##### 









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---




FORM 10-Q/A






|  |                                                                                         
|- | ----------------------------------------------------------------------------------------
|x | Quarterly Report Pursuant to Section 13
	or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31,
2001



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



---

434 Fayetteville Street Mall, Suite 600

Raleigh, North Carolina 27601


(919) 807-5600


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


of Registrants Principal Executive
Offices)




---

Indicate by check mark whether the registrant: 
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such
reports), x Yes   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                     



---






---



##### 



HIGH SPEED NET SOLUTIONS, INC.




FORM 10-Q/A





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 31, 2001 and 2000 (Unaudited) |          |    | 2 | 
|        
|        
|        
|        
|         |  |                                                                                        | Consolidated Statements of Shareholders
	Equity as of March 31, 2001 (Unaudited)                     |          |    | 3 | 
|        
|        
|        
|        
|         |  |                                                                                        | Consolidated Statements of Cash Flows for the
	Three Months Ended March 31, 2001 and 2000 (Unaudited) |          |    | 4 | 
|        
|        
|        
|        
|         |  |                                                                                        | Notes to Consolidated Financial Statements                                                            |          |    | 5 | 
|        
|        
|        
|        
|Item  2. |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |                                                                                                       |          | 17 |  
|        
|        
|        
|        
|Item  3. |  | Quantitative and Qualitative Disclosures About
	Market Risk                            |                                                                                                       |          | 25 |  
|        
|        
|        
|        
|Part II  |  | Other Information                                                                      |                                                                                                       |          | 26 |  
|        
|        
|        
|        
|Item  1. |  | Legal Proceedings                                                                      |                                                                                                       |          | 26 |  
|        
|        
|        
|        
|Item  2. |  | Changes in Securities and Use of Proceeds                                              |                                                                                                       |          | 27 |  
|        
|        
|        
|        
|Item  3. |  | Defaults Upon Senior Securities                                                        |                                                                                                       |          | 28 |  
|        
|        
|        
|        
|Item  4. |  | Submission of Matters to a Vote of Security
	Holders                                   |                                                                                                       |          | 28 |  
|        
|        
|        
|        
|Item  5. |  | Other Information                                                                      |                                                                                                       |          | 28 |  
|        
|        
|        
|        
|Item  6. |  | Exhibits and Reports on Form 8-K                                                       |                                                                                                       |          | 29 |  




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
|                                                |                                                                                                                                                                                              |                |            |                  
|                                                |                                                                                                                                                                                              | (Unaudited)    |            |                  
|                                                |                                                                                                                                                                                              | (Restated)     |            |                  
|                                               
|                                               
|                                               
|                                               
|Assets                                          |                                                                                                                                                                                              |                |            |                   |   |   |            |            
|                                               
|                                               
|                                               
|                                               
|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    |            
|                                                |                                                                                                                                                                                              |                |            |                   |   |   |            |            
|Total assets                                    |                                                                                                                                                                                              | $              | 1,973,161  |                   |   | $ | 1,406,271  |            
|                                                |                                                                                                                                                                                              |                |            |                   |   |   |            |            
|Liabilities and shareholders
	deficit          |                                                                                                                                                                                              |                |            |                   |   |   |            |            
|                                               
|                                               
|                                               
|                                               
|Payables to related parties                     |                                                                                                                                                                                              | $              | 435,815    |                   |   | $ |           |            
|                                               
|                                               
|                                               
|                                               
|Accounts payable and accrued expenses           |                                                                                                                                                                                              |                | 4,374,842  |                   |   |   | 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                       |                                                                                                                                                                                              |                | 6,363,461  |                   |   |   | 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 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                                                                                                                                                                   |                |            | 19,649,236        |   |   |            | 19,729,222  |  
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred compensation                                                                                                                                                                        |                |            | (690,826          | ) |   |            | (978,510    | )
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated deficit                                                                                                                                                                          |                |            | (26,027,838       | ) |   |            | (23,414,113 | )
|                                               
|                                               
|                                               
|                                               
|                                                | Treasury stock, at cost (38,500 shares)                                                                                                                                                      |                |            | (227,619          | ) |   |            |            |  
|                                                |                                                                                                                                                                                              |                |            |                   |   |   |            |            
|Total shareholders deficit                     |                                                                                                                                                                                              |                | (5,263,606 | )                 |   |   | (4,653,812 | )          
|                                                |                                                                                                                                                                                              |                |            |                   |   |   |            |            
|Total liabilities and shareholders deficit     |                                                                                                                                                                                              | $              | 1,973,161  |                   |   | $ | 1,406,271  |            
|                                                |                                                                                                                                                                                              |                |            |                   |   |   |            |            




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

1



---



##### 






High Speed Net Solutions, Inc.







Consolidated Statements of Operations (Unaudited)







