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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 March 31, 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)

__________________________

434 Fayetteville Street Mall, Suite 600
Raleigh, North Carolina 27601
(919) 807-5600
(Address, Including Zip Code, and Telephone Number, Including Area Code
of Registrants Principal Executive Offices)

__________________________

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), [X] Yes       [  ] 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 June 30, 2001
|                                       
|                                       
|                                       
|                                       
|Common stock, par value $.001 per share |  | 34,831,122                     



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HIGH SPEED NET SOLUTIONS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

TABLE OF CONTENTS

|         |  |                                                                                       |                                                                                                      |          |    |  | 
|-------- |  | ------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | -------- | -- |  | 
|         |  |                                                                                       |                                                                                                      | Page No.
|         |  |                                                                                       |                                                                                                      |         
|        
|PART I.  |  | FINANCIAL INFORMATION                                                                 |                                                                                                      | 1        |   
|        
|ITEM 1.  |  | FINANCIAL STATEMENTS (UNAUDITED)                                                      |                                                                                                      | 1        |   
|        
|         |  |                                                                                       | CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2001
(UNAUDITED) AND DECEMBER 31, 2000                   |          | 1  | 
|        
|         |  |                                                                                       | CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 30, 2001 and 2000 (UNAUDITED) |          | 3  | 
|        
|         |  |                                                                                       | CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY                                                      |          | 4  | 
|        
|         |  |                                                                                       | CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED) |          | 5  | 
|        
|         |  |                                                                                       | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                           |          | 6  | 
|        
|         |  | PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)                                   |                                                                                                      | 19       |   
|        
|         |  |                                                                                       | PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 2000 (UNAUDITED)          |          | 21 | 
|        
|         |  |                                                                                       | PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 2001 (UNAUDITED)     |          | 23 | 
|        
|ITEM 2.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS |                                                                                                      | 21       |   
|        
|ITEM 3.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK                            |                                                                                                      | 28       |   
|        
|PART II. |  | OTHER INFORMATION                                                                     |                                                                                                      | 29       |   
|        
|ITEM 1.  |  | LEGAL PROCEEDINGS                                                                     |                                                                                                      | 29       |   
|        
|ITEM 2.  |  | CHANGES IN SECURITIES AND USE OF PROCEEDS                                             |                                                                                                      | 30       |   
|        
|ITEM 3.  |  | DEFAULTS UPON SENIOR SECURITIES                                                       |                                                                                                      | 31       |   
|        
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |                                                                                                      | 31       |   
|        
|ITEM 5.  |  | OTHER INFORMATION                                                                     |                                                                                                      | 32       |   
|        
|ITEM 6.  |  | EXHIBITS AND REPORTS ON FORM 8-K                                                      |                                                                                                      | 32       |   

i



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PART I.      FINANCIAL INFORMATION

Item 1.       Financial Statements

High Speed Net Solutions, Inc.
Consolidated Balance Sheets

|                                                        |                                             |                                                    |            |                |           |                   |            |             |       | 
|------------------------------------------------------- | ------------------------------------------- | -------------------------------------------------- | ---------- | -------------- | --------- | ----------------- | ---------- | ----------- | ----- | 
|                                                       
|                                                        |                                             |                                                    |            | March 31, 2001 |           | December 31, 2000
|                                                       
|Assets                                                  |                                             |                                                    | (Unaudited | )             
|                                                       
|                                                       
|                                                       
|                                                       
|Current assets:                                        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Cash                                        |                                                    | $          | 341,655        |           |                   | $          | 208,495     |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accounts receivable                         |                                                    |            | 246,240        |           |                   |            | 32,744      |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other current assets                        |                                                    |            | 63,513         |           |                   |            | 39,153      |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Total current assets                                    |                                             |                                                    | 651,408    |                |           |                   | 280,392    |            
|                                                       
|Receivable from related party                           |                                             |                                                    |           |                |           |                   | 134,677    |            
|                                                       
|                                                       
|                                                       
|                                                       
|Equipment, software and furniture, net                  |                                             |                                                    | 1,321,753  |                |           |                   | 991,202    |            
|                                                       
|                                                       
|                                                       
|                                                       
|Goodwill, net of accumulated amortization of $1,144,741 |                                             |                                                    | 26,351,230 |                |           |                   |           |            
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Total assets                                            |                                             | $                                                  | 28,324,391 |                |           | $                 | 1,406,271  |            
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Liabilities and shareholders equity (deficit)         
|                                                       
|                                                       
|                                                       
|                                                       
|Payables to related parties                             |                                             | $                                                  | 435,815    |                |           | $                 |           |            
|                                                       
|                                                       
|                                                       
|                                                       
|Accounts payable and accrued expenses                   |                                             |                                                    | 4,159,342  |                |           |                   | 1,282,157  |            
|                                                       
|                                                       
|                                                       
|                                                       
|Loss contingency accrual                                |                                             |                                                    | 430,902    |                |           |                   |           |            
|                                                       
|                                                       
|                                                       
|                                                       
|Accrued salaries and related costs                      |                                             |                                                    | 281,868    |                |           |                   | 721,956    |            
|                                                       
|                                                       
|                                                       
|                                                       
|Preferred stock dividends payable                       |                                             |                                                    | 179,845    |                |           |                   |           |            
|                                                       
|                                                       
|                                                       
|                                                       
|Notes payable, current portion                          |                                             |                                                    | 229,215    |                |           |                   | 229,215    |            
|                                                       
|                                                       
|                                                       
|                                                       
|Capital lease obligations, current portion              |                                             |                                                    | 430,974    |                |           |                   | 339,724    |            
|                                                       
|                                                       
|                                                       
|                                                       
|Loans payable to related party                          |                                             |                                                    |           |                |           |                   | 1,435,000  |            
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Total current liabilities                               |                                             |                                                    | 6,147,961  |                |           |                   | 4,008,052  |            
|                                                       
|Capital lease obligations, less current portion         |                                             |                                                    | 197,306    |                |           |                   | 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, 33,435,107 shares issued and   
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                             | outstanding at March 31, 2001 and 9,584,938 shares
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                             | issued and outstanding at December 31, 2000        |            |                | 33,435    |                   |            |             | 9,585 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Additional paid-in capital                  |                                                    |            | 47,227,518     |           |                   |            | 19,729,222  |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Deferred compensation                       |                                                    |            | (690,826       | )         |                   |            | (978,510    | )    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Accumulated deficit                         |                                                    |            | (27,039,390    | )         |                   |            | (23,414,113 | )    
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Treasury stock, at cost (38,500 shares)     |                                                    |            | (227,619       | )         |                   |            |            |      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Total shareholders equity (deficit)                    |                                             |                                                    | 21,303,124 |                |           |                   | (4,653,812 | )          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Total liabilities and shareholders equity (deficit)    |                                             | $                                                  | 28,324,391 |                |           | $                 | 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
|                                                     |                            |                           |            |                   
|                                                     |                            |                           |            | March 31, 2001     |            | March 31, 2000
|                                                    
|Revenues:                                           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Contracts and license fees |                           | $          | 296,160            |            |                | $          | 279,775 |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Media creation services    |                           |            | 157,639            |            |                |            |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Total revenues                                       |                            |                           | 453,799    |                    |            |                | 279,775    |        
|                                                    
|Costs of revenues:                                  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Contracts and license fees |                           |            | 133,272            |            |                |            | 130,152 |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Media creation services    |                           |            | 112,135            |            |                |            |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Total costs of revenues                              |                            |                           | 245,407    |                    |            |                | 130,152    |        
|                                                    
|                                                    
|Gross Profit                                         |                            |                           | 208,392    |                    |            |                | 149,623    |        
|                                                    
|Selling, general and administrative expenses         |                            |                           | 1,846,121  |                    |            |                | 1,341,660  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Amortization expense                                 |                            |                           | 1,144,741  |                    |            |                |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|Non-cash compensation                                |                            |                           | 714,456    |                    |            |                |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|Research and development                             |                            |                           | 101,729    |                    |            |                | 395,257    |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Operating loss                                       |                            |                           | (3,598,655 | )                  |            |                | (1,587,294 | )      
|                                                    
|Other income (expense):                             
|                                                    
|                                                    
|                                                    
|                                                    
|Gain on sale of stock of equity investee             |                            |                           |           |                    |            |                | 3,127,579  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Participation in loss of equity investee             |                            |                           |           |                    |            |                | (1,072,214 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|Interest income (expense), net                       |                            |                           | (3,365     | )                  |            |                | 29,953     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Total other income (expense)                         |                            |                           | (3,365     | )                  |            |                | 2,085,318  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Net income (loss)                                    |                            | $                         | (3,602,020 | )                  |            | $              | 498,024    |        
|                                                    
|                                                    
|Net income (loss) applicable to common shareholders:
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                            | Net income (loss)         |            | $                  | (3,602,020 | )              |            | $       | 498,024 | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                            | Preferred stock dividends |            |                    | (23,257    | )              |            |         |        | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                    
|Net income (loss) applicable to common shareholders  |                            | $                         | (3,625,277 | )                  |            | $              | 498,024    |        
|                                                    
|                                                    
|Earnings (loss) per share (basic and diluted)        |                            | $                         | (0.17      | )                  |            | $              | 0.05       |        
|                                                    
|                                                    
|Weighted average shares of common stock outstanding  |                            |                           | 20,817,205 |                    |            |                | 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 Statement of Shareholders 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                                       |                               |   |                |       |              |   |          |           |        |       |       |       |        |   |  |   |  |           | 408,134    |            |   |       | 408    |       
|                            
|                            
|                            
|                            
|                             | Preferred stock dividends                                        |                               |   |                |       |              |   |          |           |        |       |       |       |        |   |  |   |  |           |           |            |   |       |       |       
|                            
|                            
|                            
|                            
|                             | Common stock issued in partial
settlement of    loss contingency |                               |   |                |       |              |   |          |           |        |       |       |       |        |   |  |   |  |           | 50,000     |            |   |       | 50     |       
|                            
|                            
|                            
|                            
|                             | Amortization of deferred compensation                            |                               |   |                |       |              |   |          |           |        |       |       |       |        |   |  |   |  |           |           |            |   |       |       |       
|                            
|                            
|                            
|                            
|                             | Reversal of deferred compensation of
forfeited    options        |                               |   |                |       |              |   |          |           |        |       |       |       |        |   |  |   |  |           |           |            |   |       |       |       
|                            
|                            
|                            
|                            
|                             | Net loss for the period                                          |                               |   |                |       |              |   |          |           |        |       |       |       |        |   |  |   |  |           |           |            |   |       |       |       
|                            
|                             | Balance March 31, 2001 (unaudited)                               |                               |   | 2,000           |       |              | $ | 2,000,000 |           |        |       | 6,000  |       |        | $ | 6 |   |  |           | 33,435,107 |            |   | $     | 33,435 |       
|                            

