2001, the Financial Accounting Standards Board
(FASB) unanimously approved the issuance of
Statements of Financial Accounting Standards (SFAS)
No. 141, Business Combinations and
No. 142, Goodwill and Other Intangible
Assets. SFAS 141 eliminates the pooling-of-interests
method of accounting for business combinations except for
qualifying business combinations that were initiated prior to
July 1, 2001. SFAS 141 also includes new criteria to
recognize intangible assets separately from goodwill. The
requirements of SFAS 141 are effective for any business
combination accounted for by the purchase method that is
completed after June 30, 2001. Under SFAS 142, goodwill and
intangible assets with indefinite lives are no longer amortized
but are reviewed annually, or more frequently if impairment
indicators arise, for impairment. Separable intangible assets
that are not deemed to have an indefinite life will continue to
be amortized over their useful lives. The amortization
provisions of SFAS 142 requiring non-amortization of goodwill
and indefinite-lived intangible assets apply to goodwill and
indefinite-lived intangible assets acquired after June 30,
2001. With respect to goodwill and intangible assets acquired
prior to July 1, 2001, the Company will adopt SFAS 142 in
the fiscal year beginning January 1, 2002, and therefore
cease all amortization of goodwill as of January 1, 2002. The
effect of adopting SFAS 142 by the Company beginning
January 1, 2002 will result in not recording amortization
of approximately $9.2 million in 2002 of the goodwill
resulting from the business combination between HSNS and Summus,
Ltd. on February 16, 2001 that otherwise would have been
recorded.




Item  3.  Quantitative and Qualitative
Disclosures About Market Risk

We do not use any derivative financial instruments for hedging,
speculative or trading purposes. Our exposure to market risk is
currently immaterial.

28



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PART II.

OTHER INFORMATION


Item  1.  Legal Proceedings

The Analysts International Corporation
Litigation

On March 30, 2001, Analysts International Corporation
(AIC) filed a civil summons and complaint in General
Court of Justice, District Court Division, County of Wake, North
Carolina, against High Speed Net Solutions, Inc. The complaint
alleged that we breached certain contracts with AIC, dated
December 9, 1999, February 11, 2000, April 25,
2000, May 9, 2000, and May 23, 2000, under which AIC
provided us with computer programming services. AIC requested
that the court enter judgment in its favor for $358,426, plus
pre-judgment interest from September 26, 2000 on certain
invoices at the rate of 18% per annum, post-judgment interest at
the rate of 8% per annum, reasonable costs of AIC and other
relief the court deemed equitable.

The Company and AIC entered into a settlement agreement and
release, dated August 7, 2001, under which we agreed to pay
the sum of $358,426, plus interest accruing at the rate of 8%
per annum from March 31, 2000 (the
Indebtedness) according to the following payment
schedule: (i) $20,000 upon execution of the settlement
agreement, (ii) $5,000 per month for a period of six
months, commencing one month after execution of the agreement,
and (iii) $10,000 per month until the balance of the
Indebtedness is paid in full. We also executed a consent order
in favor of AIC providing for AICs entry of a judgment by
consent in the amount of the Indebtedness, less any payments
made under the settlement agreement, in the event we default on
our obligations under the settlement agreement.

The Cale Yarborough Litigation

On April 25, 2001, Cale Yarborough, a Company shareholder,
filed a summons and complaint against High Speed Net Solutions,
Inc., David Gordon, Bear Stearns Securities Corp., MidSouth
Capital, Inc., and Interwest Stock Transfer Co. in the United
States District Court, District of South Carolina, Florence
Division, alleging, among other things, (i) breach of an
agreement Mr. Yarborough entered into with David Gordon under
which Mr. Gordon was to provide an opinion letter as to
Mr. Yarboroughs ability to resell shares of our
common stock in accordance with Rule 144 promulgated under
the Securities Act of 1933, (ii) violation of
Rule 144, (iii) professional negligence and breach of
fiduciary duty, and (iv) violation of federal and state
securities laws. All of the causes of action in the complaint
stem from the alleged failure to properly advise
Mr. Yarborough as to when the shares of our common stock
held by Mr. Yarborough could properly be resold under
Rule 144.




On May 17, 2001, the complaint was dismissed without
prejudice. As such, it is subject to being reopened upon the
showing of good cause within the 60-day period following the
issuance of the dismissal order. A check of the court docket has
revealed that nothing was filed during this 60-day period. We
believe that Mr. Yarborough and Mr. Gordon are in the
process of reaching or have reached a settlement of this matter.
The Company has not recorded a loss contingency relating to this
complaint because; in managements opinion, it is not
probable that a loss contingency exists and an amount cannot be
reasonably estimated.




