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                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549
                                 ____________

                                  FORM 10-KSB
                 Annual Report Pursuant to Section 13 or 15(d)
                                      of
                      the Securities Exchange Act of 1934
                                 ____________

For the Fiscal Year Ended May 31, 2000     Commission file number   33-23430-D
                                                                 --------------

                               NETCOMMERCE, INC.

                     (formerly, Virtual Enterprises, Inc.)
            (Exact name of registrant as specified in its charter)

              Nevada                                       84-1091271
              ------                                       ----------
(State of other jurisdiction of corporation    (IRS Employer Identification No.)
or organization)

                    1900 Westridge Dr., Irving, Texas 75038
                   ----------------------------------------
                   (Address of Principal Executive Offices)

  Registrant's telephone number, including area code: (972) 465-5900
                          ____________

  Securities registered pursuant to Section 12(b) of the Act:  None

  Securities registered pursuant to Section 12(g) of the Act:  None

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), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No
                                       ---

          Check if disclosure of delinquent filers in response to item 405 of
Regulation S-B is not contained in this form and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

          Issuer's revenues for most recent fiscal year: $974,052

          State the aggregate market value of voting stock held by nonaffiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: As of September 8, 2000, $10,206,011

          State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of September 8, 2000,
there were 32,270,237 shares of common stock outstanding.
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                                 TABLE OF CONTENTS

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                                           PART I

Item 1.     Business...............................................................   1

Item 2.     Properties.............................................................  20

Item 3.     Legal Proceedings......................................................  20

Item 4.     Submission of Matters to a Vote of Security Holders....................  20

                                           PART II

Item 5.     Market for Company's Common Equity and Related Stockholder matters.....  20

Item 6.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations..............................................  21

Item 7.     Financial Statements...................................................  23

Item 8.     Change in and Disagreements With Accountants...........................  39

                                           PART III

Item 9.     Directors and Executive Officers.......................................  39

Item 10.    Executive Compensation.................................................  41

Item 11.    Security Ownership of Certain Beneficial Owners and Management.........  42

Item 12.    Certain Relationships and Related Transactions.........................  43

                                           PART IV

Item 13.    Exhibits and Reports on Form 8-K.......................................  43

            Index to Consolidated Financial Statements and Schedules...............  23
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               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      Some of the statements in this Annual Report on Form 10-K, constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. These
factors include those listed under Part 1, Item I, "Business -- Risk Factors".

      Forward-looking statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of such terms or other comparable terminology. These statements include but are
not limited to statements regarding: the results of our services and attendant
benefits of those services for our clients; our plans regarding future changes
to our pricing models and our expectations regarding the impact of those
changes; the impact of our knowledge management system and framework development
on the delivery of our services and our operational results; the development and
protection of our intellectual property; changes in the competitive environment;
factors, including client mix, that may impact our future revenues; our
expectations regarding amount and type of future expenses and/or our method of
accounting for those expenses; and our expectations regarding future revenues,
profitability, and other operating and financial results. These statements are
only predictions. Actual events or results may differ materially. In evaluating
these statements, you should specifically consider various factors, including
the risks outlined under Part 1, Item I "Business -- Risk Factors". These
factors may cause our actual results to differ materially from any forward-
looking statement.


                                    PART I

ITEM 1.

BUSINESS

History

     NetCommerce, Inc., (formerly, Virtual Enterprises, Inc.) (the "Company")
was incorporated in the State of Colorado on June 10, 1988, for the purpose of
searching for, evaluating and acquiring an interest in one or more business
opportunities. On December 3, 1989, the Company completed a public offering of
its stock pursuant to a Registration Statement on Form S-18 filed with the
Denver Regional Office of the Securities and Exchange Commission ("SEC"). The
Company, through an underwriter, sold a total of 50,000,000 shares of the its no
par value common stock and redeemable common stock purchase warrants
("Warrants") which entitle the holders to purchase 162,000,000 additional shares
of common stock at a later date.

     On March 9, 1990, the Company completed an agreement to exchange its common
stock for all of the issued and outstanding capital stock of Sunbelt Media Group
Inc. ("Sunbelt").  Pursuant to the terms of the agreement with the shareholders
of Sunbelt, the Company issued 278,400,000 shares of its common stock in
exchange for all the outstanding shares of common stock of Sunbelt following
which Sunbelt became a wholly-owned subsidiary of the Company.  From March 1990
to October 1992 Sunbelt owned, operated, and provided programming to low power
television stations and related businesses.  The Company discontinued the
Sunbelt business in October 1992 and sold all the assets associated with the
operation of Sunbelt to William J. Kitchen ("Kitchen") in consideration of 1)
Kitchen's forgiveness of notes and other obligations owed to Kitchen by the
Company; and 2) Kitchen's assumption of miscellaneous debts of Sunbelt.
Pursuant to the sale, Kitchen also re-conveyed back to the Company

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98,795,000 shares of its common stock for cancellation. Since October 1992 the
Company has not had any revenues or operations.

     On August 31, 1992, Jeffrey Paul Stroud ("Stroud") acquired 173,995,000
shares of the Company's common stock, representing 51% of the then issued and
outstanding shares, from Kitchen. Stroud also acquired the Warrants from
Kitchen. In March 1993 Stroud sold the 173,995,000 shares of the Company's
common stock and the Warrants.

     In September 1994, the Company's shareholders voted to affect a 1 for 1000
reverse split of the Company's issued and outstanding common stock.  The split
was implemented through a merger with a newly formed Nevada corporation.  The
accompanying financial statements have been retroactively restated to reflect
the merger including the change from no par value common stock to $.01 par value
common stock. In connection with the merger and reverse split, the Company's
authorized number of shares was reduced from 785,000,000 to 50,000,000.  There
are presently outstanding Warrants to purchase 668,000 shares of common stock,
at $5.00 per share.

     Effective October 8, 1996, the Company's Articles of Incorporation were
amended to change the name of the Company from The Toen Group, Inc. to Virtual
Enterprises, Inc.

     On May 5, 1999, the Company entered into an Asset Purchase Agreement and
Plan Of Reorganization (the "Agreement") with MetroplexWeb Inc., a Texas
corporation ("Metroplex") whereby the Company acquired certain assets, property,
business interests and intellectual rights owned by Metroplex for securities
consisting of Ten Million (10,000,000) shares of the Company's $.01 par value
common stock, causing Metroplex shareholders to have voting control and become
the principal stockholders of the Company.  As a result of the change in control
of the Company, generally accepted accounting principles required the
acquisition to be accounted for as a recapitalization of Metroplex.
Accordingly, the consolidated financial statements reflect the historical
assets, liabilities and operations of Metroplex for the periods presented.  In
June 1998, Metroplex acquired Intellesell, Inc. ("Intellesell").  Intellesell
operated in the web development and web hosting business.

     The Company's day-to-day business affairs are handled by the Company
President and management of Metroplex.  As of the filing date of this Report the
Company had 48 employees.  Current management is pursuing additional business
opportunities, but no assurance can be given that the Company will be successful
in acquiring any business opportunities, or if acquired, what revenues might be
provided from such operations.

     As used herein, the term "Company" refers to NetCommerce, Inc., (formerly
Virtual Enterprises, Inc.), MetroplexWeb, Inc., a wholly owned Nevada
corporation ("MWI") and successor in interest to the assets of Metroplex and
Intercon, Inc., a wholly owned Nevada Corporation ("Intercon").  The Company
owns NetComISP, Inc a Texas Corporation as a wholly owned subsidiary and owns a
majority interest of 51% of Tectonic Data, LLC a Texas Limited Liability
Company.  The Company currently maintains its executive offices at 1900
Westridge Dr., Las Colinas, Irving, Texas 75038, and its telephone number is
(972) 465-5900.

     At the date of acquisition of its assets, Metroplex was a provider on the
Internet of local city guides, local advertising and innovative edge e-commerce
applications.  The Company intends to integrate its local Metroplex city guides
with distribution capabilities to offer web site design, hosting, e-commerce
merchandise, electronic coupons and other transactions to a broader audience of
consumers, both domestically and internationally.

     The Metroplex city guides provide up-to-date information regarding arts and
entertainment events, community activities, recreation, business, shopping,
professional services and news/sports/weather to consumers in metropolitan
areas.  The Company owns and operates the city

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guides on the Internet thru it website - www.metroplexweb.com - through numerous
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direct links from banners and event profiles.

     Each local Metroplex city guide primarily consists of original content
developed and designed specifically for the Web by the Company.  The service is
typically organized by categories, such as arts and entertainment, restaurants
and bars, community, shops and services, sports and outdoors, hotels and
tourism, local news and professional services.  Within most of the Metroplex
city guides, consumers can search neighborhood-shopping areas, obtain maps,
contact community organizations and vendors by e-mail, and shop business
inventories with a click of the mouse.  The Company creates original and locally
focused content that can be accessed using targeted, sophisticated searches
across all content residing on a Metroplex City site.  In contrast, many search
engines and navigational guides access pre-existing content from third-party Web
sites that may be incomplete or out of date.  In its owned and operated markets,
the Company offers a broad array of updated, local content that is relevant to
consumers.

     The Company also designs and produces custom-built Web-sites and performs
related services for local and regional businesses, aggregates them in a local
city guide environment and provides these businesses with the ability to
regularly update and expand their sites.  The typical site offers local and
regional businesses the opportunity to reach and interact with targeted
consumers.  The Company builds its city guides with the involvement of local
government, community and volunteer associations, business and professional
groups, educational institutions and local media companies.  In addition,
content generated by consumers through e-mail enhances the sense of community in
the Metroplex City sites.

The NetCommerce Service

     Each local city guide primarily consists of original content developed and
designed specifically for the Web by the Company. The NetCommerce service is
topically organized by categories, such as arts and entertainment, restaurants
and bars, community, shops and services, sports and outdoors, hotels and
tourism, local news and professional services. Within most of the city guides,
consumers can search neighborhood-shopping areas, obtain maps, contact community
organizations and vendors by e-mail, and shop business inventories with a click
of the mouse.

     The Company designs and produces custom-built Web sites and performs
related services for local and regional businesses, aggregates them in a local
city guide environment and provides these businesses with the ability to
regularlyupdate and expand their sites. The NetCommerce sites offer local and
regional businesses the opportunity to reach and interact with targeted
consumers.  The Company builds its city guides with the involvement of local
government, community and volunteer associations, business and professional
groups educational institutions and local media companies. In addition, content
generated by consumers through e-mail enhances the sense of community in
NetCommerce sites.

     The Company creates original and locally focused content that can be
accessed using targeted, sophisticated searches across all content residing on a
NetCommerce site. In contrast, many search engines and navigational guides
access pre-existing content from third-party Web sites that may be incomplete or
out of date. In its owned and operated markets, the Company offers a broad array
of updated, local content that is relevant to consumers.

     The Company launched its initial site in the Dallas/Ft. Worth metropolitan
area in May 1996. The Company has since launched or initiated a roll out of Web-
based local city guides in Los Angeles, Salt Lake City, Phoenix, Kansas City,
Denver, Minneapolis, and Raleigh/Durham.   As of July 1, 1999, approximately
3,000 NetCommerce business Web sites were online in the Company's owned and
operated markets.

The NetCommerce Solution

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     The Company operates two complementary Web services: a network of
NetCommerce local city guides and the  Web site. The  NetCommerce city guides
provide up-to-date information regarding arts and entertainment events,
community activities, recreation, business, shopping, professional services and
news/sports/weather to consumers in metropolitan areas.

     Each local city guide primarily consists of original content developed and
designed specifically for the Web by the Company and its partners. The Company
designs and produces custom-built Web sites and performs related services for
local and regional businesses, aggregates them in a local city guide environment
and provide these businesses with the ability to regularly update and expand
their sites. The  NetCommerce sites offer local and regional businesses the
opportunity to reach and interact with targeted consumers. The Company typically
targets medium- to large-sized cities for its

     NetCommerce city guides with a combination of high personal computer
penetration, high Internet use, strong population growth, significant high
technology employment, a large university population and a government presence.
The Company has two primary means of providing its local city guides. In its
owned and operated markets, the Company systematically produces the majority of
its own content, hires and deploys a direct sales force to sell custom-built Web
sites to local businesses and contracts with local media companies (primarily
radio and television stations) for promotion and distribution. In other markets,
the Company partners with a local media company (usually a leading daily
newspaper) that contracts with the Company to assist in designing, developing
and launching a city guide.

     Strategic Partnerships. The Company is engaged in a number of strategic
partnerships with media, content and other companies in order to build the
NetCommerce and brand names as well as the network of city guides. In owned and
operated NetCommerce markets, the Company partners with local media companies to
assist it in developing content and expanding its promotional activities.

     Differentiated Presence on the Web For Local and Regional Businesses. The
Company creates  NetCommerce Web sites for local and regional businesses,
aggregates the Web sites in a local city guide environment and provides
businesses the ability to regularly update and expand their sites. The Company
believes its NetCommerce service offers local and regional businesses the
opportunity to reach and interact with targeted audiences in a cost-effective
manner. The Company provides business customers with integrated solutions to
establish customized, multi-page Web sites including design, layout,
photography, posting of updated information, hosting and maintenance.
Businesses are able to provide a targeted audience with updated information
about their products and services, including photographs, prices, store
location, schedules of live entertainment, audio clips, e-mail distributions,
specials or sales and other relevant information. The Company typically creates
a customized, multi-page Web site for its customers with a minimal up-front fee
and monthly fees ranging from $30 to $1,000 per month. The Company believes its
broad offering of  NetCommerce services and prices compares favorably to other
Web advertising options available to businesses. Such options range from low
cost, low quality scanned-in information to free-standing custom-designed sites
that may cost in excess of $10,000 in up-front fees to produce and that rely on
significant additional promotion to attract traffic. By providing a high quality
Web presence at an affordable price, the Company believes that its services
address the demand of the large number of businesses whose online needs fall
between these market extremes.