[Additional columns below]

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

|                             |                                                                  |                               |            |                 |            |          |          |             |   |          |             |               |   |   |   |           |          |   |            |            |            | 
|---------------------------- | ---------------------------------------------------------------- | ----------------------------- | ---------- | --------------- | ---------- | -------- | -------- | ----------- | - | -------- | ----------- | ------------- | - | - | - | --------- | -------- | - | ---------- | ---------- | ---------- | 
|                            
|                             |                                                                  |                               |            |                 |            |          |          |             |   |          |             |               |   |   |   |           |          |   |            | Total     
|                             |                                                                  |                               |            | Additional      |            | Deferred |          | Accumulated |   | Treasury |             | Shareholders'
|                             |                                                                  |                               |            | Paid-In Capital |            | 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                                       |                               |            | 1,126,819       |            |          |          |            |   |          |             |              |   |   |   |          |          |   |            | 1,127,227  |           
|                            
|                            
|                            
|                            
|                             | Preferred stock dividends                                        |                               |            |                |            |          |          |            |   |          |             | (23,257       | ) |   |   |          |          |   |            | (23,257    | )         
|                            
|                            
|                            
|                            
|                             | Common stock issued in partial    settlement of loss contingency |                               |            | 39,033          |            |          |          |            |   |          |             |              |   |   |   |          |          |   |            | 39,083     |           
|                            
|                            
|                            
|                            
|                             | Amortization of deferred    compensation                         |                               |            |                |            |          |          | 75,268      |   |          |             |              |   |   |   |          |          |   |            | 75,268     |           
|                            
|                            
|                            
|                            
|                             | Reversal of deferred compensation of    forfeited options        |                               |            | (212,416        | )          |          |          | 212,416     |   |          |             |              |   |   |   |          |          |   |            |           |           
|                            
|                            
|                            
|                            
|                             | Net loss for the period                                          |                               |            |                |            |          |          |            |   |          |             | (3,602,020    | ) |   |   |          |          |   |            | (3,602,020 | )         
|                            
|                             | Balance March 31, 2001 (unaudited)                               |                               | $          | 47,227,518      |            |          | $        | (690,826    | ) |          | $           | (27,039,390   | ) |   | $ | (227,619) |          |   | $          | 21,303,124 |           
|                            