|                                                                                           |                                                                               |                              |            |                |        |   |            |            |           | 
|------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------- | ---------------------------- | ---------- | -------------- | ------ | - | ---------- | ---------- | --------- | 
|                                                                                           |                                                                               |                             
|                                                                                           |                                                                               | Three Months Ended          
|                                                                                           |                                                                               |                             
|                                                                                           |                                                                               | March 31, 2001               |            | March 31, 2000
|                                                                                           |                                                                               |                              |            |               
|                                                                                           |                                                                               | (Restated)                   |            |               
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|Revenues:                                                                                  |                                                                               |                              |            |                |        |   |            |           
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                           | Contracts and license fees                                                    |                              | $          | 296,160        |        |   | $          | 279,775    |          
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|Costs of revenues:                                                                         |                                                                               |                              |            |                |        |   |            |           
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                           | Contracts and license fees                                                    |                              |            | 133,272        |        |   |            | 130,152    |          
|                                                                                           |                                                                               |                              |            |                |        |   |            |           
|Gross Profit                                                                               |                                                                               |                              | 162,888    |                |        |   | 149,623    |           
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|Selling, general and administrative expenses                                               |                                                                               |                              | 1,682,988  |                |        |   | 1,341,660  |           
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|Non-cash compensation                                                                      |                                                                               |                              | 714,456    |                |        |   |           |           
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|Research and development                                                                   |                                                                               |                              | 101,729    |                |        |   | 395,257    |           
|                                                                                           |                                                                               |                              |            |                |        |   |            |           
|Operating loss                                                                             |                                                                               |                              | (2,336,285 | )              |        |   | (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 | 
|                                                                                           |                                                                               |                              |            |                |        |   |            |           
|Income (loss) from continuing operations                                                   |                                                                               |                              | (2,339,650 | )              |        |   | 498,024    |           
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|Loss from operations of discontinued Rich Media
	Direct business                           |                                                                               |                              | (35,318    | )              |        |   |           |           
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|Loss on disposal of Rich Media Direct business                                             |                                                                               |                              | (215,500   | )              |        |   |           |           
|                                                                                           |                                                                               |                              |            |                |        |   |            |           
|Net income (loss)                                                                          |                                                                               | $                            | (2,590,468 | )              |        | $ | 498,024    |           
|                                                                                           |                                                                               |                              |            |                |        |   |            |           
|Net income (loss) applicable to common
	shareholders:                                      |                                                                               |                              |            |                |        |   |            |           
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                           | Net income (loss)                                                             |                              | $          | (2,590,468     | )      |   | $          | 498,024    |          
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                           | Preferred stock dividends                                                     |                              |            | (23,257        | )      |   |            |           |          
|                                                                                           |                                                                               |                              |            |                |        |   |            |           
|Net income (loss) applicable to common
	shareholders                                       |                                                                               | $                            | (2,613,725 | )              |        | $ | 498,024    |           
|                                                                                           |                                                                               |                              |            |                |        |   |            |           
|Per share amounts (basic and diluted):                                                     |                                                                               |                              |            |                |        |   |            |           
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                           | Income (loss) applicable to common
	shareholders from continuing operations   |                              | $          | (0.07          | )      |   | $          | 0.02       |          
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                           | Income (loss) applicable to common
	shareholders from discontinued operations |                              | $          | (0.01          | )      |   |            |           |          
|                                                                                           |                                                                               |                              |            |                |        |   |            |           
|Net income (loss)                                                                          |                                                                               | $                            | (0.08      | )              |        | $ | 0.02       |           
|                                                                                           |                                                                               |                              |            |                |        |   |            |           
|Weighted average shares of common stock
	outstanding                                       |                                                                               |                              | 20,817,205 |                |        |   | 9,561,860  |           
|                                                                                          
|                                                                                          
|                                                                                          
|                                                                                          
|Recapitalization resulting from the Summus, Ltd.
	asset acquisition                        |                                                                               |                              | 12,225,843 |                |        |   | 23,392,035 |           
|                                                                                           |                                                                               |                              |            |                |        |   |            |           
|Weighted average shares of common stock
	outstanding giving effect to the recapitalization |                                                                               |                              | 33,043,048 |                |        |   | 32,953,895 |           
|                                                                                           |                                                                               |                              |            |                |        |   |            |           







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




2



---



##### 



HIGH SPEED NET SOLUTIONS, INC.

Consolidated Statement of Shareholders Equity




|                              |                                                                     |                 |   |          |  |              |   |            |  |          |       |        |  |         |   |      |  |  |           |            |  |   |       |        |  |   |            |            |   |   |          |          |  
|----------------------------- | ------------------------------------------------------------------- | --------------- | - | -------- |  | ------------ | - | ---------- |  | -------- | ----- | ------ |  | ------- | - | ---- |  |  | --------- | ---------- |  | - | ----- | ------ |  | - | ---------- | ---------- | - | - | -------- | -------- | -
|                              |                                                                     |                 |   |          |  |              |   |            |  |         
|                              |                                                                     | Preferred Stock |   |          |  |              |   |            |  |         
|                              |                                                                     |                 |   |          |  |              |   |            |  |         
|                              |                                                                     |                 |   |          |  |              |   |            |  |         
|                              |                                                                     | Series A        |   | Series B |  | Common Stock |   | Additional |  |         
|                              |                                                                     |                 |   |          |  |              |   | Paid-In    |  | Deferred
|                              |                                                                     | Shares          |   | Amount   |  | Shares       |   | Amount     |  | Shares   |       | Amount |  | Capital |   | Comp
|                              |                                                                     |                 |   |          |  |              |   |            |  |          |       |        |  |         |   |     
|                             
|                             
|                             
|                             
|Balance at December  31, 2000 |                                                                     |                 |  |          |  | $            |  |            |  |          | 4,000 |        |  | $       | 4 |      |  |  | 9,584,938 |            |  | $ | 9,585 |        |  | $ | 19,729,222 |            |   | $ | (978,510 | )       
|                             
|                             
|                             
|                             
|                              | Recapitalization resulting from the Summus, Ltd.
	asset acquisition |                 |   | 2,000    |  |              |   | 2,000,000  |  |          |       | 2,000  |  |         |   | 2    |  |  |           | 23,392,035 |  |   |       | 23,392 |  |   |            | (3,734,020 | ) |   |          |         |  
|                             
|                             
|                             
|                             
|                              | Elimination of deferred revenue                                     |                 |   |         |  |              |   |           |  |          |       |       |  |         |   |     |  |  |           |           |  |   |       |        |  |   |            | 1,834,065  |   |   |          |         |  
|                              |                                                                     |                 |   |          |  |              |   |            |  |          |       |        |  |         |   |      |  |  |           |            |  |   |       |        |  |   |            |            |   |   |          |         
|                              | Common stock options granted for services                           |                 |   |         |  |              |   |           |  |          |       |       |  |         |   |     |  |  |           |           |  |   |       |       |  |   |            | 866,533    |   |   |          |         |  
|                             
|                             
|                             
|                             
|                              | Common stock sold for cash                                          |                 |   |         |  |              |   |           |  |          |       |       |  |         |   |     |  |  |           | 408,134    |  |   |       | 408    |  |   |            | 1,126,819  |   |   |          |         |  
|                             
|                             
|                             
|                             
|                              | Preferred stock dividends                                           |                 |   |         |  |              |   |           |  |          |       |       |  |         |   |     |  |  |           |           |  |   |       |       |  |   |            |           |   |   |          |         |  
|                             
|                             
|                             
|                             
|                              | Common stock issued in partial settlement of loss
	contingency      |                 |   |         |  |              |   |           |  |          |       |       |  |         |   |     |  |  |           | 50,000     |  |   |       | 50     |  |   |            | 39,033     |   |   |          |         |  
|                             
|                             
|                             
|                             
|                              | Amortization of deferred compensation                               |                 |   |         |  |              |   |           |  |          |       |       |  |         |   |     |  |  |           |           |  |   |       |       |  |   |            |           |   |   |          | 75,268   |  
|                             
|                             
|                             
|                             
|                              | Reversal of deferred compensation of forfeited
	options             |                 |   |         |  |              |   |           |  |          |       |       |  |         |   |     |  |  |           |           |  |   |       |       |  |   |            | (212,416   | ) |   |          | 212,416  |  
|                             
|                             
|                             
|                             
|                              | Net loss for the period                                             |                 |   |         |  |              |   |           |  |          |       |       |  |         |   |     |  |  |           |           |  |   |       |       |  |   |            |           |   |   |          |         |  
|                              |                                                                     |                 |   |          |  |              |   |            |  |          |       |        |  |         |   |      |  |  |           |            |  |   |       |        |  |   |            |            |   |   |          |         
|                              | Balance March 31, 2001 (Unaudited) (Restated)                       |                 |   | 2,000    |  |              | $ | 2,000,000  |  |          |       | 6,000  |  |         | $ | 6    |  |  |           | 33,435,107 |  |   | $     | 33,435 |  |   | $          | 19,649,236 |   |   | $        | (690,826 | )
|                              |                                                                     |                 |   |          |  |              |   |            |  |          |       |        |  |         |   |      |  |  |           |            |  |   |       |        |  |   |            |            |   |   |          |         