     Community-Based Approach. The Company differentiates itself from most
national developers of local city guides by building many of the  NetCommerce
owned and operated sites with involvement from city governments, chambers of
commerce, community associations, schools and other community groups, and by
focusing its hiring efforts within the local community. The Company builds free
Web sites for selected community organizations, provides tools for e-mail to
constituents and community forums and maintains guides to community services and
volunteer organizations, thereby enhancing the sense of community each
NetCommerce site provides.  The Company believes that its community-based
approach builds consumer interest in the site both directly, since the content
it provides is of interest to many individuals and is not generally covered by
competing city sites, and indirectly, because it builds broad

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support and "ownership" in the community. The Company has secured strong
community support for its service in each of its markets, and the launch of many
of its owned and operated markets has been presided over by the mayor or
governor.

Strategy

     The Company's objective is to be the leading provider of comprehensive
local city guides and provides an easy-to-use resource for local information and
transactions. The Company's strategy is focused on rapidly rolling out its
services in the most attractive, Web-penetrated communities worldwide,
establishing a leading presence in these communities while increasing traffic
and repeat usage of its network. In addition, the Company intends to use the
NetCommerce local city guides as platforms for multiple revenue streams. The
following are key elements of this strategy:

     Rapidly Build National and International Network and Brand Awareness. The
Company intends to establish its services as the category leader for local
information and live event ticketing on the Web by linking its local city guides
together in a national and international network. The Company believes that as
the number of its sites and usage of its service increase, it is creating a
readily recognizable brand name for local content.

     Provide Multiple Revenue Streams.  NetCommerce local city guides and the
partnering with online business sales provide platforms for multiple revenue
streams. In owned and operated NetCommerce markets, the Company derives
recurring fees from the sale of Web sites to local businesses, as well as banner
and sponsorship advertising. Part of the Company's strategy is to increase
average monthly revenue from new business customers, in part through the
introduction of new services. The Company intends to offer additional e-commerce
functionality and other features designed to enable businesses to better serve
consumers, including reservations, electronic coupons, and other transactions.

     The Company further believes that its platforms will help enable it to take
advantage of new opportunities in areas such as entertainment information,
merchandising, advertising, promotional services and direct marketing.

     Increase Usage and Frequency of Use of the Network. The Company plans to
increase usage of its network by continuing to provide compelling content and
expanding services that it believes are most desired by consumers. For example,
the Company is actively developing means of increasing the personalization
capabilities of its services to enable consumers to be notified of upcoming
event, special offers by businesses, reviews and transaction offerings for which
they specify a direct interest. The Company intends to continually improve the
convenience of its services to businesses and consumers through technology
enhancements such as user interface refinements and increased efficiencies in
transaction processing and fulfillment operations. The Company also plans to
increase traffic over its network through strategic relationships and through
increased integration of the content and services provided by NetCommerce city
guides.  The Company believes these types of services offer the Company the
opportunity to attract new and existing consumers and businesses to its sites.
As the Company's network of city guides expands, the Company intends to pursue
regional and national media distribution arrangements to help drive traffic to
the Company's Web services.

     Continue to Enter into Strategic Alliances. The Company intends to continue
to differentiate its services by entering into agreements with local radio,
television and other media and telephony companies in its future owned and
operated markets and with major newspapers and other media and telephony
companies in its domestic and international partner-led markets. The Company
will also continue to evaluate means of expanding the reach of its services
through additional alliances with other Web sites, online service providers and
through other relationships.

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     Integrate Netcommerce and Services. The Company intends to increase the
degree of integration in the NetCommerce city guides in the short and medium
term. Presently, numerous hypertext links allow consumers to move between the
sites easily. The Company also intends to synchronize the NetCommerce services
events databases in order, for example, to automatically generate consumer
information profiles.

NetCommerce Service for Consumers

     The Company produces and delivers comprehensive local city guides on the
Web, providing up-to-date information regarding arts and entertainment events,
community activities, recreation, business, shopping, professional services and
news/sports/weather to consumers in metropolitan areas. Each local city guide
primarily consists of original content developed and designed specifically for
the Web by the Company and its partners. The NetCommerce service is topically
organized by categories, such as arts and entertainment, restaurants and bars,
community, shops and services, sports and outdoors, hotels and tourism, local
news and professional services. Within most of the city guides, consumers can
search neighborhood shopping areas, obtain maps, contact community organizations
and vendors by e-mail, and engage in bulletin board discussions with individuals
such as local public officials and celebrities. In certain markets, consumers
can also access audio streams, including recent news and other information, from
local radio partners.  NetCommerce offers local and regional businesses the
opportunity to reach and interact with targeted consumers. In addition, content
generated by consumers through e-mail and bulletin boards enhance the sense of
community in NetCommerce sites.

     The NetCommerce service has been launched in markets across the United
States.  The Company plans to continue to expand the service both in owned and
operated markets and by deploying a direct outbound marketing approach in other
markets. These major media partners bring capital, brand recognition,
promotional strength and local knowledge to their city guides and allow the
Company to build out its national and international network of sites faster than
it could solely through owned and operated sites.

NetCommerce Service for Businesses

     The Company creates and hosts NetCommerce Web sites for local and regional
businesses and organizations for a monthly fee. The Company offers local
businesses a wide range of options in creating Web presence, from a basic Web
presence costing as little as $30 per month to a multi-page site with additional
features and functionality costing up to $1,000 per month. Most business
customers have entered into a one-year agreement that automatically converts
into a month-to-month contract upon expiration of the initial term.  By
aggregating a customer's Web site with those of numerous other businesses in a
comprehensive local city guide, the Company provides categorical, geographic and
editorial context to a customer's Web presence to generate usage by consumers,
as well as significant Internet traffic. Based on internal studies, the Company
believes that NetCommerce users are more evenly split between men and women,
better educated, slightly older and have higher annual incomes than the typical
Internet user. The Company believes that these demographics are attractive to
its business customers.

     The Company provides an integrated solution for businesses to establish a
NetCommerce Web presence, including design, photography, layout, posting of
updated information, hosting and maintenance. Businesses are able to provide a
targeted audience with current information about their products and services
including photographs, prices, location, schedules of live entertainment, sales
and other relevant information. The business customers also receive usage
reports, e-mails from interested consumers and access to an expanded base of
potential buyers including tourists and out-of-town users. The Company has
recently introduced a strategy of bundling enhanced features and functionality,
including panoramic images and audio clips. These services, when bundled with
the Company's basic NetCommerce services, are typically priced from $60 to
$2,000 per month, and have accounted for significant increases in the average
selling prices of the Company's offerings.

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     The Company believes its broad offering of services and its prices compare
favorably to other Web advertising options available to businesses. Such options
range from low cost, low quality scanned-in information to free-standing custom-
designed sites that may cost in excess of $10,000 in up-front fees to produce
and that rely on significant promotion to attract traffic. By providing a high-
quality Web presence at an affordable price, the Company believes that its
services address the demand of the large number of businesses whose online needs
fall between these market extremes.

     The Company's proprietary site design tools and production economies enable
it to build customized multi-page Web sites for customers for a minimal up-front
fee. The production of business Web sites for NetCommerce owned and operated
markets are managed centrally in the Company's headquarters to better control
quality and cost and provide rapid production. Business Web site creation
follows a standardized process. The entire process, from the receipt of content
by the Company to putting a site online, takes approximately one month to
complete. Each step of the sales and production process is monitored by an
enterprise management system to ensure that the process is consistent and
complete. The Company believes the systems and processes it has developed to
produce business Web sites allow it to create higher quality, more informative
sites in a more cost-effective and timely manner than its competitors.

     The Company intends to offer e-commerce functionality and other innovative
features allowing businesses to better serve consumers, including ticketing,
reservations, sales events notifications, electronic coupons, newsletters and
other transactions. The Company believes these types of services offer the
Company the opportunity to further attract both consumers and businesses to its
local city guides

Operating Strategy

     The Company's business strategy is to develop and operate Internet related
web-hosting, website design and marketing, and Internet telephony services
through MWI, Intercon or other majority-owned or wholly-owned subsidiaries.

     The Company's strategy also includes the investment in other Internet
companies, either directly or by the Company's subsidiaries, both domestic and
internationally.

     The Company is currently in the process of seeking the acquisition of, or
merger with, additional business entities in the Internet related or
telecommunications fields.

Recent Developments

     On June 2, 2000, NetCommerce created Netcapitalonline.com, Inc., a wholly
owned financial services marketing and branding company.  In the course of its
current business of web hosting and design, NetCommerce has the ability to
develop and source important business transactions related to financial
planning, Internet/Web strategic planning, business development, and
accounting/payroll services.  Leveraging its proven business model,
Netcapitalonline.com intends to create opportunities for ongoing acquisition and
strategic investments that increase net value and complement the Company's core
business.  In most cases, NetCommerce will retain an equity position in these
companies, independently maintained by its subsidiary Netcapitalonline.com, Inc.

     For example, a group may have initiated a business plan for the development
and operation of a certain type of website and they may need startup capital to
fund operations prior to cash flow, and to fund the construction and hosting of
their proposed website.  In fact, the construction of the website may constitute
the major cost component of starting their business through MetroplexWeb.
Netcapitalonline.com intends to make good use of its unique position of being
afforded an insider's view of successful dot.com investment opportunities.

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     An important and significant opportunity exists for Netcapitalonline.com to
focus on small and middle market financings due to the lack of capital available
to companies that are small or illiquid, and the relative difficulty to attract
the attention of traditional financing sources.  Entrepreneurial businesses have
a strong demand not only for capital, but also for management consulting and
advisory services, especially in regard to promotion, merger and acquisition
transactions and strategic planning.

     On June 28, 2000, NetCommerce developed Askourcity.com which functions as
the leading online city directory for local information and transactions for any
given industry.  Operating in cities worldwide, Askourcity.com delivers local
entertainment, commerce, news, community resources and personal interaction to
residents and visitors.

     Askourcity.com will function as the leading personalized source for local
information and transactions for a given industry.  Operating in cities
worldwide, Askourcity.com delivers local entertainment, commerce, news,
community resources and personal interaction to residents and visitors.
Askourcity (www.askourcity.com) creates city guides that include rich Local
            ------------------
information by providing local merchants and vendors with simple one-page web
ads or a fully developed website.  These listings create a local portal that
allows people to perform everyday activities online, from shopping, to
scheduling an evening out, to planning volunteer work.

     Askourcity.com serves a vital role in the expansion of the existing
Metroplexweb sales and marketing infrastructure.  Each new client discovered by
Askourcity.com will be used as a lead for future sales efforts of other
NetCommerce, Inc. subsidiaries: NetComISP for bandwidth and hosting, Tectonic
Data for streaming media, and Metroplexweb for upgrading e commerce storefronts
and additional Internet advertising services.

     Focusing on the continual expansion of the direct marketing approach,
Askourcity.com is enabling massive market exposure to clients that may not
otherwise have this opportunity.  Askourcity.com is easily duplicated in
multiple cities and time zones simultaneously.  Askourcity.com will enjoy
continued growth by localizing the Web and expanding services to all major
cities in the continental U.S.

     Askourcity.com is a premier internet local listing service.  By providing
local area merchants with one page web ads or fully functional websites,
Askourcity.com creates localized directories for goods and services.
MetroplexWeb intends to "farm" these qualified leads and possibly turn each one-
page ad listing into a fully functional e-commerce site.

     As NetCommerce continues its strategy of growing in various markets at
ever-increasing rates, we can in turn expect exponential revenue increases in
Web design, ISP, media streaming and storage, and financial services.  Unlike
most traditional ISP models, who spend millions of dollars to reach out and
acquire new subscribers, NetCommerce Inc.'s subsidiaries will already have an
existing client base to sell their services to, thus greatly reducing the
acquisition cost of attaining new clients through marketing efforts.

     The Company plans to hold equity positions in ISP, software development,
Internet telecommunications, and Internet-related marketing companies
specializing in e-business.

     On September 1, 2000, NetCapitalOnline, Inc., signed a letter of intent
giving NetCapitalOnline, Inc. a direct equity interest for developing,
positioning and streamlining e-commerce operations for a Columbian based coal
mining operation.  This agreement was signed with an intention of
NetCapitalOnline, Inc. to provide additional opportunities of financing, capital
structure and strategic business consulting.  The company anticipates fully
integrating the day-to-day operations creating

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increased production and how its commodity Coal is sold throughout the world on
the open market utilizing e-commerce.

Risk Factors
------------

      In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, set forth below are cautionary statements
identifying important factors that could cause our actual results to differ
materially from those projected in any forward-looking statements made by or on
behalf of us, whether oral or written. We wish to ensure that any forward-
looking statements are accompanied by meaningful cautionary statements in order
to maximize to the fullest extent possible the protections of the safe harbor
established in the Private Securities Litigation Reform Act of 1995.
Accordingly, any such statements are qualified in their entirety by reference
to, and are accompanied by, the following important factors that could cause our
actual results to differ materially from those projected in our forward-looking
statements.

We are growing quickly. future growth of our business could make it difficult to
manage our resources.

      In order to manage our growth effectively, we must establish offices in
new geographic locations, set fixed-price fees accurately, maintain high
employee utilization rates, maintain project quality and successfully negotiate
rates, particularly if the average size of our projects continues to increase.