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

3



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High Speed Net Solutions, Inc.
Consolidated Statements of Cash Flows (Unaudited)

|                                                                                                                         |                                               |   |                    |           |                |   |            |            |  
|------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------- | - | ------------------ | --------- | -------------- | - | ---------- | ---------- | -
|                                                                                                                        
|                                                                                                                         |                                               |   | Three Months Ended
|                                                                                                                         |                                               |   |                   
|                                                                                                                         |                                               |   | March 31, 2001     |           | March 31, 2000
|                                                                                                                        
|Operating activities                                                                                                    
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Net (loss) income                                                                                                        |                                               | $ | (3,602,020         | )         |                | $ | 498,024    |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Adjustments to reconcile net (loss) income to net cash
used in operating activities:                                    
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Gain on sale of investment in equity investee |   |                    |          |                |   |            | (3,127,579 | )
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Loss on investment in equity investee         |   |                    |          |                |   |            | 1,072,214  |  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Non-cash compensation                         |   |                    | 714,456   |                |   |            |           |  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Depreciation                                  |   |                    | 64,598    |                |   |            | 52,487     |  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Amortization                                  |   |                    | 1,144,741 |                |   |            |           |  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Changes in operating assets
and liabilities, net of acquisition between High Speed Net Solutions,
Inc. and Summus, Ltd.:
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Accounts receivable                           |   |                    | (175,464  | )              |   |            | 58,826     |  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Other current assets                          |   |                    | (92,633   | )              |   |            | (75,531    | )
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Accounts payable and accrued expenses         |   |                    | 290,595   |                |   |            | 34,342     |  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         | Accrued salaries and related costs            |   |                    | 114,468   |                |   |            | 78,831     |  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Net cash used in operating activities                                                                                    |                                               |   | (1,541,259         | )         |                |   | (1,408,386 | )         
|                                                                                                                        
|Investing activities                                                                                                    
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Proceeds from sale of investment in equity investee                                                                      |                                               |   |                   |           |                |   | 3,857,500  |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Cash acquired in business combination                                                                                    |                                               |   | 82,311             |           |                |   |           |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Net cash provided by investing activities                                                                                |                                               |   | 82,311             |           |                |   | 3,857,500  |           
|                                                                                                                        
|Financing activities                                                                                                    
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Proceeds from sale of common stock                                                                                       |                                               |   | 1,127,227          |           |                |   |           |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Proceeds from loan with related party                                                                                    |                                               |   | 540,000            |           |                |   |           |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Principal payments on capital lease obligations and notes                                                                |                                               |   | (25,119            | )         |                |   | (69,553    | )         
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Cash payments on loss contingency accrual                                                                                |                                               |   | (50,000            | )         |                |   |           |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Net cash provided by (used in) financing activities                                                                      |                                               |   | 1,592,108          |           |                |   | (69,553    | )         
|                                                                                                                        
|                                                                                                                        
|Net increase in cash                                                                                                     |                                               |   | 133,160            |           |                |   | 2,379,561  |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Cash at beginning of period                                                                                              |                                               |   | 208,495            |           |                |   | 647,704    |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Cash at end of period                                                                                                    |                                               | $ | 341,655            |           |                | $ | 3,027,265  |           
|                                                                                                                        
|                                                                                                                        
|Supplemental disclosures of cash flow information                                                                       
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Cash paid for interest                                                                                                   |                                               | $ | 3,365              |           |                | $ | 4,646      |           
|                                                                                                                        

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

4



---



High Speed Net Solutions, Inc.
Notes to Consolidated Financial Statements

1.    Basis of Presentation

These financial statements have been prepared by High Speed Net Solutions, Inc.
(HSNS or the Company) without audit. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for fair
presentation of the accompanying condensed consolidated financial statements
have been made.

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 months ended March 31, 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.

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 for the three months ended March 31, 2001,
the Company had an accumulated deficit of $27,039,390, negative cash flows from
operations and a deficiency in working capital. 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.

5



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

1.     Basis of Presentation (continued)

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 months ended March 31, 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.

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



| |  | HSNS issued to the 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.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

2.     Business Combination (continued)



| |  | 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.

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.

7



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

2.     Business Combination (continued)

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 will be amortized on a straight-line basis over a
three-year period.

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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

Equipment and Furniture

Equipment and furniture is 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.

8



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

3.     Significant Accounting Policies (continued)

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 $714,456 in the three months ended March 31, 2001.

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

Income Taxes

Income taxes are accounted for using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes.

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.

9



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

3.     Significant Accounting Policies (continued)

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.

Loss Per Share

Loss per share has been calculated in accordance with Statement of Financial
Accounting Standards No. 128, Earnings per Share. 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
loss per share for all periods 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.

10



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

3.     Significant Accounting Policies (continued)

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 has 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 the new
statement will have a significant effect on the operations or financial
position of the Company.

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.

11



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

4.     Deferred Software Royalty Revenue (continued)

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.

5.     Common Stock

Subsequent to HSNSs acquisition of the assets of Summus, Ltd. (see Note 2),
HSNS issued 408,134 shares of its unregistered common stock and warrants to
purchase an additional 816,268 shares of common stock for gross proceeds of
$1,127,227. The warrants have exercise prices ranging from $3.50 to $4.00 per
share, a term of five years and cannot be exercised within five months of the
date of issuance.

12



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

6.    Preferred Stock

Series A Preferred Stock

The Company has 2,000 shares of Series A preferred stock outstanding at March
31, 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 March 31, 2001 cumulative dividends accrued were $179,845.

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:



| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

6.     Preferred Stock (continued)



| |  |  | 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.

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.

|         |  |                                   |            |          |  |   |         |  
|-------- |  | --------------------------------- | ---------- | -------- |  | - | ------- | -
|        
|         |  | Three Months Ended March 31, 2001
|         |  |                                  
|         |  | Research and Development          |            | Media   
|         |  | and Software                      |            | Creation
|        
|Revenues |  | $                                 | 296,160    |          |  | $ | 157,639 |  
|        
|        
|        
|        
|Net loss |  | $                                 | (3,594,277 | )        |  | $ | (7,743  | )
|        
|        
|        
|        
|Assets   |  | $                                 | 28,158,933 |          |  | $ | 165,458 |  
|        

14



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements (continued)

8.     Subsequent Events

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;                                                                                                                                                                                                                                                                                          
|
| |  |  | 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
advises the Company 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.                                                                                                                                                                                                                                                                                                                     

The Companys loss contingency accrual at March 31, 2001 includes the terms of
this settlement with Mr. Dunavant.

15



---



High Speed Net Solutions, Inc.
(Formerly Summus, Ltd.)
Unaudited Pro Forma Combined Financial Statements

On February 16, 2001, HSNS acquired substantially all the assets of Summus,
Ltd., including its intellectual property in encoding, manipulating,
compressing, managing and distributing digital multimedia content. In
accordance with accounting principles generally accepted in the United States,
the acquisition of the assets of Summus, Ltd. has been accounted for as a
reverse acquisition in which Summus, Ltd. is treated as the accounting
acquirer; HSNS, the acquired corporation.

The results of operations of HSNS (the legal acquirer) have been included in
the financial statements of the combined HSNS and Summus, Ltd. financial
statements from February 16, 2001 (the closing date of the acquisition). As
HSNS is the legal acquirer, these financial statements are considered those of
HSNS.

The following unaudited pro forma financial data are based on the historical
financial statements of HSNS and Summus, Ltd. and the adjustments described in
the accompanying notes. The unaudited pro forma financial data do not purport
to represent what the combined entitys financial position or results of
operations would actually have been had the combination occurred on the dates
indicated and are not necessarily representative of the combined entitys
financial position or results of operations at any future date or for any
future period. The unaudited pro forma financial data should be read in
conjunction with the Managements Discussion and Analysis of Financial
Condition and Results of Operations and the financial statements and related
notes thereto included elsewhere in this Form 10-Q.

