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                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

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<S>                                                             <C>
For the fiscal year ended December 31, 2000                     Commission file number:  0-27469
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                                 GLOBALNET, INC.

             (Exact name of registrant as specified in its charter)

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<S>                                                     <C>
            NEVADA                                                87-0635536
-------------------------------                         -------------------------------
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                                Identification No.)

  1919 SOUTH HIGHLAND AVENUE
          SUITE 125-D
       LOMBARD, ILLINOIS                                             60148
-------------------------------                         -------------------------------
     (Address of principal                                         (Zip Code)
      executive offices)
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       Registrant's telephone number, including area code: (630) 652-1300

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

           Securities registered pursuant to Section 12(g) of the Act:

<TABLE>
<CAPTION>
  Title of each class                            Name of each exchange on which registered
  -------------------                            -----------------------------------------
<S>                                              <C>
Common Stock, par value                                   NASDAQ Small Cap Market
    $.001 per share
</TABLE>


         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 the
filing requirements for the past 90 days. Yes [X]  No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. [ ]

         The aggregate market value of the voting common stock held by
non-affiliates of the Registrant was $23,145,806 as of April 12, 2001 based on
the per share closing price of the Common Stock on the NASDAQ Small Cap Market
of $1.27 on April 12, 2001. The number of shares outstanding of the
Registrant's common equity as of April 12, 2001 was 32,230,878 shares.
                               -------------

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                                 GLOBALNET, INC.

                          2000 FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS

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                                     PART I

ITEM 1   BUSINESS                                                                                         1
ITEM 2   PROPERTIES                                                                                      26
ITEM 3   LEGAL PROCEEDINGS                                                                               26
ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                             29

                                     PART II

ITEM 5   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                           30
ITEM 6   SELECTED FINANCIAL DATA                                                                         31
ITEM 7   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS           32
ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                      39
ITEM 8   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                     40
ITEM 9   CHANGES AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                63

                                    PART III

ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                              63
ITEM 11  EXECUTIVE COMPENSATION                                                                          69
ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                  73
ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                  76

                                     PART IV

ITEM 14  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                                81
</TABLE>


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                                     PART I

ITEM 1. BUSINESS

ORGANIZATIONAL HISTORY

         GlobalNet, Inc. was formed on May 30, 2000 as a result of a "reverse
merger" transaction, whereby GlobalNet International, Inc. merged with and into
a subsidiary of Rich Earth, Inc. pursuant to an agreement and plan of merger,
whereby 20,000,000 shares of Rich Earth common stock were issued in exchange for
100% of the common stock of GlobalNet International in a transaction accounted
for as a reverse acquisition of Rich Earth by GlobalNet International. Prior to
the reverse merger, Rich Earth was a non-operating public shell corporation with
nominal assets. Following the reverse merger, the management of GlobalNet
International controlled the merged company and the principal shareholders of
GlobalNet International became principal shareholders of the merged company.
Following the closing of the reverse merger, Rich Earth changed its name to
GlobalNet, Inc. As a result of the reverse merger transaction, GlobalNet
International continued as an operating entity and as a wholly-owned subsidiary
of GlobalNet, Inc., and the historical financial statements of GlobalNet, Inc.
replaced those of Rich Earth.

COMPANY OVERVIEW

         GlobalNet provides international voice, data and Internet services over
a private, managed Internet Protocol (IP) network to international carriers and
other communication service providers in the United States and Latin America.
GlobalNet's mission is to become the premier provider of high quality,
competitively priced IP based voice, fax, and data services to Internet Service
Providers (ISPs), Postal Telecommunications and Telegraph Providers (PTT's), and
other Telecommunications Services Providers (TSPs) serving the Small - Medium
Enterprise (SME) Market in Latin America.