      Our performance may depend on the effective integration of acquired
businesses. This integration, even if successful, may be expensive and time
consuming and could strain our resources.

We may not be able to hire and retain highly skilled employees, which could
affect our ability to compete effectively.

      To succeed, we must hire, train, motivate, retain and manage employees who
are highly skilled in the Internet and its rapidly changing technology. Because
of the recent and rapid growth of the Internet, individuals who have Internet
expertise and can perform the services we offer are scarce.  Competition for
these individuals, therefore, is intense. We might not be able to hire enough of
them or to train, motivate, retain and manage the employees we do hire. This
could hinder our ability to complete existing projects and bid for new projects.
In addition, because the competition for qualified employees in the Internet
industry is intense, hiring, training, motivating, retaining and managing
employees with the strategic, technical and creative skills we need is both
time-consuming and expensive.

History of Losses

      Virtual Enterprises, Inc., (formerly, The Toen Group, Inc.) (the
"Company") was incorporated in the State of Colorado on June 10, 1988 for the
purpose of searching for, evaluating and acquiring an interest in one or more
business opportunities. On December 3, 1989, the Company completed a public
offering of its stock pursuant to a Registration Statement on Form S-18 filed
with the Denver Regional Office of the Securities and Exchange Commission
("SEC"). The Company, through an underwriter, sold a total of 50,000,000 shares
of the its no par value common stock and redeemable common stock purchase
warrants ("Warrants") which entitle the holders to purchase 162,000,000
additional shares of common stock at a later date.

      On March 9, 1990, the Company completed an agreement to exchange its
common stock for all of the issued and outstanding capital stock of Sunbelt
Media Group Inc. ("Sunbelt"). Pursuant to the terms of the agreement with the
shareholders of Sunbelt, the Company issued 278,400,000 shares of its common
stock in exchange for all the outstanding shares of common stock of Sunbelt
following which

                                       9
<PAGE>

Sunbelt became a wholly-owned subsidiary of the Company. From March 1990 to
October 1992 Sunbelt owned, operated, and provided programming to low power
television stations and related businesses. The Company discontinued the Sunbelt
business in October 1992 and sold all the assets associated with the operation
of Sunbelt to William J. Kitchen ("Kitchen") in consideration of 1) Kitchen's
forgiveness of notes and other obligations owed to Kitchen by the Registrant;
and 2) Kitchen's assumption of miscellaneous debts of Sunbelt. Pursuant to the
sale, Kitchen also re-conveyed back to the Company 98,795,000 shares of the its
common stock for cancellation. Since October 1992 the Company has not had any
revenues or operations.

     On August 31, 1992 Jeffrey Paul Stroud ("Stroud") acquired 173,995,000
shares of the Company's common stock, representing 51% of the then issued and
outstanding shares, from Kitchen.  Stroud also acquired the Warrants from
Kitchen.  In March 1993 Stroud sold the 173,995,000 shares of the Company's
common stock and the Warrants.

     On June 17, 1993 the Company's then existing Board of Directors resigned
and Fred G. Luke and Jon L. Lawver were appointed as replacement Directors.  The
outgoing Board also elected Fred G. Luke as President of the Company and Jon L.
Lawver as Secretary, Treasurer and Chief Financial Officer.

     In September 1994 the Company's shareholders voted to effect a 1 for 1000
reverse split of the Company's issued and outstanding common stock.  The split
was implemented through a merger with a newly formed Nevada corporation.  The
accompanying financial statements have been retroactively restated to reflect
the merger including the change from no par value common stock to $.01 par value
common stock. In connection with the merger and reverse split, the Company's
authorized number of shares was reduced from 785,000,000 to 50,000,000.  There
are presently outstanding Warrants to purchase 668,000 shares of common stock,
exercisable at $5.00 per share.

     Effective October 8, 1996 the Company's Articles of Incorporation were
amended to change the name of the Company from The Toen Group, Inc. to Virtual
Enterprises, Inc.

     As used herein, the term "Company" refers to Virtual Enterprises, Inc.,
(formerly The Toen Group Inc.)  The Registrant currently maintains its executive
offices at 4695 MacArthur Court, Suite 530, Newport Beach, California  92660.
The telephone number is (949) 833-2094.

     NetCommerce business has an extremely limited operating history upon which
an evaluation of the Company and its prospects can be based. The Company's
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stages of development,
particularly companies in new and rapidly evolving markets such as those in
which the Company competes. Such risks include, but are not limited to, evolving
and unpredictable business models, management of growth, the Company's ability
to anticipate and adapt to developing markets, acceptance by Internet users,
consumers and business customers of the Company's services and the ability of
the Company to establish relationships with additional strategic partners. To
address these risks, the Company must, among other things, attract and retain an
audience of frequent users of its services in its target markets, maintain its
business customer base, attract a significant number of new NetCommerce business
customers in target markets, respond to competitive developments, continue to
form and maintain relationships with media partners, continue to attract, retain
and motivate qualified personnel, provide superior customer service, and
continue to develop and upgrade its technologies and commercialize its services
incorporating such technologies. There can be no assurance that the Company will
be successful in addressing such risks, and a failure to do so could have a
material adverse effect on the Company's business, financial condition and
results of operations.

     Furthermore, NetCommerce has a limited history as a company with public
reporting obligations, and operating the Company with such obligations will
place substantial demands on management and the Company's operating systems.
These increased demands may require further expenditures to hire

                                       10
<PAGE>

management personnel and to expand the Company's operating systems. To the
extent such expenditures precede or are not subsequently followed by increased
revenues, the Company's business, financial condition and results of operations
could be materially and adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Acquisition Strategy


     The Company's strategy is to be a leading specialty niche web page design,
e-commerce and Internet consulting provider by establishing a uniform marketing,
sales and distribution program. The Company's business strategy is to capitalize
on the brand equity and the distribution previously obtained by each of the
Company's product lines and to enhance revenues by strategic introductions of
new product lines that complement existing products. The foundation of this
strategy will be established through acquisitions and the introduction of a
number of new products. The Company believes that by integrating various
specialty e-commerce application packages to small and medium sized businesses,
it will achieve efficiencies of scale and enhanced market penetration. The
Company considers the acquisition of specialty e-commerce and online
merchants/entrepreneurs as an integral part of its business strategy. To that
end, the Company from time to time reviews and conducts preliminary discussions
with acquisition candidates. No assurance can be given, however that any such
acquisition will be consummated.

Future Capital Needs; Uncertainty of Additional Financing

     Since inception, NetCommerce has experienced negative cash flow from
operations and the Company expects to continue to experience significant
negative cash flow from operations for the foreseeable future. Thereafter, the
Company may be required to raise additional funds. No assurance can be given
that the Company will not be required to raise additional financing prior to
such time. If additional funds are raised through the issuance of equity
securities, stockholders of the Company may experience significant dilution.
Furthermore, there can be no assurance that additional financing will be
available when needed or that if available, such financing will include terms
favorable to the Company or its stockholders. If such financing is not available
when required or is not available on acceptable terms, the Company may be unable
to develop or enhance its services, take advantage of business opportunities or
respond to competitive pressures, any of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

Competition
-----------

     While the market for strategic Internet services is relatively new, it is
already highly competitive and characterized by an increasing number of entrants
that have introduced or developed products and services similar to those offered
by us. We believe that competition will intensify and increase in the future.

     Our competitors can be divided into several groups:

          -    Internet professional service providers, such as Proxicom, iXL
               Enterprises, Inc., Scient Corporation, USWeb and Viant
               Corporation;

          -    interactive marketing firms, such as Agency.com, Ltd., Modem
               Media.Poppe Tyson, Inc., Organic, Inc. and Razorfish, Inc.

     There are relatively low barriers to entry into the strategic Internet
services industry, and the costs to develop and provide Internet services are
low. Therefore, we expect that we will continually face additional competition
from new entrants into the market in the future, and we are also subject to the
risk that our employees may leave us and start competing businesses.

                                       11
<PAGE>

Competition for Venture Investments
-----------------------------------

     We face competition from numerous other capital providers seeking to
acquire interests in Internet-related businesses, including:

          -    other Internet companies
          -    venture capital firms;
          -    large corporations; and
          -    other capital providers who also offer support services to
               companies.

     Traditionally, venture capital and private equity firms have dominated
investments in emerging technology companies, and many of these types of
competitors may have greater experience and financial resources than us.  In
addition to competition from venture capital and private equity firms, several
public companies such as CMGI, Internet Capital Group and Safeguard Scientifics,
as well as private companies such as Idealab!, devote significant resources to
providing capital together with other resources to Internet companies.
Additionally, corporate strategic investors, including Fortune 500 and other
significant companies, are developing Internet strategies and capabilities.

Technology

     We develop client solutions on the current state-of-the-art technology
platforms, including Linux and those developed by Microsoft, Sun Microsystems
and IBM. These technologies are applied to client solutions in conjunction with
an in-depth requirements analysis, including business models, existing
infrastructure and technology and business forecasting. These solutions include
existing technology analysis, network and applications architecture and
implementation, security analysis and implementation, application development,
legacy integration, testing, maintenance and transfer. We also provide managed
application services to our clients. In addition, we have built an optimized
wide area network to support our worldwide offices, providing internal knowledge
management, project management and human resources functionality. Both the
internal and external networks are monitored through our network operations
center, which uses state-of-the-art tools for performance analysis and
assurance.

Government Regulation

     Currently, we are not subject to any direct governmental regulation other
than the securities laws and regulations applicable to all publicly owned
companies, and laws and regulations applicable to businesses generally. Few laws
or regulations are directly applicable to access to, or commerce on, the
Internet. Due to the increasing popularity and use of the Internet, it is likely
that a number of laws and regulations may be adopted at the local, state,
national or international levels with respect to the Internet, including the
possible levying of tax on e-commerce transactions. Any new legislation could
inhibit the growth in use of the Internet and decrease the acceptance of the
Internet as a communications and commercial medium, which could in turn decrease
the demand for our services or otherwise have a material adverse effect on our
future operating performance and business.

Low Barriers to Entry

     The market for Internet-based products and services is relatively new,
intensely competitive and rapidly evolving.  There are minimal barriers to
entry, and current and new competitors can launch new Internet sites at a
relatively low cost within relatively short time periods. Accordingly, we expect
competition to persist and intensify and the number of competitors to increase
significantly in the future. We cannot assure you that our Internet sites will
compete successfully.

                                       12
<PAGE>

Limited Experience in Sales and Marketing of Advertising

     None of our senior management team has any significant experience in
selling advertising on the Internet or any other medium, and few members of our
senior management team have any significant experience in the Internet industry.
Achieving acceptance by potential advertisers and advertising agencies of our
Internet sites as a viable marketing forum will require us to develop and
maintain relationships with key advertisers and advertising agencies, and there
can be no assurance that any such relationships will be developed, on a timely
basis or at all.

Risks of Technological Change

     The market for Internet-based products and services is characterized by
rapid technological developments, frequent new product introductions and
evolving industry standards. The emerging character of these products and
services and their rapid evolution will require that we continually improve the
performance, features and reliability of our Internet-based products and
services, particularly in response to competitive offerings. We cannot assume
you that we will be successful in responding quickly, cost effectively and
sufficiently to these developments. In addition, the widespread adoption of new
Internet technologies or standards could require substantial expenditures by us
to modify or adapt our Internet site and services and could fundamentally affect
the character, viability and frequency of Internet-based advertising, either of
which could have a material adverse effect on our business. In addition, new
Internet-based products, services or enhancements offered by us may contain
design flaws or other defects that could require costly modifications or result
in a loss of consumer confidence, either of which could harm our business.

Net Capital Requirements

     The SEC, the Department of the Treasury and various other securities and
commodities exchanges and other regulatory bodies in the United States and
abroad either have or are considering the imposition of rules with respect to
net capital requirements which could affect us or our subsidiaries. A change in
such rules, or the imposition of new rules, affecting the scope, coverage,
calculation or amount of such net capital requirements, or a significant
operating loss or any unusually large charge against net capital could adversely
affect the ability of the Company to pay dividends or to expand or even maintain
levels of business.

Listing on OTC Bulletin Board; Limited Trading Market; "Penny Stock" Regulations
May Impose Certain Restrictions

     Our common stock has been quoted on the OTC Bulletin Board since June 12,
1997. Our common stock has only a limited trading market. We cannot assure you
that a more active trading market will develop or, if developed, that it will be
maintained. We cannot predict the effect, if any, that the sale of restricted
shares of common stock or shares of common stock issuable upon exercise of the
warrants or the availability of such securities for sale will have on the market
price of the common stock. As a result, an investor might find it difficult to
dispose of, or to obtain accurate quotations as to the value of, the common
stock.

     In addition, as the common stock has limited active trading market and the
trading price of the common stock is less than $5.00 per share, trading in the
common stock is subject to the requirements of Rule 15g-9 promulgated under the
Exchange Act. Under such rule, broker-dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements, including a requirement that
they make an individualized written suitability determination for the purchase
and receive the purchaser's written consent prior to the transaction. The common
stock is also subject to the Securities Enforcement Remedies and Penny Stock
Reform Act of 1990, which requires additional disclosure in connection with any
trades involving a stock defined as a

                                       13
<PAGE>

penny stock (generally, according to recent regulations adopted by the SEC, any
equity security not traded on an exchange or quoted on Nasdaq that has a market
price of less than $5.00 per share, subject to certain exceptions), including
the delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith. Such
requirements could severely limit the market liquidity of the common stock and
the ability of purchasers in this offering to sell their securities in the
secondary market.