The unaudited pro forma financial data includes combining consolidated
statements of operations for the year ended December 31, 2000, and the three
months ended March 31, 2001, as if the business combination occurred on January
1, 2000.

Acquisition of Douglas May & Co., Inc.

On July 10, 2000, HSNS acquired all of the issued and outstanding common stock
of Douglas May & Co., Inc. by issuing 183,070 shares of its common stock to
Douglas May, the sole shareholder of Douglas May & Co., Inc., in a business
combination accounted for as a purchase. These shares were valued at
$1,376,000.

Under the terms of the share acquisition agreement, the 183,070 shares of HSNS
common stock issued in the transaction were issued three allotments. The first
allotment corresponded to $500,000 of value. At closing, HSNS issued 50,000
shares of common stock, such shares being subject to adjustment if the Over the
Counter Bulletin Board trading price of the common stock on the first
anniversary of the closing date of the transaction was less than $10.00 per
share. Under such circumstances, the Company was and is obligated to issue
additional shares of common stock that, when added to the 50,000 shares, and
multiplied by the per share trading price on the first anniversary of the
closing date, shall equal $500,000 in value.

16



---



The issuance of the 50,000 shares was recorded at the guaranteed amount of
$10.00 per share on the date of issuance, July 10, 2000. Payment or issuance
of any additional shares will not change the recorded cost of the acquisition
of Douglas May & Co., Inc.

The second allotment of shares of common stock (87,498 shares) issued at
closing corresponded to $576,000 of value. The Company committed to file a
registration statement with the SEC to register the resale of these shares. If
the shares were not freely tradable on or before January 1, 2001, Mr. May has
the right to cause the Company to repurchase these shares from him by making
six cash installment payments totaling $576,000. Mr. May has not yet elected
to have the Company repurchase these shares.

The third allotment of shares of common stock (45,572 shares) issued at closing
corresponded to $300,000 of value. The Company committed to file a
registration statement with the SEC to register the resale of these shares. If
the shares were not freely tradable on or before the expiration of 90 days from
the closing date, Mr. May had the right to cause the Company to repurchase
these shares from him by releasing funds, in the amount of $300,000, which the
share acquisition agreement provided be placed into an escrow account, the
funds being from certain accounts receivable of Douglas May & Co., Inc. that
were collected subsequent to the acquisition date. In January 2001, based on
the election of Mr. May, the Company repurchased and retired these shares for
$300,000 using the funds from the escrow account. These shares will be treated
as outstanding, prior to the repurchase by the Company, for loss per share
purposes in accordance with the guidance set forth in SFAS No. 128. All shares
issued that are subject to repurchase by the Company have been presented on the
Companys balance sheet as redeemable stock outside of stockholders equity.

The Company provides media creation services through Douglas May & Co., Inc.,
which include creative design assistance and commercial content development,
development of audio and video images and animation, as well as web site design
and construction.

17



---



High Speed Net Solutions, Inc.
Pro Forma Combined Statement of Operations

|                                            |                               |   |                 |             |                |   |                              |         |             |   |             |             |           |   |            |             |      |   |             |             |  
|------------------------------------------- | ----------------------------- | - | --------------- | ----------- | -------------- | - | ---------------------------- | ------- | ----------- | - | ----------- | ----------- | --------- | - | ---------- | ----------- | ---- | - | ----------- | ----------- | -
|                                           
|                                            |                               |   |                 |             |                |   | Year ended December 31, 2000
|                                            |                               |   |                 |             |                |   |                             
|                                            |                               |   | High Speed Net  |             | May & Co.      |   |                              |         |             |   | Pro Forma   |             | Pro Forma
|                                            |                               |   | Solutions, Inc. |             | 1/1/00-7/12/00 |   | Summus, Ltd.                 |         | Adjustments |   | Balance    
|                                           
|Revenues                                    |                               | $ | 599,054         |             |                | $ | 1,074,206                    |         |             | $ | 1,068,658   |             |           | $ |           |             |      | $ | 2,741,918   |            
|                                           
|                                           
|                                           
|                                           
|Costs of revenues                           |                               |   | 476,280         |             |                |   | 540,379                      |         |             |   | 398,326     |             |           |   |           |             |      |   | 1,414,985   |            
|                                           
|                                           
|                                           
|                                           
|                                           
|Gross Profit                                |                               |   | 122,774         |             |                |   | 533,827                      |         |             |   | 670,332     |             |           |   |           |             |      |   | 1,326,933   |            
|                                           
|Selling, general and                       
|                                           
|                                           
|                                           
|                                           
|                                            | administrative expenses       |   |                 | 6,864,159   |                |   |                              | 287,516 |             |   |             | 6,221,362   |           |   |            |            |      |   |             | 13,373,037  |  
|                                           
|                                           
|                                           
|                                           
|Non-cash compensation                       |                               |   | 333,750         |             |                |   |                             |         |             |   | 2,127,962   |             |           |   |            |             |      |   | 2,461,712   |            
|                                           
|                                           
|                                           
|                                           
|Research and development                    |                               |   |                |             |                |   |                             |         |             |   | 1,119,333   |             |           |   |           |             |      |   | 1,119,333   |            
|                                           
|                                           
|                                           
|                                           
|                                           
|Operating income (loss)                     |                               |   | (7,075,135      | )           |                |   | 246,311                      |         |             |   | (8,798,325  | )           |           |   |           |             |      |   | (15,627,149 | )          
|                                           
|                                           
|                                           
|                                           
|Gain on sale of stock of                   
|                                           
|                                           
|                                           
|                                           
|                                            | equity investee               |   |                 |            |                |   |                              |        |             |   |             | 3,680,065   |           |   |            | (3,680,065  | )(a) |   |             |            |  
|                                           
|                                           
|                                           
|                                           
|Loss on investment in equity    investee    |                               |   |                |             |                |   |                             |         |             |   | (6,356,932  | )           |           |   | 6,356,932  | (b)         |      |   |            |            
|                                           
|                                           
|                                           
|                                           
|Impairment charges                          |                               |   | (3,953,182      | )           |                |   |                             |         |             |   |             |            |           |   | 2,166,667  | (c)         |      |   | (1,786,515  | )          
|                                           
|                                           
|                                           
|                                           
|Loss contingency charges                    |                               |   | (1,281,946      | )           |                |   |                             |         |             |   |            |             |           |   |           |             |      |   | (1,281,946  | )          
|                                           
|                                           
|                                           
|                                           
|Amortization expense                        |                               |   | (116,200        | )           |                |   |                             |         |             |   |            |             |           |   | (9,274,126 | )(d)        |      |   | (9,390,326  | )          
|                                           
|                                           
|                                           
|                                           
|Interest income (expense)                   |                               |   | (15,192         | )           |                |   |                             |         |             |   | 23,911      |             |           |   |           |             |      |   | 8,719       |            
|                                           
|                                           
|                                           
|                                           
|                                           
|Net Income (Loss)                           |                               | $ | (12,441,655     | )           |                | $ | 246,311                      |         |             | $ | (11,451,281 | )           |           | $ | (4,430,592 | )           |      | $ | (28,077,217 | )          
|                                           
|                                           
|                                           
|                                           
|                                           
|Net loss applicable to common
shareholders:
|                                           
|                                           
|                                           
|                                           
|                                            | Net loss                      |   | $               | (12,441,655 | )              |   | $                            | 246,311 |             |   | $           | (11,451,281 | )         |   | $          | (4,430,592  | )    |   | $           | (28,077,217 | )
|                                           
|                                           
|                                           
|                                           
|                                            | Beneficial conversion feature |   |                 | (294,900    | )              |   |                              |        |             |   |             |            |           |   |            |            |      |   |             | (294,900    | )
|                                           
|                                           
|                                           
|                                           
|                                            | Preferred stock dividends     |   |                 | (133,333    | )              |   |                              |        |             |   |             |            |           |   |            |            |      |   |             | (133,333    | )
|                                           
|                                           
|                                           
|                                           
|                                           
|Net loss applicable to common              
|                                           
|                                           
|                                           
|                                           
|                                            | shareholders                  |   | $               | (12,869,888 | )              |   | $                            | 246,311 |             |   | $           | (11,451,281 | )         |   |            | ($4,430,592 | )    |   | $           | (28,505,450 | )
|                                           
|                                           
|                                           
|                                           
|                                           
|Loss per share                              |                               | $ | (0.60           | )           |                |   |                             |         |             | $ | (1.20       | )           |           |   |           |             |      | $ | (1.11       | )          
|                                           
|                                           
|                                           
|                                           
|                                           
|Weighted average shares                    
|                                           
|                                           
|                                           
|                                           
|                                            | outstanding                   |   |                 | 21,619,618  |                |   |                              |        |             |   |             | 9,546,768   |           |   |            |            |      |   |             | 25,751,914  |  
|                                           