         GlobalNet was formed in 1996 to capitalize on the growth of the
Internet Protocol as a communications transport medium for IP Telephony and
other enhanced services. To date, the Company has focused primarily on
wholesaling international voice and facsimile communications services between
the United States and Latin American countries, predominately Mexico. GlobalNet
has been successful in establishing and maintaining relationships with Tier 1
and Tier 2 carriers as a result of its ability to procure consistent sources of
supply in the capacity constrained telecommunications corridors linking Latin
America and the United States. This has been accomplished through the
development of partnerships with several Latin American telecommunications
companies. Leveraging these relationships, the Company has grown its revenues
from $793,000 in 1997 to $78.1 million in 2000, an annualized compound growth
rate of over 350%.


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INDUSTRY OVERVIEW

         The International Telecommunications Industry

         The international telecommunications industry is undergoing a period of
fundamental change that has, and is expected to continue to result in
significant growth in international telecommunications and revenues.

         Numerous factors have driven the growth in demand for international
telecommunications products and services. These factors include:

         -        The globalization of the world's economies
         -        The worldwide trend toward deregulation of telecommunications
         -        Declining prices and a wider selection of products and
                  services driven by greater competition as a result of
                  deregulation
         -        Increased communication accessibility made possible by
                  technological advances and greater investment in
                  telecommunications infrastructure, including the deployment of
                  wireless networks
         -        Increased international business and leisure travel
         -        Growth in computer based transmission of voice and data
                  information

         These trends have sharply increased the use of, and reliance upon,
telecommunications products and services throughout the world. According to a
study conducted by the Gartner Group, a market research firm, the international
telecommunications market is expected to grow to $1.9 trillion by the year 2003.

         Recent legislation and the World Trade Organization (WTO) agreement
among numerous countries are expected to lead to increased liberalization of the
majority of the world's telecommunication markets. Specifically, the WTO
Agreement created a framework under which 69 countries committed to liberalize
their telecommunications laws to permit increased competition and, in most
cases, foreign ownership in their telecommunications markets, beginning in 1998.

         By eroding the traditional monopolies held by PTT's, many of which are
or were wholly or partially government owned, deregulation is affording
U.S.-based providers the opportunity to negotiate more favorable agreements with
both the traditional administrations and emerging foreign providers. In
addition, deregulation in certain foreign countries is enabling U.S.-based
providers to establish local switching and transmission facilities to terminate
their own traffic and carry international long distance traffic originating in
those countries. Deregulation, privatization, the expansion of the resale market
and other trends influencing the international telecommunications market are
resulting in decreased termination costs, a proliferation of routing options and
increased competition.

         Advances in technology have created multiple ways for
telecommunications carriers to provide customer access to their networks and
services. Overall, these


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changes have resulted in a trend towards bypassing traditional international
long distance operating agreements as international long distance companies seek
to operate more efficiently. In markets that have not deregulated or are in the
process of implementing deregulation, international long distance carriers have
used advances in technology to develop innovative alternative methods to meet
customer demand.

         Data traffic is rapidly outpacing voice, creating a fundamental change
in the way service is provided. According to the latest reports, data
transmission has an accelerated growth rate of 30% annually throughout the
world.

         The Trend Towards IP Telephony Service

         According to a study by the Phillips Group, a telecom consulting firm,
the currently structured market is expected to transform itself over a five-year
period that began in 1998. Specifically, it is expected to become a market
dominated by IP architecture applications and new business models.

         A combination of technological advances and telecommunication
deregulation is changing the way customers and service providers do business.
Computers and telecommunications are converging and networks are changing from
circuit switching technology, the prevailing technology of traditional telephone
companies, to packet-based communications. In effect, this convergence is
bringing computer intelligence to the telecommunications industry. This enhances
value added customer services, increases the transmission capacity and lowers
operation costs. As a result, new carriers with innovative market strategies,
like GlobalNet, will be better able to compete against larger, traditional
telecommunications companies.

         Specific benefits to both the end user and the service provider
include:

         -  Higher quality transmission
         -  Enhanced voice quality
         -  More efficient use of bandwidth
         -  Guaranteed Quality of Service (QoS)
         -  Enhanced access

         The evolution of IP technology enables the conversion of applications
such as e-mail, Internet usage, Web hosting, broadband broadcasts and Internet
telephony and further enables the inclusion of unified messaging and e-commerce.
This will drive the need for Applications Service Providers to offer
applications to businesses and consumers who cannot afford to own the necessary
applications themselves.