Unpredictability of Future Revenues; Fluctuations in Operating Results

     As a result of NetCommerce's limited operating history and the emerging
nature of the markets in which the Company competes, the Company is unable to
accurately forecast its future revenues. The Company's current and future
expense levels are based predominantly on its operating plans and estimates of
future revenues and are to a large extent fixed. For example, the NetCommerce
business model requires significant staffing to develop content and to create
and maintain relationships with small- and medium-size businesses. The Company
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in revenues
would likely have an immediate material adverse effect on the Company's
business, financial condition and results of operations. Furthermore, the
Company currently intends to increase its operating expenses to roll out its
NetCommerce service in new markets, to fund increased sales and marketing and
customer service operations, to attempt to further develop its technology
infrastructure and to integrate its local content.  To the extent such expenses
precede or are not subsequently followed by increased revenues, the Company's
operating results will fluctuate and net anticipated losses in a given quarter
may be greater than expected. The Company expects to experience significant
fluctuations in its future operating results due to a variety of factors, many
of which are outside of the Company's control. Factors that may adversely affect
the Company's operating results include, but are not limited to, the Company's
ability to retain existing business customers, attract new business customers at
a steady rate and maintain customer satisfaction, the timing and volume of new
business Web site orders and the Company's capacity to meet such orders, the
Company's ability to maintain or increase current rates of sales productivity,
the announcement or introduction of new or enhanced sites and services by the
Company or its competitors, the amount of traffic on the Company's online sites,
the amount of expenditures for online advertising by businesses, the level of
use of the Web and online services and consumer acceptance of the Internet for
services such as those offered by the Company, the Company's ability to upgrade
and develop its systems and attract personnel in a timely and effective manner,
the amount and timing of operating costs and capital expenditures relating to
expansion of the Company's business and infrastructure, technical difficulties,
system downtime or Internet brownouts, political or economic events affecting
the cities in which the Company operates and general economic conditions.
Unfavorable changes in any of the above factors could adversely affect the
Company's revenues, gross margins and results of operations in future periods.
As a result of the foregoing, the Company believes that period-to-period
comparisons of its results of operations should not be relied upon as an
indication of future performance. In addition, the results of any quarterly
period are not indicative of results to be expected for a full fiscal year.  The
foregoing factors which are largely unpredictable and may cause significant
fluctuations in operating results may cause the Company's annual or quarterly
results of operations to be below the expectations of public market analysts or
investors, in which case the market price Common Stock could be materially and
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

New and Uncertain Markets; Unproven Market Acceptance; Risk of Significant
Business Customer Turnover

     The markets for the Company's services have only recently begun to develop,
are rapidly evolving and are characterized by a number of entrants that have
introduced or plan to introduce competing services. As is typical in the case of
new and rapidly evolving industries, demand and market acceptance for recently
introduced services are subject to a high level of uncertainty and risk. It is
therefore difficult to predict the size and future growth rate, if any, of these
markets. There can be no

                                       14
<PAGE>

assurance that the markets for the Company's services will develop or that
demand for the Company's services will emerge or become economically
sustainable. The success of NetCommerce's city guide service will depend on the
willingness of local businesses to pay for custom business Web sites developed
by NetCommerce and to retain the service, which in turn may depend on the
popularity of the guides to consumers and on the actual or perceived revenues
attributable to the services. If such businesses are unwilling to pay for the
NetCommerce service or retain the service, if the markets for the Company's
services otherwise fail to develop or develop more slowly than anticipated or if
business customer turnover rates are higher than expected by the Company, the
Company's business, financial condition and results of operations could be
materially and adversely affected. The turnover rate of business customers using
NetCommerce's service has been higher than NetCommerce had anticipated, and
there can be no assurance that such turnover rates would be at levels which
would not in the future materially and adversely affect the Company's business,
financial condition and results of operations. Specifically, the turnover rate
has been higher than expected due to several factors, including the Company's
early belief that its services would be suited to a broader base of business
customers, the challenges of proving advertising value to a broad range of small
businesses that may not have significant experience with online services, the
Company's continuing refinements to its sales, production and customer service
processes to meet the needs of its business customers, and the Company's initial
underestimation of the need for continuous marketing support of its business
customers. There can be no assurance that businesses will elect to outsource the
design, development and maintenance of their Web sites to services such as
NetCommerce. Businesses may elect to perform such tasks internally, particularly
if third-party providers of such services prove to be unreliable, ineffective or
too expensive or if software companies offer user-friendly and cost-effective
tools for such purpose. In the event that a significant number of businesses
internalize such tasks, such event may have a material adverse effect on the
Company's business, financial condition and results of operations.

Dependence on Continued Growth of Online Commerce

     The Company's future revenues and any future profits are substantially
dependent upon the widespread acceptance and use of the Web and online services
as an effective medium of commerce by consumers. Rapid growth in the use of and
interest in the Web, the Internet and commercial online services is a recent
phenomenon, and there can be no assurance that acceptance and use will continue
to develop or that a sufficiently broad base of consumers will adopt, and
continue to use, the Web and online services as a medium of commerce. Demand for
recently introduced services and products over the Web and online services is
subject to a high level of uncertainty, and there are relatively few proven
services and products. The development of the Web and online services as a
viable commercial marketplace is subject to a number of factors, including
continued growth in the number of Internet users and users of such services,
concerns about transaction security, continued development of the necessary
technological infrastructure and the development of complementary services and
products. If the Web and online services do not become a viable commercial
marketplace, the Company's business, financial condition and results of
operations would be materially and adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Dependence on Sales Personnel

     The Company currently derives and, for the foreseeable future, intends to
derive a substantial portion of its revenues from sales of business Web sites to
local businesses in markets in which it owns and operates NetCommerce city
guides. The Company depends on its direct sales force to sell business Web sites
in these markets. The creation of new revenue from NetCommerce's city guide
service and its roll-out in additional cities requires the services of a highly
trained sales force working directly for the Company. Accordingly, a shortage in
the number of trained salespeople could limit the Company's ability to sell
business Web sites as it rolls out its service in new cities or to maintain or
increase its number of business customers in cities in which NetCommerce already
operates. The Company has in the past and expects in the future to experience a
high rate of turnover in its direct sales force. There can be no

                                       15
<PAGE>

assurance that such turnover will not increase in the future or have a material
adverse effect on the Company's sales, which could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, currently derives a significant portion of its revenues from the
sale of banner advertising and sponsorships. A shortage in the number of trained
salespeople could limit the Company's ability to sell additional banner
advertising or sponsorships or renew existing sponsorship or advertising
relationships, which could have a material adverse effect on the Company's
business, financial condition and results of operations.

Dependence on Key Personnel; Need to Hire Additional Qualified Personnel

     The Company's success depends to a significant degree upon the continued
contributions of the Company's executive management team, including Mark
Lindberg, the company's Chief Executive Officer, and Daniel Henderson, the
Company's Director. The success of the Company will depend upon a successful
transition of Management's responsibility to the Company's senior management
team. The Company's employees, including its senior officers, may voluntarily
terminate their employment with the Company at any time, and competition for
qualified employees is intense. The Company's success also depends upon its
ability to attract and retain additional highly qualified management, technical
and sales and marketing personnel. The process of locating and hiring such
personnel with the combination of skills and attributes required to carry out
the Company's strategy is often lengthy. The loss of the services of key
personnel or the inability to attract additional qualified personnel could have
a material adverse effect on the Company's business, financial condition and
results of operations.

Uncertain Acceptance and Maintenance of NetCommerce Brand

     The Company believes that establishing and maintaining the NetCommerce
brand is critical to its efforts to attract consumers and business customers to
its sites and that the importance of brand recognition will increase due to the
growing number of Internet sites and relatively low barriers to entry to
providing Internet content. Promotion of the NetCommerce brand will depend
largely on the success of NetCommerce to provide high quality Internet content.
If consumers and business customers do not perceive the content of NetCommerce's
or its partners' existing sites to be of high quality, the Company will be
unsuccessful in promoting and maintaining the NetCommerce brand. Other than
links to NetCommerce's city sites, the Company has not entered into a
significant distribution relationship with any major online search or navigation
company. In order to attract and retain consumers and business customers, and to
promote the NetCommerce brand in response to competitive pressures, the Company
may find it necessary to increase its budget for content or otherwise to
increase substantially its financial commitment to creating and maintaining a
distinct brand loyalty among consumers and business customers. If the Company is
unable to provide high quality content or otherwise fail to promote and maintain
the NetCommerce brand or if the Company incurs excessive expenses in an attempt
to improve its NetCommerce content or promote and maintain the NetCommerce
brand, the Company's business, financial condition and results of operations
could be materially and adversely affected.

Risks Associated with Roll Out of Services

    The Company's future success will depend to a significant extent on its
ability, on its own and with partners, to rapidly roll out the NetCommerce local
city guide service in additional cities in the United States and
internationally. There can be no assurance that the Company will be able to
launch the NetCommerce service in additional markets in a cost-effective or
timely manner or in accordance with its planned schedule, or that any newly
launched service will achieve market acceptance. Any new service that is not
favorably received by local businesses or consumers could damage the Company's
reputation or the NetCommerce brand.

                                       16
<PAGE>

     Launching the NetCommerce service or future services offered by the Company
will also require significant additional expenses and will strain the Company's
management, financial and operational resources. In particular, the launch of
the NetCommerce service in additional cities will require the Company to expand
and upgrade its technology infrastructure and business systems, including its
enterprise management system, Web site production, customer service and billing,
and its business Web site production system. There can be no assurance that the
existing technology used by would be able to accommodate increased volumes of
traffic and transactions that may arise in the future. Expansion or increases of
the Company's technology capabilities could result in significant expenses.

     Moreover, the strain placed on the Company's resources by simultaneous
launches of the NetCommerce service in multiple cities and the Company's efforts
to integrate NetCommerce's local content with the event-specific content and
transactional capabilities of  may adversely affect the roll-out schedule or
quality of the service in a particular city.  The Company's failure to launch
the NetCommerce service in new markets in a timely and cost effective manner in
accordance with its planned schedule or the lack of market acceptance of new
services would have a material adverse effect on the Company's business,
financial condition and results of operations.

Risks of Fixed-Price Contracts

    The services offered by the Company to NetCommerce business customers
typically consist of the design, implementation, hosting and maintenance of
customized Web sites, for which the customers are billed on a fixed-price basis,
consisting of an up-front fee and monthly fees. The Company's failure to
estimate accurately the resources and time required for providing such services,
to manage client expectations effectively regarding the scope of services to be
delivered for the estimated fees or to complete the services within budget, on
time and to clients' satisfaction would expose the Company to risks associated
with cost overruns and customer dissatisfaction, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Our financial results will fluctuate from period to period depending on various
business factors.

      Our financial results may fluctuate from quarter to quarter. In future
quarters, our operating results may not meet public market analysts' and
investors' expectations. If that happens, the price of our common stock may
fall. Many factors can cause these fluctuations, including

      - the number, size, timing and scope of our projects;
      - customer concentration;
      - long and unpredictable sales cycles;
      - contract terms of projects;
      - degrees of completion of projects;
      - project delays or cancellations;
      - competition for and utilization of employees;
      - how well we estimate the resources we need to complete projects;
      - the integration of acquired businesses;
      - pricing changes in the industry; and
      - economic conditions specific to the Internet and information
      - technology consulting.

      A high percentage of our operating expenses, particularly personnel and
rent, are fixed in advance of any particular quarter. As a result, if we
experience unanticipated changes in our projects or in our employee utilization
rates, we could experience large variations in quarterly operating results and
losses in any particular quarter. Due to these factors, we believe you should
not compare our quarter-to-quarter operating results to predict our future
performance.

                                       17
<PAGE>

      We have generally realized lower revenue in the first quarter of the year
than in the other quarters. We believe that this has been due primarily to
client budget cycles and the short-term nature of our contracts.

We have many short-term contracts that can be cancelled without penalty. if
clients terminate contracts with us on short notice, our results of operations
could suffer.

      Our contracts with clients are generally short-term. Also, most clients
can reduce or cancel their contracts for our services without penalty and with
little or no notice. f a significant client or a number of small clients
terminate, significantly reduce or modify business relationships with us, our
business, financial condition and results of operations could be materially and
adversely affected. Consequently, you should not predict or anticipate our
future revenue based on the number of clients we have or the number and size of
our existing projects. When a client postpones, modifies or cancels a project,
we have to shift our employees to other projects and minimize the resulting
adverse impact on our operating results. In addition, our operating expenses are
relatively fixed and cannot be reduced on short notice.

If we fail to meet our clients' expectations, we could damage our reputation and
have difficulty attracting new business.

      Many of our projects are complex and critical to our clients. As a result,
if we fail or are unable to meet a client's expectations, we could damage our
reputation. This could adversely affect our ability to attract new business from
that client or others. If we fail to perform adequately on a project, a client
could sue us for economic damages.

We may not compete successfully with our competitors, which could result in
reduced revenues.

      We compete in markets that are new, intensely competitive and rapidly
changing. We may not compete successfully with our competitors. We currently
compete for client assignments and experienced personnel principally with large
and specialty systems integrators, strategy consulting firms and Internet
professional services providers. Many of these businesses have longer operating
histories and significantly greater financial, technical, marketing and
managerial resources than we do.

Lack of growth or decline in internet usage could cause our business to suffer.

