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



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FORM 10-Q

[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

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-29625



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High Speed Net Solutions, Inc.
(Exact Name of Registrant as Specified in its Charter)

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



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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)



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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 [  ] No; and (2) has been subject
to such filing requirements for the past 90 days [X] Yes [  ] 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 July 31, 2001
|Common stock, par value $.001 per share |  | 35,231,730                     
|                                       
|                                       
|                                       
|                                       
|                                       





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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  | 
|       
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|       
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|Item 1. |  | Financial Statements (Unaudited)                                                                        |  |  | 1  | 
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|        |  | Consolidated Balance Sheets as of June 30, 2001
    (Unaudited) and December 31, 2000                   |  |  | 1  | 
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|       
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|        |  | Consolidated Statements of Operations for the
    Three Months Ended June 30, 2001 and 2000 (Unaudited) |  |  | 2  | 
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|        |  | Consolidated Statements of Operations for the
    Six Months Ended June 30, 2001 and 2000  (Unaudited)  |  |  | 3  | 
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|        |  | Consolidated Statements of Shareholders Equity                                                         |  |  | 4  | 
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|        |  | Consolidated Statements of Cash Flows for the Six
    Months Ended June 30, 2001 and 2000 (Unaudited)   |  |  | 5  | 
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|        |  | Notes to Consolidated Financial Statements                                                              |  |  | 6  | 
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|Item 2. |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations                   |  |  | 18 | 
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|Item 3. |  | Quantitative and Qualitative Disclosures About
Market Risk                                              |  |  | 28 | 
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|PART II |  | OTHER INFORMATION                                                                                       |  |  | 29 | 
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|Item 1. |  | Legal Proceedings                                                                                       |  |  | 29 | 
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|Item 2. |  | Changes in Securities and Use of Proceeds                                                               |  |  | 30 | 
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|Item 3. |  | Defaults Upon Senior Securities                                                                         |  |  | 32 | 
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|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                     |  |  | 32 | 
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|Item 5. |  | Other Information                                                                                       |  |  | 32 | 
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|Item 6. |  | Exhibits and Reports on Form 8-K                                                                        |  |  | 33 | 

i



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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

|                                                        |                                                                                |                                                                            |   |               |                   |  |            |             |           |   |            |             |       | 
|------------------------------------------------------- | ------------------------------------------------------------------------------ | -------------------------------------------------------------------------- | - | ------------- | ----------------- |  | ---------- | ----------- | --------- | - | ---------- | ----------- | ----- | 
|                                                       
|                                                        |                                                                                |                                                                            |   | June 30, 2001 | December 31, 2000
|                                                       
|Assets                                                  |                                                                                |                                                                            |   | (Unaudited)  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|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                   |                                                                                | $                                                                          |   |               |                   |  | 4,069,546  |             |           | $ | 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                               |                                                                                |                                                                            |   |               |                   |  | 5,169,225  |             |           |   | 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                                                            |                                                                            |   |               |                   |  |            | (31,304,613 | )         |   |            | (23,414,113 | )    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Treasury stock, at cost (38,500 shares)                                        |                                                                            |   |               |                   |  |            | (227,619    | )         |   |            |            |      
|                                                       
|Total shareholders equity (deficit)                    |                                                                                |                                                                            |   |               |                   |  | 19,532,283 |             |           |   | (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