         The consulting and market research firm Frost & Sullivan expects
Voice-over Internet Protocol (VoIP) technology to be the most significant
development in the telecommunications industry since wireless technology.
Revenues are anticipated to grow from under $2 billion in 1999 to over $10
billion by 2005. Although that number is small compared with the 7 trillion
total minutes people spent on traditional phone


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networks in 1999, it is a sign that consumers and businesses are starting to
accept Web-based phone calls.

         Technology like VoIP will make telephony more efficient and less
expensive. While traditional voice calls require a dedicated "circuit" between
the two parties, VoIP takes a voice call, breaks it into "packets" of
information, then reassembles those packets at its final destination, much in
the same way a data transmission is handled on Internet-based networks.

         New players are entering the field to capitalize on the convergence of
the traditional telephone network with both private and public data networks.
Providers currently in the VoIP marketplace are very few, but they are starting
to mold the markets to generate demand for such technology. Established telecom
companies are in the process of redefining their platforms and have plans to
enter the IP market worldwide within the next two years. However, their existing
legacy networks will slow down their market entry.

         The Latin American Telecommunications Market

         Latin America is a deregulating, rapidly expanding telecommunications
market and the world's fastest-growing Internet market. According to market
researchers, Frost & Sullivan, the Latin American market, valued at $51 billion
two years ago, was forecast to reach $90 billion in 2000. The Yankee Group, an
independent research firm, estimates that voice traffic in Latin America is
growing by 20%, data by 93%, and the Internet by 113%.

         The Phillips Group projects an explosion in demand, with less than 2%
of the Latin American population connected to the Internet. An example of the
market opportunity is Brazil. This country has the world's 5th largest
population and the 8th largest GNP, but ranks 43rd in teledensity with only 9.5%
penetration.

         GlobalNet believes that Latin American telecommunications, including
traffic between the United States and Latin America, will continue to grow
faster than the international market as a result of:

         -  Underlying economic growth within Latin America
         -  Growth of regional trade from trade initiatives such as NAFTA,
            Mercosur and the Andean Pact
         -  Deregulation and privatization of telecommunications carriers in the
            region
         -  Projected increases in telephone density
         -  Increasing demand for bandwidth-intensive applications

         There are significant opportunities created by deregulation and market
growth in the rapidly changing telecommunications markets in Latin America.
Countries in the Latin American region generally are experiencing a solid period
of economic, business


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and infrastructure growth, reduced inflation and economic and political
stability. Substantial opportunities exist for providers of telecommunications
equipment, system integration, value-added services and voice and data services
as Latin American countries move toward privatization and greater liberalization
of their telecommunications markets.

         We believe that GlobalNet is well positioned to capitalize on these
opportunities by providing high quality, low-cost, comprehensive
telecommunications services. As a rule, Latin American countries have
historically suffered from extremely low teledensity. Moreover, these markets
have been subject to characteristically inefficient, poor-quality service, as
well as, the unavailability of new and innovative systems and services. The
Latin American markets in which GlobalNet offers services, or seeks to compete,
are generally characterized by a lack of fiber optic cable capacity. As a
result, there is a critical and growing demand for the type of high-quality,
innovative systems, products and services that GlobalNet intends to provide.

GLOBALNET'S STRATEGY

         Current Business

         The Company was organized to engage in the telecommunications industry
and to capitalize on the growth of Internet Protocol (IP) (the transmission of
international voice, data and Internet services over a private network to
international carriers and other communications service providers in the United
States and Latin America) as a communications transport media for IP telephony
and other enhanced services.