[Additional columns below]




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




|                              |                                                                     |             |             |             |   |               |   |          |   |   |            |            |  
|----------------------------- | ------------------------------------------------------------------- | ----------- | ----------- | ----------- | - | ------------- | - | -------- | - | - | ---------- | ---------- | -
|                              |                                                                     |             |             |             |   | Total        
|                              |                                                                     | Accumulated |             | Treasury    |   | Shareholders
|                              |                                                                     | Deficit     |             | Stock       |   | Equity       
|                              |                                                                     |             |             |             |   |              
|                             
|                             
|                             
|                             
|Balance at December  31, 2000 |                                                                     | $           | (23,414,113 | )           |   | $             |  |          |   | $ | (4,653,812 | )         
|                             
|                             
|                             
|                             
|                              | Recapitalization resulting from the Summus, Ltd.
	asset acquisition |             |             |            |   |               |   | (227,619 | ) |   |            | (1,938,245 | )
|                             
|                             
|                             
|                             
|                              | Elimination of deferred revenue                                     |             |             |            |   |               |   |          |   |   |            | 1,834,065  |  
|                              |                                                                     |             |             |             |   |               |   |          |   |   |            |           
|                              | Common stock options granted for services                           |             |             |            |   |               |   |         |   |   |            | 866,533    |  
|                             
|                             
|                             
|                             
|                              | Common stock sold for cash                                          |             |             |            |   |               |   |         |   |   |            | 1,127,227  |  
|                             
|                             
|                             
|                             
|                              | Preferred stock dividends                                           |             |             | (23,257     | ) |               |   |         |   |   |            | (23,257    | )
|                             
|                             
|                             
|                             
|                              | Common stock issued in partial settlement of loss
	contingency      |             |             |            |   |               |   |         |   |   |            | 39,083     |  
|                             
|                             
|                             
|                             
|                              | Amortization of deferred compensation                               |             |             |            |   |               |   |         |   |   |            | 75,268     |  
|                             
|                             
|                             
|                             
|                              | Reversal of deferred compensation of forfeited
	options             |             |             |            |   |               |   |         |   |   |            |           |  
|                             
|                             
|                             
|                             
|                              | Net loss for the period                                             |             |             | (2,590,468  | ) |               |   |         |   |   |            | (2,590,468 | )
|                              |                                                                     |             |             |             |   |               |   |          |   |   |            |           
|                              | Balance March 31, 2001 (Unaudited) (Restated)                       |             | $           | (26,027,838 | ) |               | $ | (227,619 | ) |   | $          | (5,263,606 | )
|                              |                                                                     |             |             |             |   |               |   |          |   |   |            |           




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

3



---



##### 



HIGH SPEED NET SOLUTIONS, INC.

Consolidated Statements of Cash Flows (Unaudited)




|                                                                                                                           |                                               |                    |            |                |   |   |            |            |  
|-------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | ------------------ | ---------- | -------------- | - | - | ---------- | ---------- | -
|                                                                                                                           |                                               |                   
|                                                                                                                           |                                               | Three Months Ended
|                                                                                                                           |                                               |                   
|                                                                                                                           |                                               | March 31, 2001     |            | March 31, 2000
|                                                                                                                           |                                               |                    |            |               
|                                                                                                                           |                                               | Restated           |            |               
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Operating activities                                                                                                       |                                               |                    |            |                |   |   |            |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Loss from continuing operations                                                                                            |                                               | $                  | (2,339,650 | )              |   | $ | 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     |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Changes in operating assets and liabilities, net
	of acquisition between High Speed Net Solutions, Inc. and
	Summus, Ltd.: |                                               |                    |            |                |   |   |            |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accounts receivable                           |                    |            | (195,179       | ) |   |            | 58,826     |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Other current assets                          |                    |            | (92,633        | ) |   |            | (75,531    | )
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accounts payable and accrued expenses         |                    |            | 282,245        |   |   |            | 34,342     |  
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                           | Accrued salaries and related costs            |                    |            | 114,468        |   |   |            | 78,831     |  
|                                                                                                                           |                                               |                    |            |                |   |   |            |           
|Net cash used in continuing operations                                                                                     |                                               |                    | (1,451,695 | )              |   |   |           |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Net cash used in discontinued operations                                                                                   |                                               |                    | (7,253     | )              |   |   |           |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Net cash used in operating activities                                                                                      |                                               |                    | (1,458,948 | )              |   |   | (1,408,386 | )         
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Investing activities                                                                                                       |                                               |                    |            |                |   |   |            |           
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|Proceeds from sale of investment in equity
	investee                                                                       |                                               |                    |           |                |   |   | 3,857,500  |           
|                                                                                                                           |                                               |                    |            |                |   |   |            |           
|Net cash provided by investing activities                                                                                  |                                               |                    |            |                |   |   | 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




The condensed consolidated financial statements of High Speed
Net Solutions, Inc. (HSNS or the
Company) and its subsidiaries included in this
quarterly report on Form 10-Q are unaudited. In the opinion
of management, such financial statements contain all adjustments
(consisting of normal recurring adjustments) necessary to
present fairly the financial position of HSNS and its
subsidiaries as of March 31, 2001, the results of
operations for the three month periods ended March 31, 2000
and 2001, shareholders equity as of March 31, 2001,
and cash flows for the three month periods ended March 31,
2000 and 2001.