      We have derived most of our revenue from projects involving the Internet.
The Internet is new and rapidly evolving. Our business will be adversely
affected if Internet usage does not continue to grow. A number of factors may
inhibit Internet usage. These factors include inadequate network infrastructure,
security concerns, inconsistent service quality and lack of cost-effective,
high-speed service. On the other hand, if Internet usage grows, the Internet
infrastructure may not support the demands this growth will place on it. The
Internet's performance and reliability may decline. In addition, outages and
delays have occurred throughout the Internet network infrastructure and have
interrupted Internet service. If these outages or delays occur frequently in the
future, Internet usage could grow more slowly or decline.

We depend on intellectual property which may be difficult to protect. This could
affect our ability to compete effectively.

      Our success depends, in part, upon our intellectual property rights. We do
not have any patents or patent applications pending. Existing trade secret and
copyright laws afford us only limited protection. Third parties may attempt to
disclose, obtain or use our solutions or technologies. This is particularly true
in foreign countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States. Others may independently
develop and obtain patents or copyrights for

                                       18
<PAGE>

technologies that are similar or superior to our technologies. If that happens,
we may not be able to license those technologies on reasonable terms, or at all.

      Generally, we develop software applications for specific client
engagements. We generally assign software ownership to the client and retain
only a license for limited uses. Issues relating to ownership of and rights to
use software applications and frameworks can be complicated. We may become
involved in disputes that affect our ability to resell or reuse these
applications and frameworks. Also, we may have to pay economic damages in these
disputes.

Future acquisitions or investments could disrupt our ongoing business, distract
our management and employees, increase our expenses and adversely affect our
results of operations.

      We have made material acquisitions and investments in the last few months.
Any acquisitions or investments we make in the future will involve risks. We may
not be able to make acquisitions or investments on commercially acceptable
terms. If we do buy a company, we could have difficulty retaining and
assimilating that company's personnel. In addition, we could have difficulty
assimilating acquired products, services or technologies into our operations.
These difficulties could disrupt our ongoing business, distract our management
and employees, increase our expenses and materially and adversely affect our
results of operations. Furthermore, we may incur debt or issue equity securities
to pay for any future acquisitions. If we issue equity securities, your
ownership share of NetCommerce could be reduced.

The market price of our stock may fluctuate widely.

      The market price of our common stock could fluctuate substantially due to:

     -    future announcements concerning us or our competitors;
     -    quarterly fluctuations in operating results;
     -    announcements of acquisitions or technological innovations; or
     -    changes in earning earnings estimates or recommendations by analysts.

In addition, the stock prices of many technology companies fluctuate widely for
reasons which may be unrelated to operating results. Fluctuations in our common
stock's market price may affect our visibility and credibility in the Internet
solutions market.

We have started expanding our business overseas. our international expansion
could result in financial losses due to changes in foreign economic conditions
as well as fluctuations in currency and exchange rates.

     We expect to expand our international operations and international sales
and marketing efforts. We have limited experience in  marketing, selling and
distributing our services internationally. International  operations are subject
to other inherent risks, including the following:

     -    recessions in foreign economies;
     -    political and economic instability;
     -    fluctuations in currency exchange rates;
     -    difficulties and costs of staffing and managing foreign operations;
     -    potentially adverse tax consequences;
     -    reduced protection for intellectual property rights in some countries;
     -    changes in regulatory requirements; and
     -    reductions in business activity during the summer months in Europe.

                                       19
<PAGE>

ITEM 2.   PROPERTIES

     The Company's principal executive offices are located in leased premises of
approximately 20,000 square feet in Las Colinas, Irving, Texas.  The Company
conducts substantially all of its operations in these premises.

ITEM 3.   LEGAL PROCEEDINGS

     None other than in the normal course of business.

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

     None.

                                    PART II

ITEM 5.   MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  Market Information

     Following the completion of the public offering on November 30, 1989, and
until September 6, 1990, the Company's common stock was traded on the over-the-
counter market until trading ceased on September 6, 1990. On April 26, 1999,
trading resumed and quotes were maintained on the bulletin board by the National
Association of Securities Dealers, Inc.

     At September 8, 2000, the Company's outstanding securities consisted of
32,270,237 shares of $.01 par value common stock and 668,014 redeemable common
stock purchase warrants.

     The expiration of the Warrants has been extended to December 31, 2000. Each
Warrant currently entitles the holder to purchase at a price of $5.00, one share
of the Company's common stock and holders of the Warrants have no voting,
preemptive, liquidation, dividend or other rights. The Warrants became subject
to redemption by the Company on September 15, 1989, for $.00001 per Warrant,
upon 30 days written notice to the warrantholders. The Warrants are redeemable
only in the event of a current effective registration statement.

      The following table sets forth the range of the high and low sales
reported for the common stock since trading resumed on May 5, 1999:


                                            High    Low
                                           ------  ------
Quarter ended May 31, 2000                 $2.562   $.656
Quarter ended February 29, 2000             3.875    .593
Quarter ended November 30, 1999             1.062    .343
Quarter ended August 31, 1999               3.000    .343

     The above prices were obtained from the Financial Web.  The prices shown in
the above table represent inter-dealer quotations without retail mark-up, mark-
down or commission, and may not necessarily represent actual transactions.  On
May 31, 2000, and currently, there are broker-dealers publishing quotes for the
common stock.

                                       20
<PAGE>

(b)  Holders

     The approximate number of holders of record of each class of equity
securities of the Company as of September 8, 2000, was as follows:

                                              NUMBER OF
               TITLE OF CLASS                  RECORD
               --------------                  ------
                                               HOLDERS
                                               -------
          $.01 Par Value Common Stock            429

                 Warrants                         29


(c)  Dividends

     The Company has never declared or paid a cash dividend on its common stock.
The Company does not intend to pay a cash dividend in the foreseeable future.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     Overview

     During fiscal 2000, the Company changed its name to NetCommerce from
Virtual Enterprises, Inc. to better reflect its Internet activities. The
consolidated financial statements presented herein reflect the operations and
cash flows of Metroplex for all periods presented. On May 5, 1999, Metroplex
merged with NetCommece, formerly Virtual Enterprises, Inc., whereby the
acquisition was accounted for as a recapitalization of Metroplex. NetCommerce
has expanded its presence in Utah through its acquisition of Current Media, LLC,
and acquired additional resources through two small acquisitions. The Company
currently develops, designs and hosts Internet web pages.

     Results of Operations

     Year Ended May 31, 2000 Compared to Year Ended May 31, 1999
     -----------------------------------------------------------

     Revenues

     Revenues for the year ended May 31, 2000, were $974,052 versus $382,798, a
154% increase over the prior year. Revenues increased as the Company continued
to expand its operations and market its products and services. The Company's
revenues from web development were $832,770 for the current year versus $326,000
in 1999. The Company's revenues from hosting fees were $141,282 for the current
year versus $57,000 in 1999. The Company recognizes hosting fee revenues over
the term of the contract ranging from one to three years.

     Development costs

     Development expenses were $1,086,254 in fiscal 2000 compared to $687,143 in
fiscal 1999, an increase of 58%. The increase was primarily attributable to an
increase in web development staff and stock compensation totaling $124,000 paid
to a key consultant.

                                       21
<PAGE>

     Sales and Marketing

     Sales and marketing expenses were $2,239,157 in fiscal 2000 compared to
$860,524 in fiscal 1999, an increase of 160%. The increase is related to the
Company's expansion of its direct telemarketing sales staff, sales commissions
totaling $527,961, as well as $781,101 in stock compensation paid to sales and
marketing consultants.

     General and Administrative

     General and administrative expenses were $2,250,217 in fiscal 2000 compared
to $292,856 in fiscal 1999, an increase of 668%. The increase is primarily
related to $1,525,160 in stock compensation paid to our former chief executive
officer and individuals associated with NuVen prior to the termination of the
NuVen agreement. The Company has expanded finance and accounting functions, as
well as incurred other expenses necessary to operate a public company.

     Liquidity and Capital Resources.

     The Company has incurred losses from operations during 2000 and 1999 and as
of May 31, 2000, it had a working capital deficiency of $513,869. The Company
requires significant capital to meet its obligations as they become due and fund
its operations until such time the Company can achieve profitability. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The Company's plan is to seek additional capital through a
private placement of its common stock. Furthermore, the Company intends to
utilize its common stock for future financial support to finance its needs.
There are no assurances that the Company will be successful in completing an
offering sufficient to meet its operating needs. No adjustments have been made
to the financial statements as a result of this uncertainty. The Company's
independent accountants have modified their report to include an explanatory
paragraph regarding this matter.

     The Company has no commitments for capital expenditures or additional
equity or debt financing and no assurances can be made that its working capital
needs can be met. The Company incurred $185,767 of capital expenditures in 2000.

     The Company has generated cash from sales of its common stock and notes to
fund its capital expenditures and operating losses. In 2000, the Company
generated $2,039,730 and $448,680 from the issuance of common stock and notes,
respectively, versus aggregate proceeds received of $777,210 in 1999. The
Company used $1,648,599 in operations in fiscal 2000 versus $716,922 in fiscal
1999.

     Income Taxes

     The Company has incurred losses which are available to offset future
taxable income. Due to the uncertainties regarding the recovery of such asset
through future operations, management has recorded a valuation allowance for to
reduce all its deferred tax assets to zero. Accordingly, there is no benefit for
income taxes in the accompanying financial statements.


ITEM 7.   FINANCIAL STATEMENTS

                                       22
<PAGE>

                               NETCOMMERCE, INC.
                     (formerly Virtual Enterprises, Inc.)

                  Index to Consolidated Financial Statements

<TABLE>
<CAPTION>


Description                                                                                  Page
-----------                                                                                  ----
<S>                                                                                          <C>

Independent Auditors' Report                                                                  24

Consolidated Balance Sheet as of May 31, 2000                                                 25

Consolidated Statements of Operations for the Years Ended May 31, 2000 and 1999               26

Consolidated Statements of Stockholders' Equity for the Years Ended May 31, 2000 and 1999     27

Consolidated Statements of Cash Flows for the Years Ended May 31, 2000 and 1999               28

Notes to Consolidated Financial Statements                                                    29
</TABLE>

                                       23
<PAGE>

INDEPENDENT AUDITORS' REPORT


Board of Directors
NetCommerce, Inc.
(formerly Virtual Enterprises, Inc.)

We have audited the accompanying consolidated balance sheet of NetCommerce, Inc.
(the "Company") as of May 31, 2000, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
two-year period ended May 31, 2000. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of May 31, 2000, and the consolidated results of its operations and
its cash flows for each of the years in the two-year period ended May 31, 2000,
in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has sustained losses from
operations since its inception, has a working capital deficit, and requires
substantial financing to meet its obligations as they become due. These factors
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


                                 /s/  McKennon, Wilson & Morgan LLP
                                 ----------------------------------

Irvine, California
September 8, 2000

                                       24
<PAGE>

                                    ASSETS
Current assets:
 Cash and cash equivalents                                      $   414,716
 Accounts receivable                                                 22,623
 Other current assets                                               101,103
                                                                -----------
     Total current assets                                           538,442

Investment, at cost (Note 4)                                        313,200
Property and equipment, net of accumulated
 depreciation of $235,106 (Note 5)                                  308,154
Intangible assets, net of accumulated
 amortization of $371,466 (Note 6)                                1,200,108
Other assets                                                         92,806
                                                                -----------
                                                                $ 2,452,710
                                                                ===========

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                               $   185,206
 Accrued sales tax (Note 7)                                         151,517
 Notes payable (Note 8)                                             256,250
 Notes payable to related parties (Note 11)                        253,977
 Other accrued liabilities                                          219,702
                                                                -----------
     Total current liabilities                                    1,066,652

Commitments and contingencies (Note 9)

Stockholders' equity (Note 10):
 Common stock, par value $0.01; 75,000,000 shares
     authorized; 25,672,937 shares issued and                       256,729
      outstanding
 Additional paid-in capital                                       8,914,862
 Accumulated deficit                                             (7,785,533)
                                                                -----------
     Total stockholders' equity                                   1,386,058
                                                                -----------

                                                                $ 2,452,710
                                                                ===========

                                       25
<PAGE>

                                                  For the Year Ended May 31,
                                                  --------------------------
                                                         2000           1999
                                                  -----------    -----------

Net revenues                                      $   974,052    $   382,798
                                                  -----------    -----------


Operating expenses (Notes 10 and 11):
 Development and services                           1,086,254        687,143
 Sales and marketing                                2,239,157        860,524
 General and administrative                         2,250,217        292,856
                                                  -----------    -----------
    Total expenses                                  5,575,628      1,840,523
                                                  -----------    -----------

Operating loss                                     (4,601,576)    (1,457,725)

Other income (expense):
 Interest expense (Notes 8, 10 and 11)             (1,111,060)      (118,986)
 Other                                                 32,983            862
                                                  -----------    -----------
    Total other expense, net                       (1,078,077)      (118,124)
                                                  -----------    -----------

Net loss                                          $(5,679,653)   $(1,575,849)
                                                  ===========    ===========

Basic and diluted loss per share                       $(0.30)        $(1.07)
                                                  ===========    ===========

Basic and diluted weighted average
 common shares outstanding                         18,952,295      1,472,878
                                                  ===========    ===========

                                       26
<PAGE>

<TABLE>
<CAPTION>
                          Common Stock          Additional      Accumulated
                      ----------------------
                       Shares       Amount     Paid-In Capital     Deficit          Total
                     -----------  ----------  ---------------  --------------  -------------
<S>                  <C>          <C>         <C>              <C>             <C>
Balances, May 31,        509,298    $  5,093      $  298,501     $  (530,031)   $  (226,437)
 1998
Shares issued for
 acquisition of            1,049          10         135,132               -        135,142
 InteleSell
Conversion of
 Metroplex note        7,154,989      71,550       1,209,450               -      1,281,000
 payable to
 InteleSell
Shares issued for
 services rendered     1,406,000      14,060         221,745               -        235,805
 to Metroplex
Shares deemed
 issued in
 satisfaction of         332,000       3,320         327,385               -        330,705
 preferred stock
 of Metroplex
Shares deemed
 issued for equity
 participation           596,664       5,967         353,326               -        359,293
 interests of
 Metroplex
Shares retained by
 NetCommerce
 shareholders in       5,919,372      59,194         (59,194)              -              -
 recapitalization
Net loss                       -           -               -      (1,575,849)    (1,575,849)
                      ----------    --------      ----------   -------------    -----------