         To date, GlobalNet has derived its revenues primarily from wholesaling
international voice and fax services between the United States and Latin
America, predominately Mexico, using its IP-based network. Through established
partnerships with several Latin American telecommunication companies, GlobalNet
has emerged as a significant and consistent wholesale provider of supply in the
capacity-constrained U.S.-Latin American corridor. Our domestic customers
include Tier 1 and Tier 2 carriers such as MCI WorldCom, Qwest, Global Crossing,
Teleglobe and IDT.

         We have based our technology future on IP platforms. IP is a
network-layer protocol containing addressing and control information that
enables packets to be efficiently and quickly moved through a network. IP has
become the protocol of choice on the Internet due to its inherent flexibility
and adaptability over different physical transmission media and over different
protocol layers such as ATM and frame relay. Recent initiatives that address
quality of service, security and core-network switching have underscored IP's
advantages and result in its increased acceptance across proprietary networks.
Additionally, IP's flexibility and functionality allow a number of value added
applications such as VoIP, IP fax and unified messaging service to be layered on
top of basic transport.

         Our strategy is to deliver high quality communications services while
providing customers with IP inherent cost savings and global reach of the
Internet. Our business philosophy is to meet customer needs with bundled service
packages that integrate a customer's telecommunications traffic. Our growth
strategy targets partnerships with service providers with a proper license, an
established network and an in-house sales and support organization. We intend to
focus our sales and marketing efforts on strategic partners whose sales efforts
concentrate on servicing small-to-medium businesses, ISPs and TSPs. We believe
that our business success in a large part will be dependent upon our existing
management team of seasoned professionals who offer industry, operating,
marketing, technical and financial expertise. We believe that we can
successfully compete within our industry through our ability to offer turnkey
solutions which include provisioning of a billing system and the design,
staffing and implementation of state of the art customer care and network
management centers. Our solutions enable the delivery of seamless networks by
alternating and integrating critical functions, including billing, customer
care, fault isolation and repair, network management and network OSS.

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         Our principal competitors in the Latin American markets include
Telefonica (Spain's privatized PTT), AT&T, MCI WorldCom Inc., Bell South and
Global Crossing. These companies are larger and better financed than the
Company. We believe that our ability to compete is based on our core management
team of experienced telecommunication professionals. Central to our ability
to compete is our aggressive pricing and product diversification and our
emphasis on superior customer care. We believe that our bundled service offering
is superior to that offered by our competitors. We also intend to compete based
on a strategy of working with carriers who concentrate on niche markets,
including ISPs and TSPs who market to small and medium sized companies, as well
as our focus on location where we can achieve a high level of on-net customers
in order to achieve our revenue and margin goals.

         We are well positioned with the development of our next-generation
network because network infrastructure costs are less; the cost of VoIP
equipment is less; and VoIP equipment occupies 90% less space in telephone
exchanges than traditional circuit-switched equipment. The industry is
converging on a single vision based on IP technology to lower costs and handle
exploding data traffic. However, traditional carriers will have trouble catching
up, as they would have to write off huge investments made in traditional circuit
switched networks designed to carry voice.

         Planned Expansion and Future Business Activities

         The Company has developed an overall plan for expanding its existing
business and enhancing its business through other related IP activity. Our
expansion plans are dependent upon our ability to secure additional debt or
equity financing. We are unable to determine when, if at all, such financing may
be obtained or the amounts, levels and terms upon which such financing may be
obtained. This uncertainty will have an effect on the timing of the
implementation of our future growth plans. The areas of our additional activity
are therefore largely proposed and intended.

         We plan to phase in the building of up to 15 Network Access Points
(NAPs) in 13 countries to enable us to provide Latin American ISPs, TSPs and the
PTT, a local "in-country" forum for exchanging Internet and other IP-based
traffic. These planned centers will also serve as our distribution nodes for our
IP-based product offering. Our strategy is based on our goal of eliminating
"backhauling", thereby providing value to our customers. At the present time,
service providers to Latin America purchase their connectivity to the Internet
from a variety of suppliers who are either United States based or Latin American
based providers who purchase their Internet access from United States providers.
The result of this is that all Internet traffic whether it is web site access,
e-mail or file transfer, first goes to the United States and then back to Latin
America, even if both of the originating and destination points are both in
Latin America. This practice is called "backhauling" and causes a number of
problems for the Latin American providers, ranging from increased exposure to
latency, higher packet failure and retry rates to increased cost resulting from
the need to buy additional capacity to backhaul the data.