The ENELF Litigation




On March 15, 2001, ENELF, LLC filed a civil lawsuit in the
United States District Court for the Eastern District of Texas
alleging patent infringement by Microsoft Corporation, Texas
Instruments, Incorporated, Aware, Inc. and Summus, Ltd. ENELF
alleged that certain modules of MaxxSystem and PhotoID SDK
infringed upon ENELFs U.S. Patent Number 4,599,567
entitled Signal Representation Generator. ENELF
sought to enjoin Summus, Ltd. from making, selling, offering for
sale, using, or importing its wavelet-based video and image
processing technology. In addition, ENELF sought an unspecified
amount of monetary damages. We have filed an answer denying
ENELFs allegations, and seeking a declaratory judgment of
non-infringement, invalidity and unenforceability. We have
recently entered into settlement discussions with ENELF, but are
prepared to provide a vigorous defense to this lawsuit. The
Company has not recorded a loss contingency relating to this
lawsuit because, in managements opinion, it is not
probable that a loss contingency exists and an amount cannot be
reasonably estimated.




29



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The Pin High Company Litigation

In February, 2001, the Pin High Company, Inc. filed suit against
Summus, Ltd. and us in the Superior Court of Wake County, North
Carolina, for non-payment of consulting services rendered. On
April 30, 2001, we, Summus, Ltd. and Pin High entered into
a Release and Settlement Agreement. Under the terms of the
agreement, Summus, Ltd. agreed to pay an aggregate amount of
$20,145.08 in eight installments, the last of which will be due
in December, 2001. The agreement stipulates that if Summus, Ltd.
defaults in its payment obligations, Pin High will have the
right to file a confession of judgment previously executed by
both the Company and Summus, Ltd. making us jointly and
severally liable for the amounts due under the agreement, plus
costs and attorneys fees.

Item  2.  Changes in Securities and Use of
Proceeds

During the three months ended June 30, 2001, the Company
issued an aggregate of 1,396,615 shares of its common stock to
48 persons and entities. These securities were not registered
under the Securities Act of 1933. Except as noted below, the
securities described below were issued in transactions deemed to
be exempt from registration under Section 4(2) of the
Securities Act as transactions by an issuer not involving any
public offering. All of such securities are deemed to be
restricted securities as defined in
Rule 144(a)(3) under the Securities Act. Except as noted
below, no commissions were paid in connection with any of the
issuances.

Stock Issuances for Cash

From April 1, 2001 to June 30, 2001, the Company
issued an aggregate of 636,421 shares of common stock to
40 accredited investors (all of whom were unaffiliated with
the Company) for a price per share ranging from $2.00 to $4.25,
and issued warrants to purchase, at an exercise price of $3.50
to $5.25 per share, an additional 1,314,930 shares of common
stock, for aggregate consideration of $1,711,630. In connection
with the issuance of these shares, the Company issued 8,194
shares of its restricted common stock, as commissions, to the
placement agents involved in such sales. The shares and warrants
were issued in transactions deemed to be exempt from
registration under the Securities Act in reliance upon the
exemption provided by Rule 506 of Regulation D.

In May 2001, the Company issued 2,000 shares of its common
stock upon the exercise of an outstanding stock option. The
Company received $500 in proceeds from the exercise of the stock
option.

Stock Issuances in Settlement of Litigation

Under the terms of a second amended and restated settlement
agreement, dated October 26, 2000, the Company issued
25,000 shares of its common stock to Mr. William R.
Dunavant in the month of April 2001. Under the terms of a
settlement agreement, dated June 29, 2000, the Company
agreed to issue 475,000 shares of its common stock to
Mr. Dunavant and his counsel.

Stock Issuances in Settlement of Liabilities

Under the terms of an agreement of settlement and compromise,
dated June 25, 2001, the Company agreed to issue 250,000
shares of its common stock to Mr. Brad Richdale in full
satisfaction of indebtedness, in the aggregate amount of
$435,815, payable to Mr. Richdale or entities controlled by
him.

Under the terms of a settlement agreement, dated May 18,
2001, the Company issued 5,560 shares of its common stock as
partial payment on amounts owed to Avenel Financial Group.