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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    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Media creation services                  |   |                           | 109,593 |                    |            |               |           |  
|                                                    |                                         
|                                                   
|Total revenues                                      |                                          |   | 320,612                   |         |                    |            | 390,571       |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|Costs of revenues:                                 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Contracts and license fees               |   |                           | 102,484 |                    |            |               | 157,210    |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Media creation services                  |   |                           | 47,477  |                    |            |               |           |  
|                                                   
|                                                    |                                          |  
|Total costs of revenues                             |                                          |   | 149,961                   |         |                    |            | 157,210       |           
|                                                   
|Gross Profit                                        |                                          |   | 170,651                   |         |                    |            | 233,361       |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|Selling, general and administrative expenses        |                                          |   | 1,918,775                 |         |                    |            | 1,551,396     |           
|                                                   
|                                                   
|                                                   
|                                                   
|Amortization expense                                |                                          |   | 2,291,331                 |         |                    |            |              |           
|                                                   
|                                                   
|                                                   
|                                                   
|Non-cash compensation                               |                                          |   | 57,806                    |         |                    |            | 823,999       |           
|                                                   
|                                                   
|                                                   
|                                                   
|Research and development                            |                                          |   | 115,657                   |         |                    |            | 378,656       |           
|                                                   
|Operating loss                                      |                                          |   | (4,212,918                | )       |                    |            | (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      | )         
|                                                   
|Net loss                                            |                                          | $ | (4,221,626                | )       |                    | $          | (3,393,960    | )         
|                                                   
|Net loss applicable to common shareholders:        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                          |   | Net loss                  |         | $                  | (4,221,626 | )             |            | $ | (3,393,960 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                          |   | Preferred stock dividends |         |                    | (43,597    | )             |            |   |           |  
|                                                   
|Net loss applicable to common shareholders          |                                          | $ | (4,265,223                | )       |                    | $          | (3,393,960    | )         
|                                                   
|Loss per share (basic and diluted)                  |                                          | $ | (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



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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 |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Media creation services                  |                           |            | 267,232          |            |               |            |        |           
|                                                   
|Total revenues                                      |                                          |                           | 774,411    |                  |            |               | 670,346    |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|Costs of revenues:                                 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Contracts and license fees               |                           |            | 235,756          |            |               |            | 287,362 |           
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Media creation services                  |                           |            | 159,612          |            |               |            |        |           
|                                                   
|Total costs of revenues                             |                                          |                           | 395,368    |                  |            |               | 287,362    |        
|                                                   
|                                                   
|Gross Profit                                        |                                          |                           | 379,043    |                  |            |               | 382,984    |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|Selling, general and administrative expenses        |                                          |                           | 3,764,896  |                  |            |               | 2,893,056  |        
|                                                   
|                                                   
|                                                   
|                                                   
|Amortization expense                                |                                          |                           | 3,436,072  |                  |            |               |           |        
|                                                   
|                                                   
|                                                   
|                                                   
|Non-cash compensation                               |                                          |                           | 772,262    |                  |            |               | 823,999    |        
|                                                   
|                                                   
|                                                   
|                                                   
|Research and development                            |                                          |                           | 217,386    |                  |            |               | 773,913    |        
|                                                   
|Operating loss                                      |                                          |                           | (7,811,573 | )                |            |               | (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  |        
|                                                   
|Net loss                                            |                                          | $                         | (7,823,646 | )                |            | $             | (2,895,936 | )      
|                                                   
|                                                   
|Net loss applicable to common shareholders:        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                          | Net loss                  |            | $                | (7,823,646 | )             |            | $       | (2,895,936 | )
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                          | Preferred stock dividends |            |                  | (66,854    | )             |            |         |           |  
|                                                   
|Net loss applicable to common shareholders          |                                          | $                         | (7,890,500 | )                |            | $             | (2,895,936 | )      
|                                                   
|                                                   
|Loss per share (basic and diluted)                  |                                          | $                         | (0.29      | )                |            | $             | (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



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High Speed Net Solutions, Inc.