         The Company believes that its planned IP service centers will overcome
the backhauling problems and become a forum for the exchange of Internet and
other IP-based traffic. Our planned IP service centers will also be able to
provide other value added services, including Tier 1 Internet access, caching,
web site mirroring, and network management services.

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         Our business model, yet to be implemented and dependent upon factors,
many of which are beyond the Company's control, is dependent upon our ability to
establish strategic alliances with qualified in-country service providers for
the deployment of the IP service centers. We intend to accomplish this through
joint venture relationships to be pursued with qualified service providers
having proper licenses, an established network and an in-house sales and support
organization.

         Our initial NAP focus will be on the Mexican market, which is presently
the predominant source of our revenue.

         The implementation of our proposed additional business activities, and
hence the need for further additional capital, will be our creation of
additional switching and transmission facilities in which we will increase fiber
optic and satellite capacity for the provisioning of voice, video, data and
Internet services. Our objectives in making the necessary capital investment to
create these facilities will be to provide on-net capacity to allow growth in
the Mexican voice service business, increase profitability for switched services
by reducing the amount of traffic terminated by other long distance carriers,
and the use of the expanded network as a platform to support advanced
bandwidth-intensive data and Internet applications.

GLOBALNET'S SERVICES

         Current Services


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         The following are the services that GlobalNet currently offers to Tier
1 and Tier 2 U.S. carriers and Latin American TSPs:

         -  Voice over IP (VoIP). GlobalNet provides international providers
            voice and fax termination to Mexico, Central and South America. The
            Company's competitive advantage to these destinations is the result
            of unique, bilateral relationships, which it has cultivated with
            incumbent and emerging carriers in the respective countries.
            GlobalNet competes in other worldwide destinations through
            aggressively managed carrier traffic exchange agreements. High
            volume, active network management and aggressive acquisition and
            sale of international routes have all been key elements to the
            success of the international carrier program. With high quality VoIP
            routes to Latin America, GlobalNet will continue to grow the carrier
            program by executing new interconnect agreements with domestic U.S.
            and international carriers.

         -  Bi-Directional Switched Voice and Fax. GlobalNet provides
            international voice and data services over its private IP network to
            international carriers and service providers throughout Mexico,
            Central and South America. GlobalNet is able to offer international
            carriers the ability to route international voice and fax calls over
            its IP backbone to the United States and the rest of the world at
            reduced costs while providing reliable, high quality service via new
            technology. Many carrier customers have become strategic partners of
            GlobalNet's, enabling the Company to gain direct access to the
            strategic partner's network. This reduces GlobalNet's cost for
            international traffic termination. The result is a mutually
            beneficial relationship for both parties. These partnerships provide
            GlobalNet with access to several large customer bases. GlobalNet
            will continue to expand its reach into these regions by attracting
            emerging carriers and ISP's through ongoing sales and marketing
            efforts.

         -  IP Hosting. GlobalNet recently began offering IP Hosting to give
            international carriers and other communication service providers
            quick entry into the rapidly expanding IP market. Services such as
            international voice, fax and enhanced data services can expand the
            customer's existing product offering and give-accelerated access to
            a worldwide network without capital expenditures or the risk of
            technological obsolescence. Carriers are provided the necessary IP
            equipment and network access to originate and terminate traffic.
            This access-replacing network can be scaled and the bandwidth
            matched to meet the customer's requirements. Customers are charged
            flat, recurring fees for international origination and termination
            and for the equipment provided. Rates will vary depending on the
            scale and service level plan established. GlobalNet will grow this
            segment by exploiting the "One Stop Shop" approach for voice, fax
            and data services.