As disclosed in Note 2 below, effective February 16, 2001,
HSNS acquired all the assets and operations of Summus, Ltd.
under the terms of an asset purchase agreement, dated
October 30, 2000, as amended (the Asset Purchase
Agreement). In legal form, the transaction was effected by
HSNS issuing shares of its common and Series B preferred
stock, and other equity interests, in exchange for the net
assets of Summus, Ltd. As explained more fully in Note 2,
the transaction has been accounted for as a capital transaction,
accompanied by a recapitalization. In view of the accounting
associated with the transaction, 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 condensed consolidated balance sheet of the Company as
of December 31, 2000 has been derived from the audited
balance sheet of Summus, Ltd. as of that date.







The accompanying unaudited condensed consolidated financial
statements as of and for the three months ended March 31,
2001, have been restated to reflect a change in the accounting
for HSNSs acquisition of the assets and operations of
Summus, Ltd. Initially, the transaction was recorded as a
reverse acquisition in which Summus, Ltd. was treated as the
accounting acquirer; HSNS, the acquired corporation. The initial
accounting for the transaction as a reverse acquisition resulted
in the recording of goodwill in the amount of
$27.5 million, as well as amortization of the goodwill in
the approximate amount of $1.1 million during the three
month period ended March 31, 2001. Upon further analysis,
the Company has determined that it is more appropriate to
account for the transaction as a capital transaction,
accompanied by a recapitalization. See Note 2 to the financial
statements for a further discussion of the transaction.







In connection with the reissuance of the Companys
unaudited condensed consolidated financial statements for the
three month period ended March 31, 2001, the Company will
record the estimated loss on disposal of its Rich Media Direct
business of $215,500 as part of its discontinued operations
accounting.







In connection with accounting for the Summus, Ltd. asset
acquisition as a capital transaction, the Company has charged to
equity (i.e., additional paid-in capital) transaction costs to
the extent of HSNSs cash at the time of the transaction.
Initially, these costs were charged to expense.




5



---



##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)



1.  Basis of Presentation (continued)





The following table summarizes the effect of the restatement
adjustments on the Companys balance sheet and statement of
operations as of and for the three month period ended March 2001:







|                                    |  |               |             |  
|----------------------------------- |  | ------------- | ----------- | -
|                                    |  | Balance Sheet
|                                   
|                                   
|                                   
|                                   
|Total assets as previously reported |  | $             | 28,324,391  |  
|                                   
|                                   
|                                   
|                                   
|Elimination of net goodwill         |  |               | (26,351,230 | )
|                                   
|                                   
|                                   
|                                   
|Total assets as restated            |  | $             | 1,973,161   |  







|                                                              |  |                         |            |  
|------------------------------------------------------------- |  | ----------------------- | ---------- | -
|                                                              |  | Statement of Operations
|                                                             
|                                                             
|                                                             
|                                                             
|Net loss as previously reported                               |  | $                       | (3,602,020 | )
|                                                             
|                                                             
|                                                             
|                                                             
|Elimination of goodwill amortization                          |  |                         | 1,144,741  |  
|                                                             
|                                                             
|                                                             
|                                                             
|Transaction costs reclassified to Additional
	Paid-in Capital |  |                         | 82,311     |  
|                                                              |  |                         |            |  
|Loss on disposal of Rich Media Direct business                |  |                         | (215,500   | )
|                                                             
|                                                             
|                                                             
|                                                             
|Net loss as restated                                          |  | $                       | (2,590,468 | )
|                                                              |  |                         |            |  
|Net loss per share as previously reported                     |  | $                       | (0.17      | )
|                                                              |  |                         |            |  
|Net loss per share as restated                                |  | $                       | (0.08      | )
|                                                              |  |                         |            |  







The accompanying unaudited condensed consolidated financial
statements as of and for the three months ended March 31,
2001 have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial
information and with 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, as amended. The
Form 10-K, as amended, is available through the Internet in
the SECs EDGAR database at www.sec.gov or from the Company
upon request.







The accompanying unaudited condensed consolidated financial
statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the
financial statements at March 31, 2001, the Company had an
accumulated deficit of $26,027,838 and a deficiency in working
capital. Additionally, for the three months ended March 31,
2001, the Company incurred a significant net loss and
experienced negative cash flows from operations. These factors,
among others, indicate the Company may be unable to continue as
a going concern for a reasonable period of time. As a result of
these matters, the Companys auditors have issued their
opinion on the December 31, 2000 financial statements
including a going concern explanatory paragraph. The financial
statements presented herein do not include any adjustments
relating to the recoverability of assets and classification of
liabilities that might be necessary should the Company be unable
to continue as a going concern.




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




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




6



---



##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)




2.  Asset Acquisition/Recapitalization







On February 16, 2001, HSNS acquired all the assets and
operations of Summus, Ltd. under the terms of the Asset Purchase
Agreement.