Consolidated Statement of Shareholders Equity

|                                  |                                                                                       |  |       |          |       |          |           |                 |           |        |       |        |       |              |   |   |   |  |            |           |            |   |        |       |        | 
|--------------------------------- | ------------------------------------------------------------------------------------- |  | ----- | -------- | ----- | -------- | --------- | --------------- | --------- | ------ | ----- | ------ | ----- | ------------ | - | - | - |  | ---------- | --------- | ---------- | - | ------ | ----- | ------ | 
|                                 
|                                  |                                                                                       |  |       |          |       |          |           | Preferred Stock |           |        |       |        |       | Common Stock
|                                  |                                                                                       |  |       |          |       |          |           |                 |           |        |       |        |       |             
|                                  |                                                                                       |  |       | Series A |       | Series B
|                                  |                                                                                       |  |       |          |       |         
|                                  |                                                                                       |  |       | Shares   |       | Amount   |           | Shares          |           | Amount |       | Shares |       | Amount      
|                                 
|Balance at
December 31, 2000      |                                                                                       |  |      |          |       | $        |          |                 |           |        | 4,000 |        |       | $            | 4 |   |   |  | 9,584,938  |           |            | $ | 9,585  |      
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Impact of reverse acquisition                                                         |  |       |          | 2,000 |          |           |                 | 2,000,000 |        |       |        | 2,000 |              |   |   | 2 |  |            |           | 23,392,035 |   |        |       | 23,392 | 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock options granted for services                                             |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            |          |            |   |        |      |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock sold for cash                                                            |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            | 1,052,749 |            |   |        | 1,052 |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Preferred stock dividends                                                             |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            |          |            |   |        |      |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in partial settlement of loss contingency                         |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            | 550,000   |            |   |        | 550   |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Deferred compensation recognized in connection with the
    issuance of stock options |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            |          |            |   |        |      |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Amortization of deferred compensation                                                 |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            |          |            |   |        |      |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Reversal of deferred compensation of forfeited options                                |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            |          |            |   |        |      |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in settlement of amounts due to related
parties                   |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            | 250,000   |            |   |        | 250   |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in partial settlement of vendor liability                         |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            | 5,560     |            |   |        | 6     |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Stock option exercise                                                                 |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            | 2,000     |            |   |        | 2     |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Net loss for the period                                                               |  |       |         |       |          |           |                |           |        |       |       |       |              |   |  |   |  |            |          |            |   |        |      |       
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|Balance June 30, 2001 (Unaudited) |                                                                                       |  | 2,000 |          |       | $        | 2,000,000 |                 |           |        | 6,000 |        |       | $            | 6 |   |   |  | 34,837,282 |           |            | $ | 34,837 |      
|                                 

[Additional columns below]