Stock/ Option Issuances to Directors, Officers
and Employees

During the three months ended June 30, 2001, the Company
granted options to purchase an aggregate of 219,500 shares of
common stock to employees under the Companys 2000 Equity
Compensation Plan. These options were issued with exercise
prices below the fair market value at the time of issuance, and
we recorded total deferred compensation expense of $240,500
related to the option issuances.

30



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Options exercisable for 210,000 shares of common stock were
issued to Barry Johnson upon his execution of an employment
agreement with the Company. These options are subject to a
three-year vesting schedule and conditioned upon his continued
employment with the Company.

Options exercisable for 4,000 shares of common stock were issued
to four Summus employees for services rendered to the Company.
These options were fully vested upon issuance.

Options exercisable for 5,500 shares of common stock were issued
to a consultant on June 15, 2001, and vested one month
after issuance.

Item  3.  Defaults Upon Senior
Securities

None.

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

During the quarterly period ended June 30, 2001, no matter
was submitted to a vote of the security holders of the Company.
However, shareholders representing a majority of the outstanding
shares of the Companys voting securities, in accordance
with the provisions of the Florida Business Corporation Act, by
written consent, dated June 13, 2001, adopted and approved
an amendment to the Companys 2000 Equity Compensation Plan
to increase the number of shares of common stock available for
issuance pursuant to awards under the Plan from 2,000,000 to
6,500,000 shares.

Item  5.  Other Information

As previously reported, Messrs. Stuart Diamond and
Christopher W. Gaertner, and Ms. Wendi Tush, each resigned
as a member of (or, in the case of Mr. Gaertner, as an
advisor to) the Companys Board of Directors in mid-July
2001. Dr. Bjorn Jawerth has since been appointed as the
Chairman of the Board.

By letter, dated August 1, 2001, Stuart Diamond confirmed
his resignation as trustee under the Voting Trust Agreement,
dated as of February 16, 2001, among Dr. Bjorn
Jawerth, the Company and Mr. Diamond. The Voting Trust
Agreement was entered into at the time of the closing of the
Companys acquisition of Summus, Ltd.s assets,
primarily to provide for the orderly governance of the Company.
In view of Dr. Jawerths substantial equity interest
in the Company following the asset acquisition, the Company
deemed it prudent to provide for Dr. Jawerths
transfer of shares of the Companys common stock held by
him to Mr. Diamond, in his capacity as the trustee (the
Trustee). The Voting Trust Agreement provides for
the Trustee to vote the shares in the manner directed by the
majority of the Companys Board of Directors. By its terms,
one-twelfth of the shares subject to the Voting Trust Agreement
are to be released to Dr. Jawerth on a monthly basis over
the one-year period following the closing of the asset
acquisition. Accordingly, by August 16, 2001, 50% of the
shares originally subject to the Voting Trust Agreement will
have been released to Dr. Jawerth. The Voting Trust
Agreement provides that the Board of Directors may select a
successor trustee upon the resignation of the Trustee. The Board
has not yet determined whether it will appoint a successor
trustee and, if so, who will serve in such capacity.

31



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Item 6.  Exhibits and Reports on
Form 8-K

(a) Exhibits

|        |       |             |  |                                                                                                                                                                                                                                                                                                                                
|------- | ----- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       | Exhibit    
|Number  |       | Description
|        |       |            
|        | 10.1  |             |  | Settlement Agreement and General Release of all
	Claims, effective April 25, 2001, by and among High Speed
	Net Solutions, Inc., RPC International L.C. and Ronald P.
	Cropper (incorporated by reference to Exhibit 10.21 of our
	Annual Report on Form 10-K for the fiscal year ended
	December 31, 2000, filed July 5, 2001)
|        | 10.2  |             |  | Release and Settlement Agreement, dated
	April 30, 2001, between Pin High Company, Inc. and Summus,
	Ltd. (incorporated by reference to Exhibit 10.24 of our
	Annual Report on Form 10-K for the fiscal year ended
	December  31, 2000, filed July 5, 2001)                                                                    
|        | 10.3  |             |  | Settlement Agreement and Release, dated
	August 7, 2001, between Analysts International Corporation
	and High Speed Net Solutions, Inc.                                                                                                                                                                                        
|        | 10.4  |             |  | Master Porting Agreement, dated as of
	July 27, 2001, between High Speed Net Solutions, Inc. d/b/a
	Summus, Ltd. and Samsung Electronics America                                                                                                                                                                               
|        | 10.5* |             |  | Letter of Employment, dated June 7, 2001,
	between High Speed Net Solutions, Inc. and Barry J. Johnson                                                                                                                                                                                                                         
|        | 10.6  |             |  | Consulting Agreement, dated June 15, 2001,
	between High Speed Net Solutions, Inc. and John Maxwell                                                                                                                                                                                                                            
|        | 10.7* |             |  | Letter of Employment, dated August 9, 2001,
	between High Speed Net Solutions, Inc. and John Maxwell                                                                                                                                                                                                                           
|        | 10.8  |             |  | Consulting Agreement, dated July 9, 2001,
	between High Speed Net Solutions, Inc. d/b/a Summus and Chris
	Kremer                                                                                                                                                                                                               




|  |                                              
|- | ---------------------------------------------
|* | Executive compensation plans and arrangements