Balances, May 31,     15,919,372     159,194       2,486,345      (2,105,880)       539,659
 1999
Shares issued for         20,900         209         210,241               -        210,450
 debt issue costs
Shares issued to
 employees for         1,857,485      18,574       1,315,825               -      1,334,399
services
Shares issued for
 investment              174,000       1,740         311,460               -        313,200
Shares issued to
 consultants for       1,572,401      15,724       1,133,047               -      1,148,771
 services
Shares issued at
 various dates for
 cash at prices        5,678,779      56,788       1,982,942               -      2,039,730
 ranging from
 $0.20 to $1.50,
 each
Shares issued in
 acquisition of          100,000       1,000         184,777               -        185,777
 NetCom ISP
Shares issued in
 acquisition of           50,000         500          85,997               -         86,497
 Current Media
Shares issued for         50,000         500          88,500               -         89,000
 settlement
Shares issued for
 Techtonic Data          150,000       1,500         173,103               -        174,603
 interest
Value of shares
 contributed to                -           -         831,125               -        831,125
 service debt
Value of shares
 issued to related       100,000       1,000         111,500               -        112,500
 party for lease
Net loss                       -           -               -      (5,679,653)    (5,679,653)
                      ----------    --------      ----------   -------------    -----------
Balances, May 31,     25,672,937    $256,729      $8,914,862     $(7,785,533)   $ 1,386,058
 2000                 ==========    ========      ==========   =============    ===========
</TABLE>



                                       27
<PAGE>

<TABLE>
<CAPTION>
                                              For the Year Ended May 31,
                                         -----------------------------------

                                               2000               1999
                                         -----------------   ---------------
<S>                                      <C>                 <C>
Cash flows from operating activities:
 Net loss                                      $(5,679,653)      $(1,575,849)
 Adjustments to reconcile net loss to
  net cash used in operating activities:
  Depreciation                                     128,532            90,273
  Amortization                                     209,564           161,902
  Issuance of common stock to employees for      1,334,399           235,805
    services
  Issuance of common stock to consultants for
    services                                       990,771                 -
  Issuance of common stock for interest            200,000            81,000
  Issuance of common stock for legal settlement     89,000                 -
  Value of shares contributed to service debt      831,125                 -
  Other                                             26,250                 -
  Change in operating assets and liabilities:
   Increase in accounts receivable                 (42,623)                -
   Increase in other current assets                (63,603)                -
   Increase in accounts payable                    119,601            13,014
   Increase in accrued sales tax                   151,517           186,000
   Increase in other accrued liabilities            56,521            90,933
                                               -----------       -----------
        Net cash used in operating activities   (1,648,599)         (716,922)
                                               -----------       -----------

Cash flows from investing activities:
  Capital expenditures                            (185,767)          (60,288)
  Increase in other assets                         (14,192)                -
                                               -----------       -----------
        Net cash used in investing activities     (199,959)          (60,288)
                                               -----------       -----------

Cash flows from financing activities
  Proceeds from issuance of notes payable          448,680            82,412
  Payments on related party notes payable         (225,136)                -
  Proceeds from issuance of stock                2,039,730                 -
  Issuance of preferred stock of Metroplex               -           330,705
  Issuance of equity participation interests
    of Metroplex                                         -           364,093
                                               -----------       -----------
        Net cash provided by financing
         activities                              2,263,274           777,210
                                               -----------       -----------

Net increase in cash                               414,716                 -
Cash at beginning of year                                -                 -
                                               -----------       -----------
Cash at end of year                            $   414,716       $         -
                                               ===========       ===========

Cash paid for:
 Interest                                      $    79,935       $    18,849
                                               ===========       ===========

Non cash financing activities:
 Common stock issued for investment, at cost   $   313,200       $         -
                                               ===========
 Common stock issued for acquisitions          $   446,877       $         -
                                               ===========
 Common stock issued for accrued liabilities   $   260,000       $         -
                                               ===========
 Common stock issued for assets of InteleSell  $         -       $   135,142
                                               ===========       ===========
 Note payable issued for acquisition
  of InteleSell                                $         -       $ 1,200,000
                                               ===========       ===========
 Conversion of Metroplex note payable
  to InteleSell, plus accrued interest
  into common stock                            $         -       $ 1,281,000
                                               ===========       ===========

</TABLE>

                                       28
<PAGE>

Note 1 - Organization and History

NetCommerce, Inc., formerly Virtual Enterprises, Inc. ("NetCommerce") was formed
in June 1989 as a Colorado corporation under the name The Toen Group, Inc.
NetCommerce was primarily engaged in the acquisition, maintenance and operation
of television stations in various states through 1992. From 1992 through May 5,
1999, NetCommerce had no operations.

On Aug. 31, 1999, the company changed its name from Virtual Enterprises, Inc. to
NetCommerce, Inc.

On May 5, 1999, NetCommerce acquired the assets and assumed certain liabilities
of MetroplexWeb, Inc. ("Metroplex") for 10,000,000 shares of its common stock.
Metroplex, a Texas corporation was formed on September 12, 1996. Metroplex is
engaged primarily in the development, design, hosting and support of Internet
web pages. Metroplex also creates, designs and administers Internet malls, where
users can search for products and services in their geographical area known as
"virtual cities." Metroplex's operations are primarily located in Dallas/Forth
Worth, Texas and are expanding into other metropolitan cities. The acquisition
of Metroplex is accounted for as a reverse merger as if Metroplex was
recapitalized by NetCommerce.

Prior to becoming a subsidiary of NetCommerce, Metroplex entered into an asset
purchase agreement with InteleSell, Inc. ("InteleSell") on June 30, 1998. In
connection therewith, Metroplex issued common stock and notes aggregating
$1,335,142 to acquire these assets. The acquisition was accounted for as a
purchase. InteleSell develops, designs and hosts Internet web pages. During
fiscal 2000, NetCommerce acquired three small companies with very limited
operations for an aggregate purchase price of $446,877. The acquisitions were
primarily consummated to establish an office in the state of Utah and expand
into broadband and collection services. See Note 3 for further discussion of
these acquisitions.

Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
NetCommerce and its majority-owned subsidiaries (collectively, the "Company").
All significant intercompany accounts have been eliminated in consolidation.

The accompanying consolidated financial statements reflect the historical
operations of Metroplex for all periods presented. The accompanying consolidated
financial statements include the operations of the Company's acquirees from the
date of acquisition.

Going Concern

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. At May 31, 2000, the Company
had a working capital deficit of $513,869. The Company requires capital to
continue to fund losses for the foreseeable future. These factors raise
substantial doubt about its ability to continue as a going concern. Since
inception, the Company has generated cash flows from financing activities to
fund losses from operations. Management plans to raise equity and/or debt
financing through a private placement of securities. Losses from operations are

                                       29
<PAGE>

expected to increase due to management's belief that expanded marketing and
sales efforts are required to significantly increase the Company's revenues.
There are no assurances that NetCommerce will be successful in obtaining
additional funding on satisfactory terms. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

     Cash and Cash Equivalents

The Company considers all liquid investments with a remaining maturity of three
months or less to be cash equivalents. Balances in bank accounts may, from time
to time, exceed federally insured limits.

Property and Equipment

Property and equipment are stated at cost and are depreciated over their
estimated useful lives using the straight-line method ranging from three to five
years. Additions and betterments are capitalized. The cost of maintenance and
repairs is charged to expense as incurred. When depreciable property is retired
or otherwise disposed of, the related cost and accumulated depreciation and
amortization are removed from the accounts and any gain or loss is reflected in
the consolidated statements of operations.

The Company periodically reviews the value of its property and equipment for
impairment whenever events or changes in circumstances indicate that the book
value of an asset may not be recoverable. An impairment loss would be recognized
whenever the review demonstrates that the future undiscounted net cash flows
expected to be generated by an asset from its use and eventual disposition are
less than the carrying amount of the asset. Management believes no impairment
has occurred.

Intangible Assets

Customer lists represent the value of customers acquired from InteleSell on June
30, 1998. The Company assigned the value based on comparable acquisitions of
customer lists in the Company's industry. Management assigned a value of $1,000
per customer acquired, or $253,000. The Company amortizes these costs over its
expected benefit period from the customer. In management's opinion, the expected
benefit period of its customers acquired is approximately five years, and
accordingly, customer lists are amortized over five years using the straight-
line basis. In the event circumstances affecting customer retention change,
management will adjust the period to be benefited prospectively. During the
years ended May 31, 2000 and 1999, amortization of customer lists amounted to
$50,600 and $46,383.

Goodwill represents the excess of purchase price over the fair value of the net
assets of acquired businesses. Goodwill is stated at cost and is amortized on a
straight-line basis ranging from three to seven years. The Company assesses the
recoverability of this intangible asset quarterly, by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through projected undiscounted cash flows. The amount of goodwill impairment, if
any, is measured based on projected undiscounted cash flows and is charged to
operations in the period in which goodwill impairment is determined by
management. To date, management has not identified any impairment of goodwill.
During the years ended May 31, 2000 and 1999, amortization of goodwill amounted
to $158,964 and $115,519, respectively.

Revenue Recognition

Revenue is recognized when earned.  The Company's revenue recognition policies
are in compliance with American Institute of Certified Public Accountants,
Statements of Position 97-2 and 98-4, "Software

                                       30
<PAGE>

Revenue Recognition". Revenue from web site development is recorded when the web
site is completed and operational. Web site hosting revenue is recognized
ratably over the contract period. Provisions for losses are recorded for bad
debts for credit customers.

The Company generally enters into contracts to host customer web sites for one
year or more. At May 31, 2000 and 1999, the Company deferred hosting fees of
$60,656 and $69,605, respectively, included in other accrued liabilities in the
accompanying balance sheet.

Research and Development

Research and development costs are expensed as incurred.  Statement of Financial
Accounting Standards ("SFAS") 86, "Accounting for the Costs of Computer Software
to Be Sold, Leased, or Otherwise Marketed", does not materially affect the
Company.

Advertising Costs

The Company expenses the costs of advertising as incurred. Advertising expenses
were not significant for the periods presented.

Provision for Income Taxes

The Company accounts for its income taxes under an asset and liability method
whereby deferred tax assets and liabilities are determined based on temporary
differences between bases used for financial reporting and income tax reporting
purposes. Income taxes are provided based on the enacted tax rates in effect at
the time such temporary differences are expected to reverse. A valuation
allowance is provided for certain deferred tax assets if it is more likely than
not that the Company will not realize tax assets through future operations.

The Company's net deferred tax assets of approximately $2.3 Million at May 31,
2000, consist of net operating loss carryforwards amounting to approximately
$5.6 Million for federal income tax reporting purposes; these net operating
losses begin to expire in 2019. The utilization of these net operating losses
may be substantially limited by the occurrence of certain events, including
changes in ownership. At May 31, 2000, the Company provided a valuation
allowance for deferred tax asset totaling $2.3 Million. During the years ended
May 31, 2000 and 1999, the Company's valuation allowance increased $1,822,000
and $117,000, respectively.

Loss Per Share

The Company presents basic earnings per share ("EPS") and diluted EPS on the
face of all statements of operations. Basic EPS is computed as net loss divided
by the weighted average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur from common shares
issuable through stock options and warrants. Due to the net losses incurred
during the years ended May 31, 2000 and 1999, all common stock equivalents
outstanding were considered anti-dilutive and were excluded from the
calculations of diluted net loss per share. At May 31, 2000, there were no
securities that would be recorded as common stock equivalents in the calculation
of diluted net loss per share.

Estimates

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of

                                       31
<PAGE>

assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Reporting Comprehensive Income

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income".
This statement establishes standards for reporting the components of
comprehensive income and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
included in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income includes net income, as well as
certain non-shareholder items that are reported directly within a separate
component of stockholders' equity and bypass net income. The Company had adopted
the provisions of this statement during the prior fiscal year, with no impact on
the accompanying consolidated financial statements.

Disclosures about Segments of an Enterprise and Related Information

The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" in fiscal year 1999.  SFAS No. 131 establishes
standards for reporting information about operating segments and related
disclosures about products, geographic information and major customers.  The
Company's operations have been classified into two operating segments: (i) Web
Site Development - the Company contracts the design, development and
implementation of Internet sites on the World Wide Web; and (ii) Web Site
hosting - the Company provides web hosting and support services.

The Company's operating segments are differentiated by service type.  Summarized
financial information by operating segment is as follows:

                                             2000           1999
                                           --------       --------
          Net revenues:
             Web Site Development          $832,770       $325,723
             Web Site Hosting               141,282         57,075
                                           --------       --------
                                           $974,052       $382,798
                                           ========       ========

Stock-based Compensation

The FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which
defines a fair value based method of accounting for stock-based compensation.
However, SFAS 123 allows an entity to continue to measure compensation cost
related to stock and stock options issued to employees using the intrinsic
method of accounting prescribed by Accounting Principles Board Opinion No. 25
("APB 25"), "Accounting for Stock Issued to Employees".  Entities electing to
remain with the accounting method of APB 25 must make pro forma disclosures of
net income and earnings per share, as if the fair value method of accounting
defined in SFAS 123 had been applied.  Through May 31, 2000, the Company had no
employee stock options outstanding.