| | (a) |  | Reflects the elimination of the gain Summus, Ltd. recorded on the sale of
shares of common stock of HSNS, its equity investee, during 2000.                                                                                           
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Reflects the elimination of Summus, Ltd.s proportionate share of the
loss of HSNS, its equity investee, for the year ended December 31, 2000.                                                                                        
|
| | (c) |  | Reflects the partial elimination of the impairment charge recorded by
HSNS in connection with the discontinuance of its Rich Media Direct
business. The partial elimination is associated with the costs associated
with MaxxSystem.
|
| | (d) |  | Reflects amortization of goodwill as if the HSNS Summus, Ltd.
combination and the acquisition of Douglas May & Co., Inc. occurred on January 1, 2000.                                                                                

18



---



High Speed Net Solutions, Inc.
Unaudited Pro Forma Combined Statement of Operations

|                                               |                      |                         |                           |            |                                   |            |                |            |             |            |            |            |   |            |            |            |           |            |  
|---------------------------------------------- | -------------------- | ----------------------- | ------------------------- | ---------- | --------------------------------- | ---------- | -------------- | ---------- | ----------- | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | --------- | ---------- | -
|                                              
|                                               |                      |                         |                           |            | Three Months Ended March 31, 2001
|                                               |                      |                         |                           |            |                                  
|                                               |                      |                         |                           |            | High Speed Net                   
|                                               |                      |                         |                           |            | Solutions, Inc.                   |            | Summus, Ltd    |            | Pro Forma   |            | Pro Forma 
|                                               |                      |                         |                           |            | 1/1/01-2/16/01                    |            | 1/1/01-3/31/01 |            | Adjustments |            | Balance   
|                                              
|Revenues                                       |                      | $                       | 30,663                    |            |                                   | $          | 453,799        |            |             | $          |           |            |   | $          | 484,462    |           
|                                              
|                                              
|                                              
|                                              
|Costs of revenues                              |                      |                         | 21,077                    |            |                                   |            | 245,407        |            |             |            |           |            |   |            | 266,484    |           
|                                              
|                                              
|                                              
|                                              
|                                              
|Gross profit                                   |                      |                         | 9,586                     |            |                                   |            | 208,392        |            |             |            |           |            |   |            | 217,978    |           
|                                              
|Selling, general and                          
|                                              
|                                              
|                                              
|                                              
|                                               |                      | administrative expenses |                           |            | 798,128                           |            |                |            | 1,846,121   |            |            |            |  |            |            |            | 2,644,249 |           
|                                              
|                                              
|                                              
|                                              
|Non-cash compensation                          |                      |                         | 1,493,987                 |            |                                   |            | 714,456        |            |             |            |            |            |   |            | 2,208,443  |           
|                                              
|                                              
|                                              
|                                              
|Research and development                       |                      |                         |                          |            |                                   |            | 101,729        |            |             |            |           |            |   |            | 101,729    |           
|                                              
|                                              
|                                              
|                                              
|                                              
|Operating loss                                 |                      |                         | (2,282,529                | )          |                                   |            | (2,453,914     | )          |             |            |           |            |   |            | (4,736,443 | )         
|                                              
|Amortization expense                           |                      |                         |                          |            |                                   |            | (1,144,741     | )          |             |            | (1,144,741 | )(a)       |   |            | (2,289,482 | )         
|                                              
|                                              
|                                              
|                                              
|Interest income (expense)                      |                      |                         | 936                       |            |                                   |            | (3,365         | )          |             |            |            |            |   |            | (2,429     | )         
|                                              
|                                              
|                                              
|                                              
|                                              
|Net Loss                                       |                      | $                       | (2,281,593                | )          |                                   | $          | (3,602,020     | )          |             |            | (1,144,741 | )          |   | $          | (7,028,354 | )         
|                                              
|                                              
|Net loss applicable to                        
|                                              
|                                              
|                                              
|                                              
|                                               | common shareholders: |                         |                           |           |                                   |            |                |           |             |            |            |           |   |            |            |           |          
|                                              
|                                              
|                                              
|                                              
|                                               |                      |                         | Net loss                  |            | $                                 | (2,281,593 | )              |            | $           | (3,602,020 | )          |            | $ | (1,144,741 | )          |            | $         | (7,028,354 | )
|                                              
|                                              
|                                              
|                                              
|                                               |                      |                         | Preferred stock dividends |            |                                   | (23,257    | )              |            |             | (23,257    | )          |            |   |           |            |            |           | (46,514    | )
|                                              
|                                              
|                                              
|                                              
|                                              
|Net loss applicable to                        
|                                              
|                                              
|                                              
|                                              
|                                               | common shareholders  |                         | $                         | (2,304,850 | )                                 |            | $              | (3,625,277 | )           |            | $          | (1,144,741 | ) |            | $          | (7,074,868 | )        
|                                              
|                                              
|Loss per share                                 |                      | $                       | (0.09                     | )          |                                   | $          | (0.17          | )          |             |            |           |            |   | $          | (0.21      | )         
|                                              
|                                              
|Weighted average common
    shares outstanding |                      |                         | 24,695,119                |            |                                   |            | 20,817,205     |            |             |            |           |            |   |            | 33,022,112 |           
|                                              



| | (a) |  | Reflects amortization of goodwill as if the HSNS  Summus, Ltd.
combination occurred on January 1, 2000. Goodwill is being amortized
on a straight-line basis over a three-year period.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

19



---



|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|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, 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.                                                                                                                                                                                                                            

20



---



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

21



---



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 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

22



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development and 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. It is our
intent to license our technology and provide a framework to those with whom we
enter into such 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.