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

|                                  |                                                                                     |   |            |                 |            |              |          |          |   |             |          |          |   |               |             |            |   |   |          |   |          |       |            |            |            | 
|--------------------------------- | ----------------------------------------------------------------------------------- | - | ---------- | --------------- | ---------- | ------------ | -------- | -------- | - | ----------- | -------- | -------- | - | ------------- | ----------- | ---------- | - | - | -------- | - | -------- | ----- | ---------- | ---------- | ---------- | 
|                                 
|                                  |                                                                                     |   |            |                 |            |              |          | Stock    |   |             |          |          |   |               |             |            |   |   |          |   |          | Total
|                                  |                                                                                     |   |            | Additional      |            | Subscription |          | Deferred |   | Accumulated |          | Treasury |   | Shareholders'
|                                  |                                                                                     |   |            | Paid-in Capital |            | Receivable   |          | Comp     |   | Deficit     |          | Stock    |   | Equity       
|                                 
|Balance at
December 31, 2000      |                                                                                     | $ | 19,729,222 |                 |            | $            |         |          |   | $           | (978,510 | )        |   | $             | (23,414,113 | )          |   | $ |         |   |          | $     | (4,653,812 | )         
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Impact of reverse acquisition                                                       |   |            |                 | 25,678,327 |              |          |          |  |             |          |          |  |               |             |            |  |   |          |   | (227,619 | )     |            |            | 27,474,102 | 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock options granted for services                                           |   |            | 866,533         |            |              |          |         |   |             |          |         |   |               |             |           |   |   |          |  |          |       |            | 866,533    |           
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock sold for cash                                                          |   |            | 2,837,805       |            |              |          | (100,000 | ) |             |          |         |   |               |             |           |   |   |          |  |          |       |            | 2,738,857  |           
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Preferred stock dividends                                                           |   |            |                |            |              |          |         |   |             |          |         |   |               |             | (66,854    | ) |   |          |  |          |       |            | (66,854    | )         
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in partial settlement of loss contingency                       |   |            | 419,436         |            |              |          |         |   |             |          |         |   |               |             |           |   |   |          |  |          |       |            | 419,986    |           
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Deferred compensation
recognized in connection with the  
issuance of stock options |   |            | 240,500         |            |              |          |         |   |             |          | (240,500 | ) |               |             |           |   |   |          |  |          |       |            |           |           
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Amortization of deferred compensation                                               |   |            |                |            |              |          |         |   |             |          | 133,074  |   |               |             |           |   |   |          |  |          |       |            | 133,074    |           
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Reversal of deferred compensation of forfeited options                              |   |            | (332,816        | )          |              |          |         |   |             |          | 332,816  |   |               |             |           |   |   |          |  |          |       |            |           |           
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in settlement of amounts due to related
parties                 |   |            | 435,565         |            |              |          |         |   |             |          |         |   |               |             |           |   |   |          |  |          |       |            | 435,815    |           
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Common stock issued in partial settlement of vendor liability                       |   |            | 7,722           |            |              |          |         |   |             |          |         |   |               |             |           |   |   |          |  |          |       |            | 7,728      |           
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Stock option exercise                                                               |   |            | 498             |            |              |          |         |   |             |          |         |   |               |             |           |   |   |          |  |          |       |            | 500        |           
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                  | Net loss for the period                                                             |   |            |                |            |              |          |         |   |             |          |         |   |               |             | (7,823,646 | ) |   |          |  |          |       |            | (7,823,646 | )         
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|                                 
|Balance June 30, 2001 (Unaudited) |                                                                                     | $ | 49,882,792 |                 |            | $            | (100,000 | )        |   | $           | (753,120 | )        |   | $             | (31,304,613 | )          |   | $ | (227,619 | ) |          | $     | 19,532,283 |           
|                                 

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
Net loss                                                                                            |                                               | $ | (7,823,646 | )                |   |               | $(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                           |   |            | 26,888           |   |               |             | (280,164    | )
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Other current assets                          |   |            | (113,673         | ) |               |             | 20,815      |  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Accounts payable and accrued expenses         |   |            | 200,800          |   |               |             | 433,839     |  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Accrued salaries and related costs            |   |            | 94,467           |   |               |             | 74,889      |  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Deferred software royalty revenue             |   |            |                 |   |               |             | (658,331    | )
|                                                                                                                        
|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                                                 |                                               | $ | 8,708      |                  |   | $             | 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
(HSNS or the Company) 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 the Company 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.

The condensed consolidated balance sheet of HSNS as of December 31, 2000 has been derived from the audited
balance sheet of Summus, Ltd. as of that date. As disclosed in Note 2 below, HSNS acquired all of the assets
of Summus, Ltd., effective February 16, 2001, in a transaction that has been accounted for as a reverse
acquisition. Under reverse acquisition accounting, the acquired entity (in this case, Summus, Ltd.) is the
acquirer for accounting purposes. Accordingly, the accompanying comparative financial statements as of
December 31, 2000, and for the three and 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 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 fiscal
year ended December 31, 2000. The Form 10-K is available through the Internet in the SECs EDGAR database at
www.sec.gov or from the Company upon request.

6



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

1.      Basis of Presentation (continued)

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 deficit of
$31,304,613 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 acquired all of the assets of Summus, Ltd. in a business combination (the Combination)
accounted for as a reverse acquisition in which Summus, Ltd. is treated as the acquirer for accounting
purposes. Prior to the closing of the Combination, Summus, Ltd. was the largest shareholder of HSNS. It
owned 8,217,781 shares (33.2%) of the Company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 HSNS 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.

7



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

2.      Business Combination (continued)

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.

The Asset Purchase Agreement also 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 canceled upon
the closing of the asset acquisition.