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






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Summus, Ltd. already had a substantial equity interest in HSNS.
	In fact, the transaction contemplated by the Asset Purchase
	Agreement provided both companies the opportunity to capitalize
	on investments they previously made in each other. Prior to the
	closing of the transaction, Summus, Ltd. owned approximately
	27.6% of HSNS on a fully-diluted basis and HSNS owned
	approximately 14% of Summus, Ltd.
|
|
|
| |  | HSNS had success in raising equity capital through private
	placements or other types of fund-raising, notwithstanding its
	own limited financial resources and unprofitable operations.
	This caused Summus, Ltd.s management to believe that the
	Company, following the closing of the transaction, would be able
	to continue to have success in raising capital.                                                
|
|
|
| |  | HSNS was in the process of seeking to register its common stock
	under Section  12 of the Securities Exchange Act of 1934
	and then seeking to have such stock made eligible for quotation
	on the OTC Bulletin Board. This offered potential for future
	liquidity in such stock.                                                                                                                                    
|
|
|
| |  | The transaction offered the potential to create more growth
	opportunities for the Company based on the expected enhanced
	access to capital resources.                                                                                                                                                                                                                                                               
|




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







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







In legal form, the transaction was effected by HSNS issuing
shares of its common and Series B preferred stock, and
other equity interests, in exchange for the net assets of
Summus, Ltd. The consideration paid by HSNS to acquire the
assets of Summus, Ltd. is described below:









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | HSNS issued to Summus, Ltd. for distribution to the shareholders
	of Summus, Ltd. a total of 20,218,733 shares of HSNS common
	stock and 6,000 shares of Series B preferred stock. As a
	shareholder of Summus, Ltd., HSNS was entitled to receive
	3,604,445 of the total number of shares of common stock issued
	in the transaction. However, under the terms of the Asset
	Purchase Agreement these shares were canceled, resulting in a
	net issuance of 16,614,288 shares of HSNS common stock. In
	addition, the Asset Purchase Agreement provided for the
	cancellation of 8,217,781 shares of HSNS common stock owned by
	Summus, Ltd. prior to the parties execution of the
	agreement.




7



---



##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)






2.  Asset Acquisition/Recapitalization
(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).
|




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







Initially, the transaction was recorded as a business
combination under the guidance of Accounting Principles Board
Opinion No. 16 (APB 16), Business Combinations
because, among other reasons:






| |   |                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------
|
| |  | HSNS acquired all the operating assets and liabilities of
	Summus, Ltd.;                                                             
|
|
|
| |  | each of HSNS and Summus, Ltd. were operating entities at the
	time of the closing of the transaction; and                            
|
|
|
| |  | Summus, Ltd. was (and is) to be liquidated following its
	distribution of the equity securities of HSNS received in the
	transaction.
|




Under APB 16, the transaction was also accounted for as a
reverse acquisition in which Summus, Ltd. was
treated as the accounting acquirer; HSNS, the acquired
corporation. Summus, Ltd. was considered the accounting acquirer
in the transaction because Summus, Ltd. received shares of
HSNSs common stock and other equity securities, to be
distributed to the Summus, Ltd. shareholders, representing the
largest portion of the voting interests in HSNS.







At the time the determination was made to account for the
transaction as a business combination, the Company considered an
alternative accounting treatment: accounting for the transaction
as a capital transaction, accompanied by a recapitalization. The
more typical type of transaction for which this accounting
treatment is deemed appropriate is the merger of a private
operating company into a non-operating public shell corporation
with nominal net assets, with the owners and management of the
private company having actual or effective operating control of
the combined company after the transaction. The Company did not
believe this was the most appropriate accounting treatment
because HSNS (including its wholly-owned subsidiary, Douglas
May & Co.) was an operating company, not a
non-operating public shell corporation.







The Company has since reassessed the appropriateness of
accounting for the transaction as a capital transaction,
accompanied by a recapitalization, in view of the particular
facts and circumstances of this transaction, including:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Summus, Ltd.s management evaluated the operating
	activities of HSNS, which, at the time the Asset Purchase
	Agreement was entered into, were primarily conducted through
	HSNSs wholly-owned subsidiary, Douglas May & Co.
	However, the operating activities of HSNS, from Summus,
	Ltd.s perspective, were an incidental consideration in its
	decision to enter into and consummate the transaction.
|
|
|
| |  | As noted above, Summus, Ltd.s primary purpose in entering
	into the transaction was to provide a vehicle for raising
	additional capital through the acquisition of a majority
	interest in an entity (i.e., HSNS) whose common stock is
	publicly traded.                                                                                                                                                
|

8



---



##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)






2.  Asset Acquisition/Recapitalization
(continued)








Considering these factors and the result of discussions with the
staff of Securities and Exchange Commission, the Company has
concluded that HSNSs status as an operating company does
not preclude accounting for the transaction as a capital
transaction, accompanied by a recapitalization. Accordingly, the
Company has determined that it is more appropriate to account
for the transaction in this manner.







By accounting for the transaction as a capital transaction, the
transaction is effectively viewed as the issuance of stock by
Summus, Ltd. in exchange for the net monetary assets of HSNS,
accompanied by a recapitalization of Summus, Ltd. The accounting
for the transaction is quite similar to that resulting from a
reverse acquisition, except that no goodwill or other intangible
assets are recorded.







As a result of the transaction, the historical financial
statements of Summus, Ltd., for accounting purposes, are deemed
to be those of the Company. The equity accounts of Summus, Ltd.
have been adjusted for a recapitalization to reflect the equity
structure of HSNS, the legal acquirer. Specifically:






| |   |                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | the historical shareholders equity of Summus, Ltd. prior
	to the transaction has been restated for the equivalent number
	of shares of HSNS common and Series B preferred stock, and
	other equity interests, received in the transaction after giving
	effect to any difference in par value of HSNSs and Summus,
	Ltd.s common stock, with an offset to additional paid-in
	capital;
|
|
|
| |  | the accumulated deficit of Summus, Ltd. has been carried forward
	after the transaction; and                                                                                                                                                                                                                                                                                             
|
|
|
| |  | loss per share for periods prior to the transaction have been
	restated to reflect the number of equivalent shares received by
	Summus, Ltd. in the transaction.                                                                                                                                                                                                                         
|




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







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







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




9



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##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)

3.  Significant Accounting Policies

Principles of
Consolidation




The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Douglas May &
Company, Inc. Significant intercompany accounts and transactions
have been eliminated in consolidation. The results of operations
of Douglas May & Company, Inc. have been presented as
discontinued operations for the three months ended
March 31, 2001 (see Note 8).