(b)  Reports on Form 8-K

During the quarterly period ended June 30, 2001, the
Company filed with the Securities and Exchange Commission the
following Current Reports on Form 8-K:



| |    |                                                                                                                                                                                                                                                                                                                                                          
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | On April 16, 2001, the Company filed a Current Report on
	Form 8-K advising as to the expected timing of filing with
	the SEC of its annual report on Form 10-K for the fiscal
	year ended December 31, 2000.                                                                                                                                            
|
| | 2. | On May 16, 2001, the Company filed a Current Report on
	Form 8-K which consisted of a letter to the Companys
	shareholders advising as to, among other things, the resolution
	of certain accounting issues with the staff of the Securities
	and Exchange Commission, technology developments, certain
	operating results, and capital raising efforts.
|
| | 3. | On June 28, 2001, the Company filed a Current Report on
	Form 8-K providing an update on the status and timing of
	filing with the SEC of its annual report on Form 10-K for
	the fiscal year ended December  31, 2000, and its quarterly
	report on Form 10-Q for the first quarter of 2001.                                                            

32



---






SIGNATURES




Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.






| |                               
| | ------------------------------
| | HIGH SPEED NET SOLUTIONS, INC.







Date: September 28, 2001




| |     |                                                                              
| | --- | -----------------------------------------------------------------------------
| | By: | /s/ BJORN JAWERTH 
	 _______________________________________ 
	 Bjorn Jawerth

| |                           
| | --------------------------
| | Co-Chief Executive Officer




Date: September 28, 2001




| |     |                                                                                    
| | --- | -----------------------------------------------------------------------------------
| | By: | /s/ ROBERT S. LOWREY 
	 _______________________________________ 
	 Robert S. Lowrey

| |                        
| | -----------------------
| | Chief Financial Officer

33



---



EXHIBIT INDEX

| |      |   |  |                                                                                                                                                                                                                                                                                                                                
| | ---- | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.1 |   |  | Settlement Agreement and General Release of all
	Claims, effective April 25, 2001, by and among High Speed
	Net Solutions, Inc., RPC International L.C. and Ronald P.
	Cropper (incorporated by reference to Exhibit 10.21 of our
	Annual Report on Form 10-K for the fiscal year ended
	December 31, 2000, filed July 5, 2001)
|
| | 10.2 |   |  | Release and Settlement Agreement, dated
	April 30, 2001, between Pin High Company, Inc. and Summus,
	Ltd. (incorporated by reference to Exhibit 10.24 of our
	Annual Report on Form 10-K for the fiscal year ended
	December  31, 2000, filed July 5, 2001)                                                                    
|
| | 10.3 |   |  | Settlement Agreement and Release, dated
	August 7, 2001, between Analysts International Corporation
	and High Speed Net Solutions, Inc.                                                                                                                                                                                        
|
| | 10.4 |   |  | Master Porting Agreement, dated as of
	July 27, 2001, between High Speed Net Solutions, Inc. d/b/a
	Summus, Ltd. and Samsung Electronics America                                                                                                                                                                               
|
| | 10.5 | * |  | Letter of Employment, dated June 7, 2001,
	between High Speed Net Solutions, Inc. and Barry J. Johnson                                                                                                                                                                                                                         
|
| | 10.6 |   |  | Consulting Agreement, dated June 15, 2001,
	between High Speed Net Solutions, Inc. and John Maxwell                                                                                                                                                                                                                            
|
| | 10.7 | * |  | Letter of Employment, dated August 9, 2001,
	between High Speed Net Solutions, Inc. and John Maxwell                                                                                                                                                                                                                           
|
| | 10.8 |   |  | Consulting Agreement, dated July 9, 2001,
	between High Speed Net Solutions, Inc. d/b/a Summus and Chris
	Kremer                                                                                                                                                                                                               




|  |                                              
|- | ---------------------------------------------
|* | Executive compensation plans and arrangements

34