All outstanding HSNS options at February 16, 2001 have been treated as replacement options since the
transaction was accounted for as a reverse acquisition with Summus, Ltd. as the accounting acquirer.
Accordingly, these options have been valued as part of the consideration in the transaction.

8



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

2.      Business Combination (continued)

In connection with the asset acquisition, HSNS 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 HSNS for
a period of 18 months from and after the termination of his employment with HSNS, HSNS 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. Also, HSNS agreed to assist Dr. Jawerth in the private sale of $2,500,000 worth of HSNS
common stock owned by him. HSNS will issue options to Dr. Jawerth to purchase three times the number of
shares of common stock he sells in the private sale. The options will be exercisable during the second
through the fifth year after the options are issued. Additionally, 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 at
the Combination 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 based upon the discount associated with private
sales of such shares (such shares being restricted securities as defined in Rule 144 under the Securities
Act) for cash to third parties within close proximity to the Combination date. 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 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 resulting goodwill from
the Combination of $27,495,971 is being amortized on a straight-line basis over a three-year period.

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 each period:

|                                                                |                  |             |   |  |      |  |   |            
|--------------------------------------------------------------- | ---------------- | ----------- | - |  | ---- |  | - | -----------
|                                                                | Six Months Ended
|                                                                | June 30,        
|                                                                |                 
|                                                                | 2001             |             |   |  | 2000
|                                                                |                  |             |   |  |     
|Revenues....................................................    | $                | 805,074     |   |  |      |  | $ | 1,744,552  
|                                                               
|                                                               
|                                                               
|                                                               
|Net
loss....................................................... | $                | (11,249,980 | ) |  |      |  | $ | (10,818,738
|                                                               
|                                                               
|                                                               
|                                                               
|Loss per share (basic and
diluted).............                 | $                | (0.34       | ) |  |      |  | $ | (0.50      

9



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

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.

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.

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.

10



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High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

3.      Significant Accounting Policies (continued)

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

Media Creation Services

Revenue from media creation services, which includes creative design assistance and commercial development,
is recognized at the time the services are rendered and billed based upon the terms of individual contracts.

Contracts and License Fees

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 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 funded software development arrangements is used to offset
capitalized software costs related to the development arrangement.

11



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

3.      Significant Accounting Policies (continued)

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.

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.

12



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High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

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 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. HSNS was not
obligated to make any additional payments, in cash or other consideration, to Summus, Ltd. for the software
products to be provided under the software license agreement. Further, HSNS received approximately $2.2
million in credits toward future license, revenue-based and other fees due Summus, Ltd. under the software
license agreement and/or the software maintenance agreement.

The MLA and the agreements entered into in mid-February 2000 represented funded software development
arrangements between the companies and, as such, 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 acquired all of the assets of Summus, Ltd. under the terms of the Asset Purchase
Agreement. See Note 2. As of the closing date of the asset acquisition, 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
asset acquisition, 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.

13



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

5.      Common Stock

Subsequent to HSNSs acquisition of the assets of 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 at 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.

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 it 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:

14



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High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

6.      Preferred Stock (continued)



| |  |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | 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.      Business Segments

The Company operates in two business segments: (1) research and development and software license and related
services, and (2) media creation services. The research and development and software license and related
services segment provides research and development contract work for governmental agencies in the areas of
complex imaging and object recognition as well as the development of software products that are compatible
with and complementary to the Companys software and technology. The media creation segment provides designs
assistance and commercial content development, including audio, video, images and animation as well as web
site design and construction.

In evaluating financial performance, management focuses on operating results, exclusive of depreciation and
amortization. All reported segment revenues are generated from external customers and there are no
intersegment revenues.