Use of Estimates

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

Equipment and
Furniture

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

Stock-Based
Compensation

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

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




Non-cash compensation related to the issuance of fully-vested
stock options with exercise prices below the fair market value
of the underlying stock plus the amortization of deferred
compensation arising from stock option issuances totaled
$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
(SFAS) No. 109, Accounting for Income
Taxes. Under SFAS 109, deferred tax assets or
liabilities are computed based upon the difference between the
financial statement and income tax basis of assets and
liabilities using the enacted marginal tax rate applicable when
the related asset or liability is expected to be realized or
settled. Deferred income tax expenses or benefits are based on
the changes in the asset or liability from period to period. If
available evidence suggests that it is more likely than not that
some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the
deferred tax assets to the amount that is more likely than not
to be realized. Future changes in such valuation allowance would
be included in the provision for deferred income taxes in the
period of change.

10



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##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)



3.  Significant Accounting Policies (continued)


Revenue Recognition

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

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

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

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




Management has structured the Companys internal
organization as one business segment from which all operating
decisions and operating results are made and evaluated.




Loss Per Share

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

Software Development
Costs

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

Valuation of Long-Lived
Assets




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




New Accounting
Pronouncements

In June 1998, the Financial Accounting Standards Board
issued Statement No. 133 Accounting for Derivative
Instruments and Hedging Activities (SFAS
133), which is required to be adopted for fiscal years
beginning after June 15, 2000. SFAS 133 establishes
accounting and reporting standards for derivative instruments
including certain derivative instruments embedded in other
contracts and for hedging activities. The Company adopted this
statement in the first quarter of 2001. Because of the
Companys minimal use of

11



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##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)



3.  Significant Accounting Policies (continued)


derivatives, management does not anticipate that the adoption of
this statement will have a significant effect on the operations
or financial position of the Company.




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

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

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




On February 16, 2001, HSNS acquired all the assets and
operations of Summus, Ltd. under the terms of the Asset Purchase
Agreement. See Note 2. As of the closing date of the
transaction, 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




12



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##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)



4.  Deferred Software Royalty Revenue
(continued)





closing of the transaction, 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 was reclassified to additional
paid-in capital as of the closing of the transaction.




5.  Common Stock




Subsequent to HSNSs acquisition of the assets and
operations of Summus, Ltd. (see Note 2), HSNS has 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.




6.  Preferred Stock

Series A Preferred
Stock




The Company has 2,000 shares of Series A preferred stock
outstanding at June 30, 2001. The holders of the Series A
preferred stock are entitled to receive cumulative cash
dividends at a rate of 8% per annum of the initial liquidation
preference of $1,000 per share (the Liquidation
Preference). The Company, at its election, can provide for
the payment of dividends on the Series A preferred stock
through the issuance of additional shares of Series A
preferred stock having an aggregate initial liquidation
preference equal to the amount of cash dividends otherwise
payable. Dividends are cumulative from the date of issuance and
are payable, when, as and if declared by the Board of Directors,
on March 31 and September 30 of each year, commencing
on September 30, 2000. As of 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 the Companys charter is amended to
	increase the number of authorized shares of common stock to at
	least 60 million shares. Until then, the Series B
	preferred stock will not be convertible. Under the terms of the
	Asset Purchase Agreement, HSNS is required to seek shareholder
	approval to amend its charter to increase the number of
	authorized shares of common stock so that there will be
	sufficient shares of common stock available and reserved for
	issuance upon conversion of the Series B preferred stock.
|
| |  | is entitled to receive dividends and participate in
	distributions upon liquidation, pro rata, with the common stock
	on an as-converted basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

13



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##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)



6.  Preferred Stock (continued)




| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | will vote equally with the common stock on an as-converted basis.

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

7.  Settlements of Contractual Disputes and
Litigation

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

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



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Company issued an aggregate of 475,000 shares of common
	stock to Mr.  Dunavant and his counsel which were valued at
	$352,688. Such amount was determined by applying a discount to
	the traded value of the Companys stock on the date of the
	revised settlement;                                                                                                                                                                                                                                                                                                                         
|
| |  | Mr. Dunavant agreed to certain resale restrictions with
	respect to all but 350,000 shares of common stock held by him
	(an aggregate of 2,275,000 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 advised
	the Company (as counsel has) that it is in the best interests of
	the Company and its shareholders to delay the filing of such
	registration statement;
|
| |  | Mr. Dunavant, his spouse and his counsel agreed, for a
	two-year period from the date of the agreements, to vote the
	shares held by them in favor of and for the election of Board
	nominees by the Company and to vote such shares in a manner
	consistent with the recommendation of the Board with respect to
	certain extraordinary transactions (such as a tender offer, an
	exchange offer, merger or other business combination); and                                                                                                                                                     
|
| |  | the Company, on the one hand, and Mr. Dunavant and his
	counsel, on the other, executed mutual general releases with
	respect to any and all claims against each other, except with
	respect to the obligations and liabilities under such agreements.                                                                                                                                                                                                                                                                                                                                            

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



| |   |                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | becoming timely in its reporting obligations under the
	Securities Exchange Act of 1934, as amended (at the time the
	Companys quarterly report on Form 10-Q for the first
	quarter of 2001, to have been filed on or before May 15,
	2001, had not yet been filed); and

14



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##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)



| |                                                                    
| | -------------------------------------------------------------------
| | 7.  Settlements of Contractual Disputes and
	Litigation (continued)



| |   |                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | clearing its Form 10 at the earliest opportunity possible,
	since the clearance of the Form 10 is a prerequisite to
	having the Companys common stock made eligible for
	quotation on the OTC Bulletin Board and thereby potentially
	opening up greater opportunities for the Company to raise
	capital.