Although we are in the process of building relationships with wireless and mobile device manufacturers, content
providers and cellular carriers, we have not, as yet, entered into any formal
contractual agreements with these parties, and have not, to date, executed any
product orders for the BlueFuel product line currently under
development. We recognize that a concern for our corporate viability and the
related concerns regarding our lack of financial resources and ability to meet
specific applications demands and provide product support may hamper our
efforts to forge such 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.

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 fall of 2001.

We anticipate that the first version of the BlueFuel Efficency
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 anticipate that the various components of the BlueFuel
product line will be licensed separately or in

23



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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 March 31, 2001 compared to Three Months ended March 31, 2000

Revenues.Total revenues increased $174,024 to $453,799 in the three
months ended March 31, 2001, up 62.2% from $279,775 in the three months ended
March 31, 2000. Included in total revenues for the three months ended March
31, 2001, was $157,639 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 March 31, 2001 were $296,160 compared to
$279,775 for the corresponding period of the prior year. The increase in these
revenues was primarily due to the increase in providing contract services.

Costs of Revenues.Total costs of revenues increased $115,255 to $245,407
in the three months ended March 31, 2001, up 88.5% from $130,152 in the
corresponding period of the prior year. Included in the total costs of
revenues was $112,135 related to the costs of media creation associated with
the operations of Douglas May & Co., Inc. Costs of contracts and license fees
of $133,272 in the three months ended March 31, 2001, reflected an increase of
$3,120 (2.4%) from $130,152 in the corresponding period of the prior year.
Costs of contracts and license fees for the three months ended March 31, 2001
and 2000 was comprised primarily of salaries and related costs of providing
such services.

Total gross profit increased $58,769, or 39.3%, to $208,392 for the three
months ended March 31, 2001, compared with $149,623 for the three months ended
March 31, 2000. The increase in gross profit is primarily attributable to 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 March 31,
2001 increased to 55.0%, up from 53.5% for the corresponding period of the
prior year. The increase was attributable to more license fee income in the
first three months compared to the corresponding period of the prior year.
License fee income generates a high 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 March 31, 2001, were $1,846,121, compared
to $1,341,660 for three months ended March 31, 2000. The increase in selling,
general and administrative expenses resulted primarily from the reverse
acquisition transaction, which was consummated on February 16, 2001.

24



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Amortization Expense. Amortization expense for the three months ended
March 31, 2001, was $1,144,741. During the three months ended March 31, 2000,
there was no amortization expense. The amortization expense recorded in the
three months ended March 31, 2001 related to the amortization of the goodwill
resulting from the business combination between HSNS and Summus, Ltd., which
was consummated on February 16, 2001.

Non-Cash Compensation.Non-cash compensation for the three months ended
March 31, 2001 was $714,456. During the three months ended March 31, 2001,
stock options were granted to employees at prices below the fair value of the
underlying common stock resulting in non-cash compensation of $639,188. The
remaining amount of non-cash compensation, $75,268, reflects the amortization
for the three months ended March 31, 2001, 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. During the three months
ended March 31, 2000, there was no non-cash compensation.

Research and Development.Research and development costs for the three
months ended March 31, 2001, were $101,729 compared to $395,257 for the three
months ended March 31, 2000. The decrease in these costs resulted from a
reduction of the research and development staff occurring in the first quarter
of 2001.

Gain on Sale of Stock of Equity Affiliate.Gain on the sale of stock of
equity affiliate for the three months ended March 31, 2000 was $3,127,579. In
1999, Summus, Ltd. acquired shares of HSNS common stock which it later sold to
third parties. During the three months ended March 31, 2000, Summus, Ltd. sold
815,000 shares of HSNS common stock for gross proceeds of $3,857,500, resulting
in a gain on sale of $3,127,579. Summus, Ltd. did not sell any shares of HSNS
common stock during the three months ended March 31, 2001.

Participation in loss of Equity Affiliate.Participation in loss of
equity affiliate for the three months ended March 31, 2000, was $1,072,214. 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 reduce 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.
Accordingly, Summus, Ltd. did not record any amounts relating to participation
in loss of equity affiliate during the three months ended March 31, 2001.

Net Interest Income (Expense).Net interest expense for the three months
ended March 31, 2001, was $3,365, compared to net interest income of $29,953
for the corresponding period of the prior year. Net interest expense for the
three months ended March 31, 2001 related to interest costs associated with
capital lease obligations and note payable agreements. The net interest income
in the three months ended March 31, 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.

25



---



Liquidity and Capital Resources

As of March 31, 2001, the Company had $341,655 of cash on hand and
negative working capital of approximately $5.5 million. As of such date, the
Company had approximately $4.8 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 was 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.

Summus, Ltd.s principal sources of liquidity for operating activities and
capital expenditures over the past three years and through February 16, 2001,
consisted of capital contributions by and borrowings from certain principal
shareholders and their affiliates, the sales of shares of common stock of
Summus, Ltd.s equity investee, HSNS, the licensing of software products to
HSNS under the terms of the February 1999 Marketing License Agreement and loans
from HSNS under the terms of the Asset Purchase Agreement prior to the closing
of the reverse acquisition transaction on February 16, 2001.

The Companys continuation as a going concern depends on its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
obtain additional financing as may be required and ultimately to attain
profitability.

Cash Flow used in Operating Activities.Net cash used in operating
activities was $1,541,259 in the three months ended March 31, 2001, compared to
$1,408,386 in the corresponding period of the prior year. The increase in net
cash used in operating activities was due primarily to resulted primarily from
the reverse acquisition which was consummated on February 16, 2001.

Cash Flow from Investing Activities.Net cash provided by investing
activities was $82,311 in the three months ended March 31, 2001, compared to
net cash provided by investing activities of $3,857,500 in the corresponding
period of the prior year, representing the proceeds from Summus, Ltd.s sale of
815,000 shares of common stock in HSNS, its equity investee.

Cash Flow from Financing Activities.Net cash provided by financing
activities was $1,592,108 in the three months ended March 31, 2001 compared to
net cash used in financing activities of $69,553 in the corresponding period of
the prior year. Net cash provided by financing activities in the three months
ended March 31, 2001 related to:



| |  |  | the sale of 408,134 share of the Companys common stock, along with
warrants to purchase an additional 816,268 shares of common stock, at
exercises prices ranging from $3.50 to $4.00 per share (all such
securities being restricted securities as defined in Rule 144) to
accredited investors, generating aggregate proceeds of $1,127,227;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26



---





| |  |  | $540,000, representing the proceeds 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;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | $25,119 in principal payments on capital lease obligations; and                                                                                                                                                               
|
| |  |  | $50,000 in cash payments in partial settlement of the Dunavant loss contingency.                                                                                                                                              

Net cash flow used in financing activities of $69,553 in the three months
ended March 31, 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.