15



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High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

7.      Business Segments (continued)

Summarized financial information concerning each reportable segment is shown in the following table. All
revenues and assets of each segment are located in the United States.

|         |  |                                |            |          |  |   |         |  
|-------- |  | ------------------------------ | ---------- | -------- |  | - | ------- | -
|         |  | Six Months Ended June 30, 2001
|         |  |                               
|         |  | Research and Development       |            | Media   
|         |  |                                |            |         
|         |  | and Software                   |            | Creation
|         |  |                                |            |         
|Revenues |  | $                              | 507,179    |          |  | $ | 267,232 |  
|        
|        
|        
|        
|Net loss |  | $                              | (7,774,273 | )        |  | $ | (49,373 | )
|        
|        
|        
|        
|Assets   |  | $                              | 25,442,617 |          |  | $ | 81,600  |  

8.      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;                                                                                                                                                                            
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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;

16



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High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

8.      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.                                                                                                                                                                                                                                                                                                                                      

9.      Subsequent Events

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.

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.

17



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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
and 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 claims of third parties.                                                                                                                                                                                                                            

18



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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), High Speed Net Solutions, Inc. (HSNS or the Company) acquired all of the assets of
Summus, Ltd. and assumed approximately $2.8 million of Summus, Ltd.s liabilities. As a result of this
transaction, the shareholders of Summus, Ltd. acquired ownership of approximately 55.5% of the outstanding
shares of common stock of HSNS. In connection with the Summus, Ltd. asset acquisition, HSNS issued to
Summus, Ltd. (for distribution to the Summus, Ltd. shareholders):



| |  |  | 16,614,288 shares of HSNS common stock (net of the 3,604,445 shares of common stock to which HSNS was
entitled to receive as a shareholder of Summus, Ltd., such shares being cancelled along with the
8,217,781 shares of HSNS common stock held by Summus, Ltd. prior to the parties execution of the
Asset Purchase Agreement);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 6,000 shares of HSNS 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
agreement; and                                                                                                             
|
| |  |  | warrants to purchase 500 shares of HSNSs Series B preferred stock.                                                                                                                                                                                                                                                                

Although HSNS was the legal acquirer, Summus, Ltd. was the acquirer for accounting purposes because
the shareholders of Summus, Ltd. obtained a controlling voting interest in HSNS as a result of transaction,
which, in accordance with generally accepted accounting principles, was accounted for as a reverse
acquisition. The acquisition was accounted for using the purchase method of accounting whereby the purchase
price was allocated to the assets acquired and liabilities assumed based on their relative fair values.
Goodwill of approximately $27.5 million was recorded representing the excess of the purchase price over the
fair value of the assets acquired and liabilities assumed and is being amortized over three years.

The accompanying consolidated financial statements include the results of operations of HSNS from the
date of acquisition (i.e., February 16, 2001). 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 Companys acquisition of substantially all the assets of Summus, Ltd., the Company is
engaged in research and development contract work for government agencies in the areas of complex imaging and
object

19



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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 software and technology, and revenue generation through licensing and sales of that
technology. Currently, the Company is undertaking two major research projects:



| | (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.

Through our wholly-owned subsidiary, Douglas May & Co., Inc., a marketing and advertising company, we
also provide design assistance and commercial content development, including audio, video, images and
animation, as well as web site design and construction. We are in the process of seeking to divest ourselves
of this business together with our MaxxSystem"-based rich media direct service offering. Our intention is
to license and provide source code to a portion of the MaxxSystem product suite as part of this divestiture.
The Company expects to generate an on-going revenue stream from such arrangement.

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

20



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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 lines, including
Samsungs digital signal processor (DSP) products. The agreement provides us with a vehicle to distribute our
product line under development to a world-wide market through Samsung.

21



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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 $69,959 to $320,612 in the three months ended June 30, 2001, down
17.9% from $390,571 in the three months ended June 30, 2000. Included in total revenues for the three
months ended June 30, 2001, was $109,593 related to the media creation services of Douglas May & Co., a
wholly-owned subsidiary of HSNS. Revenues from contracts and license fees for the three months ended June
30, 2001 were $211,019 compared to $390,571 for the corresponding period of the prior year. The decrease in
these revenues was primarily due to a decrease in providing contract services.