     Accounting for Derivative Instruments and Hedging Activities

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities."  SFAS No. 133 establishes a new model for
accounting for derivatives and hedging activities

                                       32
<PAGE>

and supersedes and amends existing accounting standards and is effective for
fiscal years beginning after June 15, 2000. SFAS No. 133 requires that all
derivatives be recognized in the balance sheet at their fair market value, and
the corresponding derivative gains or losses be either reported in the statement
of operations or as a component of other comprehensive income depending on the
type of hedge relationship that exists with respect to such derivative. The
Company does not expect the adoption of SFAS No. 133 to have a material impact
on its consolidated financial statements.

Financial Statement Reclassifications

Certain amounts reflected in the consolidated financial statements for the year
ended May 31, 1999 have been reclassified to conform to the presentation for the
year ended May 31, 2000.

Note 3 - Acquisitions

On February 15, 2000, the Company acquired all the assets of CurrentMedia LLC
("CurrentMedia") for $10,000 cash and 50,000 shares of restricted common stock,
fairly valued at $86,497.  The acquisition was accounted for under the purchase
method with the excess of cost over the fair value of the net assets acquired of
$76,177 allocated to goodwill.  The assets acquired were fixed assets fairly
valued at $10,320.  CurrentMedia is located in Park City, Utah, and develops,
designs and hosts Internet web pages.  The Company believes that the acquisition
is the first step in expanding their operations throughout the United States.

On March 17, 2000, the Company issued 100,000 shares of restricted common stock
for all the issued and outstanding common stock of Netcom ISP, Inc. ("Netcom"),
an unrelated Internet service provider. The value of the common stock issued was
$1.86 per share or $185,777 in total, based on the average closing market price
of the stock for the 15 days prior and subsequent to the transaction
announcement date less a 10% discount for the trading restriction imposed on
such shares. The acquisition was accounted for under the purchase method with
the excess of cost over the fair value of assets acquired of approximately
$175,652 allocated to goodwill. Netcom provides connectivity and bandwidth
services to small and medium sized businesses.

On April 10, 2000, the Company issued 150,000 shares of restricted common stock
for the purchase of a 51% interest in Tectonic Data, L.L.C. ("Tectonic"), an
unrelated technology development and positioning company.  The restricted common
stock was valued at $1.16 per share or $174,603 in total, based on the average
closing market price of the stock for the 15 days prior and subsequent to the
transaction announcement date including a 10% discount for the trading
restriction imposed on such shares.  The Company believes that through the
acquisition of Tectonic it can improve its website design, development and
hosting services.

The acquisitoins discussed above are not considered material to the Company's
net assets or operations, individually or in the aggregate.

As discussed in Note 1, on June 30, 1998, Metroplex entered into an asset
purchase agreement with InteleSell to acquire all of the assets owned by
InteleSell.  In connection therewith, Metroplex issued 1,049 shares of its
common stock valued at $135,142 and a note payable of $1,200,000.  The
$1,335,142 purchase price has been allocated approximately $200,000 to certain
property and equipment, and

                                       33
<PAGE>

$253,000 to customer lists based on their estimated fair value. Metroplex
allocated the remaining purchase price of $882,142 to goodwill.

The unaudited pro forma statement of operations data for the years ended May 31,
1999, assuming the acquisition of Metroplex and InteleSell occurred June 1,
1998, are as follows:

                                       1999
                                    ------------
              Revenues              $   387,788
                                    ===========
              Net loss              $(1,810,420)
                                    ===========
              Net loss per share    $     (1.23)
                                    ===========

The above unaudited pro forma amounts are not necessarily indicative of what the
actual results might have been if the acquisitions had occurred as of the dates
indicated.

Note 4 - Investment, at cost

On July 23, 1999, the Company entered into a Memorandum of Understanding with
Anyuser.Net ("Anyuser"), South Korean corporation, of Seoul, Korea, whereby the
Company intended to invest $3 million into Anyuser to acquire approximately 47%
of the total issued and outstanding common stock of Anyuser. The Company
advanced Anyuser $100,000. On February 21, 2000, the Company transferred all its
rights to a letter of intent to Anyuser to NuVen Capital Limited Partnership for
57,143 shares of an unrelated Company's common stock. These shares are accounted
as marketable securities. At May 31, 2000, the fair market value of the common
stock was $57,143, which has been recorded in other current assets in the
accompanying balance sheet. In connection with exchange, the Company recorded a
loss of $42,857 included in other income (expenses) in the statement of
operations in fiscal 2000.

On March 2, 2000, the Company issued 174,000 shares of restricted common stock
in exchange for 50 shares of common stock or a 5% interest in an unrelated
company.  The value of the common stock issued was $313,200 based on the average
closing market price of the stock for the 15 days prior and subsequent to the
transaction date, less a 10% discount for the trading restrictions imposed on
such shares.

Note 5 - Property and Equipment


Property and equipment consists of the following as of May 31, 2000:



     Property and equipment                                   $ 485,045
     Furniture and fixtures                                      55,868
     Leasehold improvements                                       2,347
                                                              ---------
                                                                543,260
     Less: accumulated depreciation                            (235,106)
                                                              ---------

                                                              $ 308,154
                                                              =========



                                       34
<PAGE>

Note 6 - Intangible Assets

At May 31, 2000, intangible assets and related lives are as follows:

                                 Goodwill     Customer Lists           Total
                        -----------------  -----------------  -----------------
Cost                           $1,318,574           $253,000         $1,571,574
Less - Accumulated               (274,483)           (96,983)          (371,466)
 amortization                  ----------           --------         ----------
                               $1,044,091           $156,017         $1,200,108
                               ==========           ========         ==========

Range of lives              Three to five         Five years
                            years


Note 7 - Accrued Sales Taxes

Effective October 1, 1999, the State of Texas requires that sales tax must be
paid on all revenues derived from services related to the development of web
sites. The rule was retroactive, so the tax applies to all revenues derived from
web development services since the Company's inception in 1996. This liability
has been determined by the State of Texas to be $151,517 as of May 31, 2000, and
is included on the accompayning balance sheet. The Company is currently acting
to resolve this matter with the State of Texas.

Note 8 - Notes Payable

In connection with the acquisition of InteleSell, the Company issued a note
payable of $1,200,000, interest at 8% per annum, due in annual installments of
$96,000, with remaining principal, plus accrued interest due on June 30, 2001.
Interest expense included in operations during fiscal 1999 amounted to
approximately $81,000. In May 1999, the noteholders agreed to convert principal,
plus accrued interest into 7,154,989 shares of the Company's common stock.

On June 2, 1999, the Company issued 8% notes totaling $250,000, due and payable
June 2, 2000. As an inducement to obtain the financing, a NetCommerce
shareholder issued 200,000 shares of common stock. Management estimated the
value of such shares at $200,000, which were amortized as interest costs during
fiscal 2000. The due date of the note was extended to September, 2001.

On September 1, 1999, the Company issued an 8% note totaling $100,000, due and
payable January 1, 2000. As an inducement to obtain the financing, a NetCommerce
shareholder pledged as collateral 235,000 shares of common stock. On January 1,
2000, the Company defaulted on the loan and the creditor retained the 235,000
shares of common stock as settlement. The Company valued the pledged shares at
$440,625 on the date of default and charged interest expense. As of May 31,
2000, the Company was obligated to repay this shareholder the outstanding
balance of $100,000. Subsequent to May 31, 2000, the Company issued 275,000
shares of restricted common stock to this shareholder in full settlement of this
debt.

                                       35
<PAGE>

Note 9 - Commitments and Contingencies

Operating Leases

The Company is obligated under certain facility lease agreements to make future
annual minimum rental payments, excluding taxes and common area maintenance
costs, for the years ending May 31 as follows:

     Years Ending
        May 31,
     ------------

         2001                            $  385,974
         2002                               396,444
         2003                               328,333
         2004                                55,000
                                         ----------

                                         $1,165,751
                                         ==========

Total rent expense for all leases for the years ended May 31, 2000 and 1999 was
$132,039 and $97,682, respectively. See Note 11, for a lease that was entered
into subsequent to year-end.

Consulting Agreements

On November 1, 1998, Metroplex entered into certain agreements for marketing and
sales assistance, as well as certain financial advisory services with certain
consultants. These agreements expired on June 30, 1999. Total consulting fees
incurred in connection with these agreements amounted to $10,000 and $186,000 in
fiscal 2000 and 1999, respectively. The Company satisfied these obligations
through the issuance of common stock, see Note 10. Total consulting expense
during fiscal 2000 amounted to $1,404,512.

On July 1, 1998, NetCommerce entered an agreement with NuVen Advisors, Inc.
("NuVen") for financial advisory services at the rate of $10,000 per month.
NuVen is controlled by the Company's former president. On April 30, 1999,
NetCommerce issued 850,000 shares of common stock in settlement of services
rendered through April 30, 1999, valued at $100,000 or $0.12 per share based on
the fair market value of the Company's common stock. During Fiscal 2000, this
agreement was amended to reduce the rate of $3,500 and $500 per month,
respectively. On December 16, 1999, the agreement was terminated. The Company
issued 2,367,442 shares of common stock valued at $1,562,512 to employees of the
Company, which were also employees of NuVen , as well as certain other employees
of NuVen. Of such amounts, 1,671,397 shares valued at $1,103,122 were issued to
the Company's then executive officers. On December 16, 1999, the Company's
officers resigned.

The Company from time to time retains consultants in the normal course of
business. These consultants may be treated as employees by state and federal
authorities. In the event that these consultants are reclassified as employees
by authorities, the Company may be liable for state and federal payroll taxes,
plus penalties and interest, related to the individuals.

     Litigation

The Company is subject to a limited number of claims and actions, which arise in
the ordinary course of business. The litigation process is inherently uncertain,
and it is possible that the resolution of the company's existing and future
litigation may adversely affect the Company. Management is unaware of

                                       36
<PAGE>

any matters that may have material impact on the Company's consolidated
financial position, results of operations or cash flows.

Note 10 - Stockholders' Equity

Common Stock

On August 31, 1999, the board of directors approved an increase in the number of
common shares authorized from 50,000,000 to 75,000,000 while retaining the same
$0.01 par value.

In connection with Metroplex's acquisition of the assets of InteleSell on June
30, 1998, the Company issued 1,049 shares of its common stock valued at $135,142
(see Notes 1 and 3). The Board of Directors valued this common stock based on
the Company's peer group historical revenues and 1999 projected revenues. The
value placed on these shares of common stock was approximately $129 per share.

On May 3, 1999, Metroplex's Board of Directors and shareholders approved the
conversion of the InteleSell notes payable totaling $1,200,000, plus accrued
interest of $81,000 into 7,154,989 shares of the Company's common stock. The
parties agreed to a value per share of the Company's common stock of $.18 per
share; however, no credit was provided for accrued interest. The notes plus the
accrued interest were converted on May 4, 1999.

On May 3, 1999, Metroplex's Board of Directors and shareholders approved the
issuance of 1,406,000 shares of common stock to certain officers and employees
for prior services rendered to the Company. The shares issued for services
rendered were valued by the Board of Directors at $.17 per share. The valuation
was primarily based on the negotiated conversion of the InteleSell notes into
the Company's common stock.

During fiscal 1999, Metroplex issued 332 shares of convertible preferred stock
at $1,000 per share. Each preferred share was converted into 1,000 shares of the
Company's common stock. Through May 31, 1999, Metroplex received net proceeds of
$330,705; no convertible preferred shares were issued subsequent to May 31,
1999.

From July 1997 through May 31, 1999, Metroplex authorized and issued
participating equity instruments, which enabled the holder to participate in the
profits and benefit from a sale or an initial public offering of Metroplex. Such
interests were converted into shares of common stock subsequent to the
acquisition of Metroplex's assets. The investors were issued 1,100,000 shares of
common stock in satisfaction of $662,387 of these equity participation
interests. Shares were deemed issued retroactively to effect the date of
issuance of the participation interest; 503,336 shares in fiscal 1998 and
596,664 shares in fiscal 1999, because of the reverse acquisition accounted for
as a recapitalization.

On March 2, 2000, the Company issued 174,000 shares of restricted common stock
in exchange for 50 shares of common stock or a 5% interest in an unrelated
company. The value of the common stock issued was $313,200 based on the average
closing market price of the stock for the 15 days prior and subsequent to the
transaction date including a 10% discount for the trading restriction imposed on
such shares.

On March 17, 2000, the Company issued 100,000 shares of restricted common stock
for all the issued and outstanding common stock of an unrelated Internet service
provider (Note 3).

On March 22, 2000, the Company issued 50,000 shares of restricted common stock
in satisfaction of a lawsuit brought on by a prior member of management. The
shares were valued at $89,000 and charged to operations.

                                       37
<PAGE>

On April 10, 2000, the Company issued 150,000 shares of restricted common stock
valued at $174,603 for the purchase of a 51% interest in an unrelated technology
development and positioning company (Note 3).

On various dates during fiscal 2000, the Company issued 1,572,401 shares of
restricted common stock to consultants for services rendered. The services
ranged from financial consulting to promoting services. These shares were valued
at $1,148,771, which includes a 10% discount for the trading restrictions
imposed on such shares (Note 8).

On various dates during fiscal 2000, the Company issued 5,678,779 shares of
restricted common stock for cash at prices ranging from $0.20 to $1.50 per share
in private placements relying on exemptions to registration available under the
provisions of the Securities Act of 1933. The Company received $2,039,370
pursuant to such offerings.