27



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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 alleges 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 has
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. We are
negotiating with AIC to resolve the matter.

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 a
settlement of this matter.

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

28



---



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, and
intend to vigorously defend against 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 March 31, 2001,
the Company issued an
aggregate of 20,965,984 shares of its common stock to approximately
44 persons and entities, and 6,000 shares of its Series B
preferred stock to Summus, Ltd.
These securities were not registered under the Securities Act of 1933. Except
as noted below, the issuance of the securities described below were issued in
transactions deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act as transactions by an issuer not
involving any public offering. All of such securities, except for those issued
in connection with the acquisition of Summus, Ltd.s assets, 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 in connection with Business Combinations/Acquisitions

On February 16, 2001, in connection with the acquisition of the assets of
Summus, Ltd., the Company issued to Summus, Ltd. for distribution to the
Summus, Ltd. shareholders:



| |  |  | 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., the Company 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, as
amended, these shares were canceled, resulting in a net issuance of
16,614,288 shares of the Companys common stock. In addition, the
asset purchase agreement provided for the cancellation of 8,217,781
shares of the Companys common stock owned by Summus, Ltd. prior to
the parties execution of the agreement.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                  

29



---





| |  |  | 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s securities issued in the transaction were exempt from
registration pursuant to Section 3(a)(10) under the Securities Act.

Stock Issuances for
Cash

From January 1, 2001 to March 31, 2001, the Company issued an aggregate of
642,251 shares of common stock to 41 investors (all of whom were unaffiliated
with the Company) for a price per share ranging from $2.50 to
$3.00, and issued
warrants to purchase, at an exercise price of $3.50 to $4.00 per share, an
additional 1,284,502 shares of common stock, for aggregate consideration of
$1,829,562.

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 common stock to Mr.
William R. Dunavant in each of the months of January, February and March of
2001.

On January 31, 2001, we issued 30,000 shares of common stock to Ronald P.
Cropper under the terms of a settlement agreement and general release of all
claims, effective April 25, 2001, among the Company, RPC International L.C. and
Ronald P. Cropper.

Stock/Option Issuances
to Directors, Officers and Employees

During the three months ended March 31, 2001, the Company granted options to
purchase an aggregate of 2,617,375 shares of common stock to our directors,
officers and employees under the Companys 2000 Equity Compensation Plan.

Options exercisable for 346,667 shares of common stock were issued with
exercise prices below the fair market value at the time of issuance, and we
recorded non-cash compensation expense in the aggregate amount of $639,188
related to these option issuances. This consisted of options issued to Dr.
Bjorn Jawerth exercisable for 166,667 shares of common stock; options issued to
Alan Kleinmaier exercisable for 150,000 shares; and options issued to Gregory
Gush exercisable for 30,000 shares. Options exercisable for an additional
110,900 shares of common stock were issued to former Summus, Ltd. employees
(now Company employees) for payment of bonuses in lieu of cash for services
performed in fiscal 2000. All of the above-described options were fully vested
upon issuance.

Prior to the combination with Summus, Ltd., options exercisable for an
aggregate of 460,000 shares of common stock were issued to
Messrs. Robert Lowrey and Andrew Fox with exercise prices below the fair market value at the time of issuance
and options exercisable for an additional 93,744 shares of common
stock were issued to HSNS employees for payment of bonuses in lieu of cash for
services performed in fiscal 2000. These options were fully vested upon
issuance.

Of the remaining options exercisable for 1,606,064 shares of common stock, such
options were issued with exercise prices equal to the fair market value at the
time of grant and were subject to a three-year vesting schedule tied to the
recipients continued employment with the Company or continued service as a
director, as applicable.

Item 3.    Defaults Upon Senior Securities

None.

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

During the quarterly period ended March 31, 2001, no matter was submitted
to a vote of the security holders of the Company.

30



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Item 5.     Other Information

By letter, dated July 18, 2001, Wendi Tush resigned as a member of the
Companys Board of Directors.

By letter, dated July 19, 2001, Christopher Gaertner resigned as an
advisor to the Companys Board of Directors.

By letter, dated July 20, 2001, Stuart Diamond resigned as Chairman of the
Board and as a member of the Board of Directors of the Company.

Item 6.     Exhibits and Reports on Form 8-K

(a)     Exhibits

|        |  |                                                                                                                                                                                                                                                                            
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Exhibit                                                                                                                                                                                                                                                                    
|Number  |  | Description                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                            
|       
|2.1     |  | Asset Purchase Agreement, dated October 30, 2000, among High Speed Net
Solutions, Inc., Summus, Ltd. and the stockholders named therein
(incorporated by reference to Exhibit 10.01 of our Current Report on Form
8-K dated February 16, 2001)                             
|       
|2.2     |  | Amendment Number 1 to Asset Purchase Agreement, dated as of December
30, 2000, among High Speed Net Solutions, Inc., Summus, Ltd. and the
stockholders named therein (incorporated by reference to Exhibit 10.02 of
our Current Report on Form 8-K dated February 16, 2001)
|       
|2.3     |  | Amendment to Asset Purchase Agreement, dated as of January 30, 2001,
among High Speed Net Solutions, Inc., Summus, Ltd. and the stockholders
named therein (incorporated by reference to Exhibit 10.03 of our Current
Report on Form 8-K dated February 16, 2001)          
|       
|2.4     |  | Escrow Agreement, dated as of February 16, 2001, by and among High
Speed Net Solutions, Inc., Summus, Ltd. and Branch Banking Trust Company
(incorporated by reference to Exhibit 10.05 of our Current Report on Form
8-K dated February 16, 2001)                         
|       
|3.1     |  | Restated Articles of Incorporation, filed February 28, 2000
(incorporated by reference to Exhibit 3.01 of our Quarterly Report on
Form 10-Q for the quarter ended March 31, 2000, filed May 15, 2000)                                                                      