Costs of Revenues. Total costs of revenues decreased $7,249 to $149,961 in the three months ended
June 30, 2001, down 4.6% from $157,210 in the corresponding period of the prior year. Included in the total
costs of revenues was $47,477 related to the costs of media creation associated with the operations of
Douglas May & Co., Inc. Costs of contracts and license fees of $102,484 in the three months ended June 30,
2001, reflected a decrease of $54,726 (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.

22



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Total gross profit decreased $62,710, or 26.9%, to $170,651 for the three months ended June 30, 2001,
compared with $233,361 for the three months ended June 30, 2000. The decrease in gross profit is primarily
attributable to a decrease in revenue from contracts and license fees, offset by the inclusion of the results
of operations of HSNS (including Douglas May & Co., Inc.) from and after February 16, 2001. Gross profit as
a percentage of revenues from contracts and license fees for the three months ended June 30, 2001 decreased
to 51.4%, down from 59.7% from the corresponding period of the prior year. The decrease was 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 $1,918,775, 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., which was consummated on February 16, 2001.

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 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 $240,500, of which $25,250 was charged to expense during the three 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 three months ended June 30, 2001 of $32,556, reflects the amortization for three 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 three months ended June 30, 2000,
amortization of the deferred compensation was $823,999. The decrease in amortization of deferred compensation
recorded in the three 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 three months ended June
30, 2000.

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
resulted from a reduction of the research and development staff occurring early in 2001.

23



---



Gain on Sale of Stock of Equity Affiliate. Gain on the sale of stock of equity affiliate 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 Affiliate. Participation in loss of equity affiliate 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. HSNS ceased being an equity affiliate when the business combination
between HSNS and Summus, Ltd. was consummated in February 2001.

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 increased $104,065 to $774,411 in the six months ended June 30, 2001, up
15.5% from $670,346 in the six months ended June 30, 2000. Included in total revenues for the six months
ended June 30, 2001, was $267,232 related to the media creation services of Douglas May & Co., a wholly-owned
subsidiary of HSNS. Revenues from contracts and license fees for the six months ended June 30, 2001 were
$507,179 compared to $670,346 for the corresponding period of the prior year. The decrease in revenues from
contracts and license fees was primarily due to a decrease in contract services provided compared with the
corresponding period of the prior year.

Costs of Revenues. Total costs of revenues increased $108,006 to $395,368 in the six months ended
June 30, 2001, up 37.6% from $287,362 in the corresponding period of the prior year. Included in the total
costs of revenues was $159,612 related to the costs of media creation associated with the operations of
Douglas May & Co., Inc. Costs of contracts and license fees of $235,756 in the six months ended June 30,
2001, reflected a decrease of $51,606 (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.

24



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Total gross profit decreased $3,941, or 1.03%, to $379,043 for the six months ended June 30, 2001,
compared with $382,984 for the six months ended June 30, 2000. The decrease in gross profit is primarily
attributable to a decrease in revenue from contracts and license fees, offset by the inclusion of the results
of operations of HSNS (including Douglas May & Co., Inc.) from and after February 16, 2001. Gross profit as
a percentage of revenues from contracts and license fees for the six months ended June 30, 2001 decreased to
53.5%, down from 57.1% from the corresponding period of the prior year. The decrease was 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 months ended June 30, 2001, were $3,764,896, compared to $2,893,056 for six months ended June 30,
2000. The increase in selling, general and administrative expenses resulted primarily from the business
combination between HSNS and Summus, Ltd., which was consummated on February 16, 2001.

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

25



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$217,386 compared to $773,913 for the six months ended June 30, 2000.
The decrease in these costs resulted
from a reduction of the research and development staff occurring early in 2001.

Gain on Sale of Stock of Equity Affiliate. Gain on the sale of stock of equity affiliate 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 Affiliate. Participation in loss of equity affiliate 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. HSNS ceased being an equity affiliate when the business combination
between HSNS and Summus, Ltd. was consummated in February 2001.

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.