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




8.  Subsequent Event







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







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







On September 19, 2001, the Company and Douglas May entered
into a stock purchase agreement under which the Company sold and
transferred to Mr. May all of the Companys equity
interest in Douglas May & Co. and related rich media
direct assets. Under the terms of a share acquisition agreement,
the Company acquired all of the issued and outstanding shares of
capital stock of Douglas May & Co. from Mr. May in
June 2000. The date of the transaction, September 19,
2001, represents the measurement date, as defined by Accounting
Principles Board Opinion No. 30 (APB 30), for
the disposition of the Companys rich media direct
business. Although the measurement date of the disposition
occurred in the third quarter of 2001, the results of operations
of Douglas May & Co. have been presented as
discontinued operations in the Companys statement of
operations for the three months ended March 31, 2001 in
accordance with the guidance of APB 30. For the period
February 16, 2001 through March 31, 2001, the
operations of Douglas May & Co. reflected approximately
$157,639 in revenues and a net loss of $35,318. The carrying
value of the assets of Douglas May & Co. was
approximately $81,000 at March 31, 2001. The Company has
recorded a loss of $215,500 on this disposition for the three
months ended March 31, 2001.




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



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

15



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##### 



HIGH SPEED NET SOLUTIONS, INC.


Notes to Consolidated Financial Statements 
(Continued)






8.  Subsequent Event (continued)





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

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

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




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




16



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##### 



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

Forward-Looking Statements

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



| |   |                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a lack of sufficient financial resources to implement the
        Companys business plan, which has resulted in the
        Companys receiving a going concern opinion
        from its independent auditors with respect to its audited
        financial statements as of and for the year ended December 
        31, 2000;
|
| |  | our ability to generate sufficient working capital to meet our
        operating requirements;                                                                                                                                                                                                                                    
|
| |  | our ability to develop and enter into strategic relationships
        with wireless service providers, semiconductor and device
        designers, wireless device manufacturers and content providers;                                                                                                                           
|
| |  | timely deployment by wireless service providers, semiconductor
        and device designers, 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.                                                                                                                                                                                                                                                                     

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, High Speed Net Solutions, Inc. d/b/a
Summus (HSNS or the Company) acquired
all the assets and operations of Summus, Ltd. under the terms of
an asset purchase agreement, dated October 30, 2000, as
amended. In legal form, the transaction was effected by HSNS
issuing shares of its common and Series B preferred stock,
and other equity interests, in exchange for the net assets of
Summus, Ltd.







We initially accounted for the transaction as a business
combination and a reverse acquisition under the
guidance of Accounting Principles Board Opinion No. 16
Business Combinations. Because the transaction was
accounted for as a reverse acquisition, Summus, Ltd. was
considered the accounting acquirer




17



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##### 














As a result of the transaction, the historical financial
statements of Summus, Ltd. are, for accounting purposes, deemed
to be those of the Company.







The HSNS Acquisition of
Summus, Ltd.s Assets and Operations







On February 16, 2001, HSNS acquired all of the assets and
operations of Summus, Ltd. under the terms of an asset purchase
agreement, dated October 30, 2000, as amended (the
Asset Purchase Agreement).







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






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




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




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




Prior to the closing of the transaction, Summus, Ltd. was the
largest shareholder of HSNS. It owned 8,217,781 shares (33.2%)
of HSNSs common stock, approximately 27.6% on a fully
diluted basis. Immediately after the closing, Summus,
Ltd.s ownership interest in HSNS increased to
20,593,352 shares (55.5%) of HSNS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
HSNSs securities received in the transaction to the
shareholders of Summus, Ltd. On March 13, 2001, Summus,
Ltd. distributed certain of the shares of HSNSs common
stock received in the




18



---



##### 








In legal form, the transaction was effected by HSNS issuing
shares of its common stock and Series B preferred stock,
and other equity interests, in exchange for the net assets of
Summus, Ltd. The consideration paid by HSNS to acquire the
assets of Summus, Ltd. is described below:






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




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







Initially, the transaction was recorded as a business
combination under the guidance of Accounting Principles Board
Opinion No. 16 (APB 16), Business Combinations
because, among other reasons:






| |   |                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------
|
| |  | HSNS acquired all the operating assets and liabilities of
	Summus, Ltd.;                                                             
|
|
|
| |  | each of HSNS and Summus, Ltd. were operating entities at the
	time of the closing of the transaction; and                            
|
|
|
| |  | Summus, Ltd. was (and is) to be liquidated following its
	distribution of the equity securities of HSNS received in the
	transaction.
|




Under APB 16, the transaction was also accounted for as a
reverse acquisition in which Summus, Ltd. was
treated as the accounting acquirer; HSNS, the acquired
corporation. Summus, Ltd. was considered the accounting acquirer
in the transaction because Summus, Ltd. received shares of
HSNSs common stock and other equity securities, to be
distributed to the Summus, Ltd. shareholders, representing the
largest portion of the voting interests in HSNS.







At the time the determination was made to account for the
transaction as a business combination, we considered an
alternative accounting treatment: accounting for the transaction
as a capital transaction, accompanied by a recapitalization. The
more typical type of transaction for which this accounting
treatment is deemed appropriate is the merger of a private
operating company into a non-operating public shell corporation
with nominal net assets, with the owners and management of the
private company having actual or effective operating control of
the combined company after the transaction. We did not believe
this was the most appropriate accounting treatment because HSNS
(including its wholly-owned subsidiary, Douglas May & Co.)
was an operating company, not a non-operating public shell
corporation.




19



---



##### 






We have since reassessed the appropriateness of accounting for
the transaction as a capital transaction, accompanied by a
recapitalization, in view of the particular facts and
circumstances of this transaction, including:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Summus, Ltd.s management evaluated the operating
	activities of HSNS, which, at the time the Asset Purchase
	Agreement was entered into, were primarily conducted through
	HSNSs wholly-owned subsidiary, Douglas May & Co.
	However, the operating activities of HSNS, from Summus,
	Ltd.s perspective, were an incidental consideration in its
	decision to enter into and consummate the transaction.
|
|
|
| |  | As noted above, Summus, Ltd.s primary purpose in entering
	into the transaction was to provide a vehicle for raising
	additional capital through the acquisition of a majority
	interest in an entity (i.e., HSNS) whose common stock is
	publicly traded.                                                                                                                                                
|




Considering these factors and the result of discussions with the
staff of Securities and Exchange Commission, we have concluded
that HSNSs status as an operating company does not
preclude accounting for the transaction as a capital
transaction, accompanied by a recapitalization. Accordingly, we
have determined that it is more appropriate to account for the
transaction in this manner.