See Note 11 for an additional common stock transaction.

Stock Options

Options to purchase 750,000 shares of common stock at $0.01 expired on December
31, 1999, with none exercised. In addition, options to purchase 100,000 shares
of common stock, exercisable at $1.00 per share, expired on December 31, 1999,
with none exercised. As of May 31, 2000, options to purchase 100,000 shares of
common stock at $1.00 are outstanding and exercisable, and expire on June 30,
2001. No options were granted in fiscal 2000.

Warrants

As of May 31, 2000, warrants to purchase 668,000 shares of common stock were
outstanding at an exercise price of $5.00 per share. The warrants are
exercisable at the option of the holders on or before December 31, 2000.

Note 11 - Related Party Transactions

The Company has a note payable due to an officer of the Company totaling $63,995
at May 31, 2000 for advances to the Company through charges for Company expenses
on his personal credit card. The note bears interest at 17% per annum and is due
on demand. The Company made payments of $184,541 on this note in fiscal 2000.
Management expects to repay the remaining amount in fiscal 2001. Payments for
interest charges under this note were $42,374 and $18,849 in fiscal 2000 and
1999, respectively.

The Company satisfied a note payable to a former officer of the Company with
payments totaling $38,596 during fiscal year 2000. The original note was a
result of advances to the Company through charges for Company expenses on the
officer's personal credit card. Payments for interest charges under this note
were $5,920 in fiscal 2000.

In fiscal 2000, the Company renewed some of the agreements. At May 31, 2000, no
amounts are due in connection with these agreements.

On December 14, 1999, the Company issued 8% notes to a company totaling $90,000,
originally due and payable January 14, 2000. At May 31, 2000, the note is still
outstanding and is due upon demand. As an

                                       38
<PAGE>

inducement to obtain the financing, a NetCommerce shareholder pledged as
collateral 250,000 shares of common stock. On January 14, 2000, the Company
defaulted on the loan and the creditor retained the 250,000 shares of common
stock as settlement. The Company valued the pledged shares at $390,500 on the
date of default and charged interest expense. As of May 31, 2000, the Company
was obligated to repay this shareholder the outstanding balance of $90,000.
Subsequent to May 31, 2000, the Company issued 300,000 shares of restricted
common stock to this shareholder in full settlement of this debt.

On April 4, 2000, the Company issued 100,000 shares of restricted common stock
to a relative of an officer of the Company. The shares were issued, as an
incentive for the officer's relative to enter into a lease on behalf of the
Company for computers and related equipment. The shares were valued at $112,500
and will be amortized over the 36-month life of the lease. The Company charged
$6,250 to rent expense in fiscal 2000, as a result of this issuance.

Note 12 - Subsequent Events

On June 16 and July 16, 2000, the Company issued 1,200,000 and 1,150,000 shares,
respectively, of restricted common stock for cash at $0.20 per share in private
placements under exemptions available under the Securities Act of 1933. The
Company received $470,000 pursuant to these offerings. Such shares were issued
to an unrelated party and based on market conditions.

On June 26, 2000, the Company entered into a lease agreement with a three-year
term for a 20,000 square foot facility. The lease commences on August 1, 2000
and requires monthly payments of $25,833 during the first year.

On September 5, 2000, the Company entered into a letter of intent giving the
Company a direct equity interest for developing, positioning, and streamlining
e-commerce operations for a Columbian based coal mining operation.

For additional subsequent events see Notes 11.


ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

     None

                                   PART III

ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS

(a)  Identification of Directors and Executive Officers.

     The following table furnishes the information concerning the directors and
executive officers of the Company as of May 31, 2000. The directors of the
Company are elected every year and serve until their successors are elected and
qualify.

                                       39
<PAGE>

<TABLE>
<CAPTION>
                             Period Served as        Officer          Period Served
        Name           Age       Director           Position           as Officer
        ----           ---       --------           --------           ----------
<S>                   <C>    <C>                <C>                 <C>
Mark B. Lindberg         33     9/15/99 -        Chief Executive    9/15/99 - Present
                                 Present             Officer
-------------------------------------------------------------------------------------
Daniel L. Henderson      23     9/15/99 -        Chief Operating    9/15/99 - Present
                                 Present             Officer
-------------------------------------------------------------------------------------
</TABLE>

(b)  Business Experience.

     The following is a brief account of the business experience during the past
five years of each director and executive officer of the Company, including
principal occupations and employment during that period and the name and
principal business of any corporation or other organization in which such
occupation and employment were carried on.

Mark Lindberg

     Mark Lindberg, (33) CEO of MetroplexWeb, Inc., a NEET wholly owned
subsidiary specializing in website design, hosting, e-commerce applications and
consulting services. As an officer of Metroplexweb since 1996, Mr. Lindberg
qualifies as a seasoned player in the Internet. Mr. Lindberg has been Chief
Executive Officer of Metroplexweb in the transformation of Metroplexweb from a
private to a publicly held company. Mr. Lindberg has been instrumental in
arranging and securing private capital, strategic alliances, and creating new
growth strategies for the company. Mr. Lindberg holds a Bachelor of Science
degree in accounting from Baker University in Baldwin City, Kansas where he
attended on a golf scholarship. Mr. Lindberg was formerly employed for 6 years
by National Health Care Discount, Inc. (NHCD) of Dallas, Texas, where he served
as Regional Operations Manager of one of the company's five calling centers. Mr.
Lindberg started his career as a Tax Specialist for Deloitte & Touche, a Big
Five Public Accounting Firm, in their Kansas City office.

Daniel Henderson

     Mr. Henderson (23) currently serves as President of MetroplexWeb, Inc. He
is the former President of Web-Maxx Technologies, an Arlington, Texas private
company acquisition by MetroplexWeb, Inc. in late 1998. Mr. Henderson founded
Web-Maxx Technologies in 1996, and established relationships with some of the
largest businesses in the Dallas area. Mr. Henderson's unique understanding of
e-commerce applications is what made Web- Maxx Technologies a viable candidate
for the acquisition. Mr. Henderson's responsibilities include managing the day-
to-day operations of MetroplexWeb, and developing intercompany policies and
procedures. Mr. Henderson attended the University of Texas in Arlington on a
baseball scholarship.

     The Company has no audit, compensation or nominating committees. No family
relationships exist between any of the officers or directors.

     The officers of the Company are chosen by and serve at the pleasure of the
Board of Directors.

(c)  Identification of Certain Significant Employees.

                                       40
<PAGE>

     There are no employees other than the executive officers disclosed above
who make or are expected to make, significant contributions to the business of
the Company, the disclosure of which would be material.

(d)  Family Relationships.

     None.

(e)  Compliance with Section 16(a) of the Securities Exchange Act.

     Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers and directors, and greater than
ten-percent shareholders are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file.

     Based solely on review of the copies of such forms furnished to the
Company, or representations that no Forms 5 were required or filed, the Company
believes that during fiscal year 1997, all Section 16(a) filing requirements
applicable to its officers, directors, and greater than ten-percent beneficial
owners were complied with.

ITEM 10.  EXECUTIVE COMPENSATION

(a)  Summary Compensation Table.

     The following summary compensation table sets forth in summary form the
compensation received during the last fiscal year by the Company's Chief
Executive Officer and President (the "Named Executive Officers"). There were no
executive officers that were compensated in excess of $100,000 during fiscal
year 2000.

<TABLE>
<CAPTION>
   Name and Principal         Fiscal            Salary/(1)/        Other Annual           Options
        Position               Year                                Compensation         Granted (#)
        --------               ----                                ------------         -----------
<S>                           <C>               <C>                <C>                  <C>
Mark B. Lindberg, CEO     6/01/99-5/31/00           $66,239           $   40,000/(2)/        N/A
 and President

Daniel L. Henderson,      6/01/99-5/31/00           $93,162/(3)/               -0-           N/A
 Secretary

Fred G. Luke, former      6/01/99-5/31/00           $  0.00           $1,070,630/(4)/        N/A
 President, CEO, and
 Director

Leonard Roman, former     6/01/99-5/31/00           $  0.00           $   32,492/(5)/        N/A
 Chief Financial Officer
</TABLE>

  (1)  The dollar value of base salary (cash).
  (2)  Mr. Lindberg received shares of Rule 144 common stock in fiscal 2000 in
       lieu of cash for the payment of a prior year deferred compensation
       agreement.
  (3)  Mr. Henderson received $24,200 in consulting compensation paid to Webb
       Max Technologies, Inc., of which Mr. Henderson is the majority
       shareholder and President.

                                       41
<PAGE>

  (4)  Mr. Luke received shares of stock through issuance of an S-8.
  (5)  Mr. Roman received shares of stock through issuance of an S-8.

(b)  Stock Options

     There were no options granted during fiscal year 2000 to the Company's
Named Executive Officers.


(c)  Long Term Incentive Plans.

     None.

(d)  Compensation of Directors

     The Company has no standard arrangement for the compensation of directors
or their committee participation or special assignments.

(e)  Contracts with Named Executive Officer and other Officers and Directors.

     There are no other contracts with Named Executive Officers or other
Officers or Directors.

(f)  Report on Repricing of Options

     During fiscal year 2000, the Company has not adjusted or amended the
exercise price of stock options.

(g)  Change in Control.

     There was no change of control during fiscal year 2000.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


(a)  Beneficial owners of five percent (5%) or greater of the Company's
     Outstanding Voting Securities.

     The following sets forth information with respect to ownership by holders
of more than five (5%) of the Company's outstanding voting securities known by
the Company.

<TABLE>
<CAPTION>
                                                          Amount and
                                                            Nature
                             Name and Address           of Beneficial         Percent of
   Title of Class          of Beneficial Owner             Interest            Class/(1)/
   --------------          -------------------          -------------          --------
<S>                       <C>                           <C>                    <C>
$.001 par value           GRAT Investments, LLC
Common Stock               10009 Office Center            2,575,000             9.95% /(1)/
                          Saint Louis, MO 63128
</TABLE>

(1)  Based upon 25,872,937 common shares outstanding.

     The following sets forth information, with respect to the Company's Common
Stock beneficially owned by each Officer and Director, and by all Officers and
Directors as a group. No Officer or Director personally owns any of the
Company's Redeemable Common Stock Purchase Warrants.

                                       42
<PAGE>

<TABLE>
<CAPTION>
                                                          Amount and
                                                            Nature
                             Name and Address           of Beneficial         Percent of
   Title of Class          of Beneficial Owner             Interest            Class/(1)/
   --------------          -------------------          -------------          --------
<S>                       <C>                           <C>                    <C>
  $.001 par value            Mark Lindberg                     882,931
  Common Stock            1900 Westridge Road                                      3.4%
                          Irving, Texas 75038

   $.001 par value           Daniel Henderson                  460,000
   Common Stock           1900 Westrdige Road                                      1.8%
                          Irving, Texas 75038

    $.001 par value       All Officers and Directories       1,342,931              5.2%
    Common Stock                as a group
</TABLE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(a)  Transactions With Management and Affiliates.

     As noted in Item 10(e), effective June 30, 1998, the employment agreement
with Mr. Fred Luke, President of the Company was terminated. The services of Mr.
Luke subsequent to June 30, 1998 were provided to the Company under the Advisory
and Management Agreement with NuVen Advisors, Inc. Effective July 1, 1998, the
Company amended its Advisory and Management Agreement with NuVen Advisors, Inc.
increasing the monthly fee from $5,000 per month to $10,000 per month. The
amount due NuVen for services in fiscal 1999 was satisfied by the issuance of
additional shares of common stock. The agreement with Nuven Advisors was
terminated in December, 1999 and all payments were satisfied and paid to Nuven.

(b)  Certain Business Relationships.

     There are no employees other than the executive officers disclosed above
who make, or are expected to make, significant contributions to the business of
the Company, the disclosure of which would be material.

(c)  Indebtedness of Management.

     None.


                                 PART IV


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  8-K Reports:

     During fiscal 2000, the Company filed Form 8-K's as follows:

     On June 28, 1999, the Company issued an 8-K in reference to the audit firm
of Kang, Ye, & Jun CPA, resigned as the Company's independent accountant which
did not have an adverse opinion or any qualification as to uncertainty or scope
of accounting principles. There were no disagreements with the audit firm. On
June 29, 1999, the audit firm of McKennon, Wilson, & Morgan LLP was engaged to
perform the audit.

                                       43
<PAGE>

     On August 31, 1999, the Company issued an 8-K in reference to restating and
amending the Articles of Incorporation of the Company. The Company increased its
authorized capital stock from 50,000,000 shares of $0.01 common shares to
75,000,000 shares of $0.001 common and 25,000,000 shares of $0.001 preferred
shares. There was not change in issued or outstanding shares of either class.
The new cusip number is 641082 10 2 and the new trading symbol is NEET.

     On March 7, 2000, the Company issued an 8-K in reference to the change of
principle office relocation to 15280 Addison Road, Suite 250, Addison, Texas
75001 and the new phone number is (972) 503-8984.

(b)  Exhibits:

     Exhibit
     Number                          Description
     -------                         -----------

     1         Consent of Independent Accountants

     2         Financial Data Schedule [Exhibit included herein]


                                 SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   NETCOMMERCE, INC.
                                    (formerly, Virtual Enterprises, Inc.)



Date: September 12, 2000            By:/s/ Mark Lindberg
                                       -----------------
                                       Mark Lindberg,
                                       President and
                                       Chief Executive Officer

                                    By:/s/ Daniel Henderson
                                       --------------------
                                       Daniel Henderson
                                       Secretary

                                       44