Liquidity and Capital Resources

As of June 30, 2001, the Company had $143,567 of cash on hand and negative working capital of
approximately $4.9 million. As of such date, the Company had approximately $4.9 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

26



---



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.

The Company is currently in the process of working through various matters with Douglas May with
respect to certain of the Companys obligations arising out of the July 2000 share acquisition agreement
under which the Company purchased from Mr. May all of the capital stock of Douglas May & Co., Inc. and Mr.
Mays employment agreement. The share acquisition agreement provides for an effective guarantee of the value
of 50,000 shares of the Companys common stock issued in the transaction (at $10.00 per share) and Mr. Mays
right to cause the Company to repurchase an additional 87,498 shares of common stock for an aggregate amount
of $576,000. Resolution of these matters will likely have an impact on the Companys cash position.

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 Internet business.

The Companys continuation as a going concern depends on its ability to initiate sales of its products
and services, generate sufficient cash flow to meet its obligations on a timely basis, obtain additional
financing as may be required and ultimately attain profitability. To continue as a going concern, the
Company anticipates that it will require at least $5,000,000 in debt or equity financing over the next twelve
months of operation. To address the Companys severe liquidity constraints, the Company is, among other
things, seeking to enter into business relationships and alliances with wireless and mobile device
manufacturers, content providers and cellular carriers, under which such companies would provide additional
capital to the Company in exchange for exclusive or non-exclusive licenses or other rights to certain of the
technologies and products the Company is developing. Competition for corporate partnering arrangements with
these companies is intense. Accordingly, there can be no assurance that an agreement will be entered into in
a timely manner, or at all, or that any agreement will successfully reduce the Companys short-term and
longer-term funding requirements.

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 a reduction in staff that occurred
in the first half of 2001.

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
corresponding period of the prior year. Net cash provided by financing activities in the six months ended
June 30, 2001 related to:

27



---





| |  |  | 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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the exercise of stock options for 2,000 shares of common stock, generating cash proceeds of $500;                                                                                                                                                                                                                                                    
|
| |  |  | the proceeds ($540,000) of a loan from HSNS extended under the terms of the Asset Purchase Agreement.
Upon the closing the asset acquisition on February 16, 2001, the indebtedness was cancelled in its
entirety;                                                                                                                                   
|
| |  |  | principal payments on capital lease obligations in the aggregate amount of $121,534; and                                                                                                                                                                                                                                                             
|
| |  |  | cash payments in partial settlement of the Dunavant loss contingency in the aggregate amount of
$100,000.                                                                                                                                                                                                                                            

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.

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.

29



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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 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

30



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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.

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.

31



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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.

32



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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.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

33



---





| | 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.                                                            

34



---



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: August 14, 2001 |  | By:/s/   Bjorn Jawerth
     Bjorn Jawerth
     Co-Chief Executive Officer                
|                     
|Date: August 14, 2001 |  | By:/s/  
Robert S. Lowrey            
      Robert S. Lowrey
     Chief Financial Officer

35



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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)                                                                    
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|10.3  |  | Settlement Agreement and Release, dated August 7, 2001, between Analysts International
Corporation and High Speed Net Solutions, Inc.                                                                                                                                                                                     
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|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                                                                                                                                                                            
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|10.5* |  | Letter of Employment, dated June 7, 2001, between High Speed Net Solutions, Inc. and Barry J.
Johnson                                                                                                                                                                                                                     
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|10.6  |  | Consulting Agreement, dated June 15, 2001, between High Speed Net Solutions, Inc. and John
Maxwell                                                                                                                                                                                                                        
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|10.7* |  | Letter of Employment, dated August 9, 2001, between High Speed Net Solutions, Inc. and John
Maxwell                                                                                                                                                                                                                       
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|10.8  |  | Consulting Agreement, dated July 9, 2001, between High Speed Net Solutions, Inc. d/b/a Summus
and Chris Kremer                                                                                                                                                                                                            
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|*     |  | Executive compensation plans and arrangements                                                                                                                                                                                                                                                                             

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