By accounting for the transaction as a capital transaction, the
transaction is effectively viewed as the issuance of stock by
Summus, Ltd. in exchange for the net monetary assets of HSNS,
accompanied by a recapitalization of Summus, Ltd. The accounting
for the transaction is quite similar to that resulting from a
reverse acquisition, except that no goodwill or other intangible
assets are recorded.







Our change in the accounting for the transaction dictates a
restatement of our financial statements as of and for the three
month period ended March 31, 2001, to eliminate both the
goodwill originally recorded in the transaction (in the amount
of $27.5 million), and the amortization of the goodwill
during the three months ended March 31, 2001 (in the amount
of $1.1 million).







As a result of the transaction, the historical financial
statements of Summus, Ltd., for accounting purposes, are deemed
to be those of the Company. The equity accounts of Summus, Ltd.
have been adjusted for a recapitalization to reflect the equity
structure of HSNS, the legal acquirer. Specifically:






| |   |                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | the historical shareholders equity of Summus, Ltd. prior
	to the transaction has been restated for the equivalent number
	of shares of HSNS common and Series B preferred stock, and
	other equity interests, received in the transaction after giving
	effect to any difference in par value of HSNSs and Summus,
	Ltd.s common stock, with an offset to additional paid-in
	capital;
|
|
|
| |  | the accumulated deficit of Summus, Ltd. has been carried forward
	after the transaction; and                                                                                                                                                                                                                                                                                             
|
|
|
| |  | loss per share for periods prior to the transaction have been
	restated to reflect the number of equivalent shares received by
	Summus, Ltd. in the transaction.                                                                                                                                                                                                                         
|

Divestiture of Rich Media
Direct Business




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







On September 19, 2001, the Company and Douglas May entered
into a stock purchase agreement under which the Company sold and
transferred to Mr. May all of the Companys equity
interest in Douglas May & Co. and related rich media
direct assets. The date of the transaction, September 19,
2001, represents the measurement date, as defined by Accounting
Principles Board Opinion No. 30 (APB 30), for
the




20



---



##### 














Under the terms of the June 2000 share acquisition
agreement, HSNS acquired all of the issued and outstanding
shares of capital stock of Douglas May & Co. from
Mr. May on July 10, 2000. As partial consideration for
the sale of Douglas May & Co. back to Mr. May, the
Company has been released from its obligations with respect to
two allotments of shares of HSNSs common stock issued to
Mr. May under the terms of the share acquisition agreement,
specifically:






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




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







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







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







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




The Companys Current
Business Focus

The core of the Companys business plan is to focus on the
emerging wireless and mobile 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.

21



---



##### 



Our strategy is to continue to work toward commercial release of
our BlueFuel product line currently under 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
revenue-generating 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
adapting or porting BlueFuel to the Qualcomm
BREW wireless platform. This effort is expected to consume a
significant amount of the Companys technical and business
development resources through the remainder of 2001. In parallel
with this effort, we are dedicating additional resources to
define, develop and execute a beta/field trial for
BlueFuel Video (our video compression software for
multimedia applications) to support our internal development
efforts and begin to develop market awareness for
BlueFuel. This beta/field trial is planned for the fourth
quarter of 2001.







The initial porting effort to Qualcomms BREW platform
should provide the foundation for future ports, with the
knowledge gained by porting our technology to the BREW platform
providing an increased knowledge base that can be used across
multiple wireless operating systems. The experience gained
should help reduce the time to market when porting to the
platforms of other industry participants. Regardless of our
porting efforts, however, we will still have to secure contracts
with carriers, content providers and device manufacturers to
generate revenue.




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

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




Management has structured the Companys internal
organization as one business segment from which all operating
decisions and operating results are made and evaluated.




22



---



##### 



Results of Operations

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




Revenues. Total revenues increased $16,385 to $296,160 in
the three months ended March 31, 2001, up 5.86% from
$279,775 in the three months ended March 31, 2000. The
increase in these revenues was primarily due to the increase in
providing contract services.







Costs of Revenues. Total costs of revenues increased
$3,120 to $133,272 in the three months ended March 31,
2001, up 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 $13,265, or 8.9%, to $162,888 for
the three months ended March 31, 2001, compared with
$149,623 for the three months ended March 31, 2000. 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
$1,682,988, compared to $1,341,660 for three months ended
March 31, 2000. The increase in selling, general and
administrative expenses resulted primarily from the
Summus, Ltd. asset acquisition, 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,

23



---



##### 








Loss from Discontinued Rich Media Direct Operations. The
Company recorded a loss from operations related to its
rich media direct business of $35,318, as well as a
loss on disposal of this business segment of $215,500 for the
three months ended March 31, 2001. The Companys
divestiture of this business includes the sale of Douglas May
& Co. to Mr. May on September 19, 2001.




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 Summus, Ltd. asset acquisition 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 $1,458,948 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 Summus, Ltd. asset acquisition which was consummated on
February 16, 2001.







Cash Flow from Investing Activities. Net cash provided by
investing activities was of $3,857,500 in the three months ended
March 31, 2000, 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;
|
| |  | $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.

24



---



##### 





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

25



---



##### 



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 Company has
not recorded a loss contingency accrual relating to this
complaint because; in managements opinion, it is not
probable that a loss contingency exists and an amount cannot be
reasonably estimated.




The ENELF Litigation




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




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

26



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##### 





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
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.                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | 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.

27



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##### 



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 Summus, Ltd. asset acquisition, 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.

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.

28



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##### 



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)                                                                                                                       
|        | 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)                                                                     

29



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##### 



|        |      |             |  |                                                                                                                                                                                                                                   
|------- | ---- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      | Exhibit    
|Number  |      | Description
|        |      |            
|        | 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.

(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.

30



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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.                                 
|                      
|Date: October 31, 2001 |  | By: /s/ BJORN JAWERTHBjorn JawerthCo-Chief Executive Officer   
|                      
|Date: October 31, 2001 |  | By: /s/ ROBERT S. LOWREYRobert S. LowreyChief Financial Officer




31



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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)                                                                                         
| | 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)                                                                                             






32