31



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|      |  |                                                                                                                                                                                                                                                                                                                           
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|3.2   |  | Second Amended and Restated Bylaws (incorporated by reference to
Exhibit 3.3 of our Annual report on Form 10-K for the fiscal year ended
December 31, 2000, filed July 5, 2001)                                                                                                                                           
|     
|3.3   |  | Articles of Amendment and Statement of Rights and Preferences of the 8%
Series A Convertible Preferred Stock, filed March 3, 2000 (incorporated
by reference to Exhibit 3.03 of our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000, filed May 15, 2000)                                               
|     
|3.4   |  | Articles of Correction filed June 23, 2000 to Articles of Amendment,
filed March 2, 2000 (incorporated by reference to Exhibit 3.4 of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2000,
filed July 5, 2001)                                                                                     
|     
|3.5   |  | Amendment to Articles of Incorporation and Statement of Rights and
Preferences of the Series B Convertible Preferred Stock (incorporated by
reference to Exhibit 3.01 of our Current Report on Form 8-K dated
February 16, 2001)                                                                                          
|     
|4.1   |  | Specimen Common Stock Certificate (incorporated by reference to Exhibit
4.1 of our Annual Report on Form 10-K for the fiscal year ended December
31, 2000, filed July 5, 2001)                                                                                                                                            
|     
|10.1  |  | Contract #N00014-01-C-0217, dated March 13, 2001, between Summus, Ltd.
and the Office of Naval Research (incorporated by reference to Exhibit
10.14 of our Annual Report on Form 10-K for the fiscal year ended December
31, 2000, filed on July 5, 2001)                                                                 
|     
|10.2  |  | 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)
|     
|10.3  |  | 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)                                                                    
|     
|10.4* |  | Amendment to High Speed Net Solutions, Inc. Equity Compensation Plan,
effective February 16, 2001 (incorporated by reference to Exhibit 10.09 to
our Current Report on Form 8-K dated February 16, 2001)                                                                                                                  
|     
|10.5* |  | Executive Employment Agreement, dated as of February 16, 2001, between
High Speed Net Solutions, Inc. and Bjorn Jawerth (incorporated by
reference to Exhibit 10.06 to our Current Report on Form 8-K dated
February 16, 2001)                                                                                            
|     
|*     |  | Executive compensation plans and arrangements.                                                                                                                                                                                                                                                                            

32



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(b)  Reports on Form 8-K

During the quarterly period ended March 31, 2001, the Company filed with
the Securities and Exchange Commission the following Current Reports on Form
8-K:



| | 1. |  | On February 6, 2001, the Company filed a Current Report on
Form 8-K regarding various matters, including:
| | -- |  | ---------------------------------------------------------------------------------------------------------



| |  |  | the execution by the Company and Summus, Ltd. of an
amendment to the asset purchase agreement between the parties
which, among other things, called for the Companys providing
interim financing to Summus, Ltd;       
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the withdrawal of the Companys registration
statement on Form S-1, originally filed on July 19, 2000,
covering the resale of shares of the Companys common stock held
by various shareholders of the Company;         
|
| |  |  | the review by the staff of the Securities and
Exchange Commission of the accounting treatment of the prepaid
royalty payments made to Summus, Ltd. under the terms of the
February 1999 Marketing License Agreement; and
|
| |  |  | the Companys liquidity constraints.                                                                                                                                                                                    



| | 2. |  | On March 5, 2001, the Company filed a Current Report on Form
8-K regarding the closing of the transactions contemplated by the
asset purchase agreement, as amended, with Summus, Ltd.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

33



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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.                  
|                   
|                    |  | By: /s/ Bjorn Jawerth                           
|                   
|                   
|                   
|                   
|Date: July 27, 2001 |  | Bjorn Jawerth
        Co-Chief Executive Officer
|                   
|                    |  | By: /s/ Robert S. Lowrey                        
|                   
|                   
|                   
|                   
|Date: July 27, 2001 |  | Robert S. Lowrey                                
|                   
|                   
|                   
|                   
|                    |  | Chief Financial Officer                         

34



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EXHIBIT INDEX

|    |  |                                                                                                                                                                                                                                                                            
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1 |  | Asset Purchase Agreement, dated October 30, 2000, among High Speed Net
Solutions, Inc., Summus, Ltd. and the stockholders named therein
(incorporated by reference to Exhibit 10.01 of our Current Report on Form
8-K dated February 16, 2001)                             
|   
|2.2 |  | Amendment Number 1 to Asset Purchase Agreement, dated as of December
30, 2000, among High Speed Net Solutions, Inc., Summus, Ltd. and the
stockholders named therein (incorporated by reference to Exhibit 10.02 of
our Current Report on Form 8-K dated February 16, 2001)
|   
|2.3 |  | Amendment to Asset Purchase Agreement, dated as of January 30, 2001,
among High Speed Net Solutions, Inc., Summus, Ltd. and the stockholders
named therein (incorporated by reference to Exhibit 10.03 of our Current
Report on Form 8-K dated February 16, 2001)          
|   
|2.4 |  | Escrow Agreement, dated as of February 16, 2001, by and among High
Speed Net Solutions, Inc., Summus, Ltd. and Branch Banking Trust Company
(incorporated by reference to Exhibit 10.05 of our Current Report on Form
8-K dated February 16, 2001)                         
|   
|3.1 |  | Restated Articles of Incorporation, filed February 28, 2000
(incorporated by reference to Exhibit 3.01 of our Quarterly Report on
Form 10-Q for the quarter ended March 31, 2000, filed May 15, 2000)                                                                      
|   
|3.2 |  | Second Amended and Restated Bylaws (incorporated by reference to
Exhibit 3.3 of our Annual report on Form 10-K for the fiscal year ended
December 31, 2000, filed July 5, 2001)                                                                                            
|   
|3.3 |  | Articles of Amendment and Statement of Rights and Preferences of the 8%
Series A Convertible Preferred Stock, filed March 3, 2000 (incorporated
by reference to Exhibit 3.03 of our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000, filed May 15, 2000)
|   
|3.4 |  | Articles of Correction filed June 23, 2000 to Articles of Amendment,
filed March 2, 2000 (incorporated by reference to Exhibit 3.4 of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2000,
filed July 5, 2001)                                      
|   
|3.5 |  | Amendment to Articles of Incorporation and Statement of Rights and
Preferences of the Series B Convertible Preferred Stock (incorporated by
reference to Exhibit 3.01 of our Current Report on Form 8-K dated
February 16, 2001)                                           

35



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|      |  |                                                                                                                                                                                                                                                                                                                           
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|     
|     
|     
|4.1   |  | Specimen Common Stock Certificate (incorporated by reference to Exhibit
4.1 of our Annual Report on Form 10-K for the fiscal year ended December
31, 2000, filed July 5, 2001)                                                                                                                                            
|     
|10.1  |  | Contract #N00014-01-C-0217, dated March 13, 2001, between Summus, Ltd.
and the Office of Naval Research (incorporated by reference to Exhibit
10.14 of our Annual Report on Form 10-K for the fiscal year ended December
31, 2000, filed on July 5, 2001)                                                                 
|     
|10.2  |  | 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)
|     
|10.3  |  | 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)                                                                    
|     
|10.4* |  | Amendment to High Speed Net Solutions, Inc. Equity Compensation Plan,
effective February 16, 2001 (incorporated by reference to Exhibit 10.09 to
our Current Report on Form 8-K dated February 16, 2001)                                                                                                                  
|     
|10.5* |  | Executive Employment Agreement, dated as of February 16, 2001, between
High Speed Net Solutions, Inc. and Bjorn Jawerth (incorporated by
reference to Exhibit 10.06 to our Current Report on Form 8-K dated
February 16, 2001)                                                                                            
|     
|*     |  | Executive compensation plans and arrangements.                                                                                                                                                                                                                                                                            

WAS1 #995814 v6

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