         -  Prepaid Phone Cards. GlobalNet discontinued its prepaid calling card
            program to Mexico at the beginning of the fourth quarter of 2000 due
            to lack of profitability


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            of the program. Prepaid card revenues were $590,000 in the fourth
            quarter of 2000. Prepaid card revenues for the year ended December
            31, 2000 were approximately $16,201,000.

         Planned Services

         The following are some of the future services that GlobalNet plans to
offer to the Latin American ISPs, TSPs, PTTs and SMEs through its IP Service
Centers. The development and timing of the services below is dependent on our
ability to obtain additional debt or equity financing.

         -  Peering. Peering gives ISP's, TSP's and the PTT the ability to
            exchange Internet and other IP-based traffic in-country rather than
            having to backhaul the traffic to the U.S.

         -  Premium Internet Connectivity. The IP Service Centers will make
            connectivity, normally a commodity product, a premium service by
            giving companies a single point for peer level access to the
            majority of Tier One Internet service providers.

         -  Caching. GlobalNet's caching capability will reduce bandwidth
            requirements by storing commonly accessed pages and data at the IP
            Service Center, thereby speeding up the user's response time. This
            product will be sold with connectivity.

         -  Mirroring. GlobalNet's mirroring capability will replicate existing
            Latin American sites in the U.S., thereby providing redundancy to a
            business enterprise's mission critical applications and web sites.

         -  Network Management. GlobalNet's network management services will
            enable customers to outsource the monitoring and management of their
            Internet network with guaranteed reliability and performance.

         -  Unified Messaging. Unified Messaging allows the integration of
            voicemail, e-mail, fax and paging in one mailbox. This "unified"
            mailbox is accessible from multiple sources including telephone,
            cell phone, browser, pager, etc.

         -  "Z-Phone". The Company recognizes the large market demand for
            Internet users to have the ability to place phone calls over the
            Internet through their computers. The "Z-Phone" product will
            incorporate proprietary technology to encrypt phone calls, providing
            users with a secure and private connection. This service, when
            introduced, has the capability of becoming the next generation of
            Internet PC/phone-based calling.

         -  "First Mile" Access. GlobalNet has developed a strategic "first
            mile" solution comprised of several transmission methods to access
            customer premises from central offices. Where economically feasible,
            GlobalNet will deploy wireless technology as a means of provisioning
            customer access. The Company's wireless solution utilizes
            leading-edge packet radio technology. These systems provide both
            point-to-point and point-to-multipoint access and support global
            Internet standards. This gives personal computer users high-speed
            access to the Internet,


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<PAGE>   12
            private or corporate Intranets and traditional telephony networks.
            Wireless technology allows GlobalNet to rapidly deploy IP-based
            access at speeds ranging from 64 Kbps (DS-0) to 100 Mbps, bypassing
            conventional wire line networks. GlobalNet deploys this technology
            using a combination of tower, wall or rooftop mounted installations.
            The Company believes this modular compact system offers new and
            existing customers an opportunity to select more enhanced services
            from the GlobalNet International portfolio.

         -  Intra Region IP Services. Intra Region IP Services uses satellite
            technology operating with a native IP transport protocol. This
            product permits calling between Latin American Countries through
            satellite broadcasting with routing accomplished via IP addressing
            within countries.

GLOBALNET'S NETWORK

         GlobalNet currently manages its own telecommunications network
utilizing the transmission capacity of several carriers. The Company is
increasing the percentage of traffic it carries on its network or "on-net",
enabling it to increase margins and profitability while insuring quality. In
addition, the Company's use of multiple carriers increases cost efficiencies by
establishing additional routing capability and guarantees sufficient capacity to
support rapid growth.

         The Company's network is an IP-based platform, which provides transport
and protocol for routing. Physical transport includes the Internet, fixed cost
point-to-point fiber optic facilities, satellite and other international private
line resources. The network has expanded by:

         -  Implementing packet-based technology to replace the traditional
            circuit-based systems.

         -  Arranging for physical satellite teleport assets and fiber optic
            transmission capacity.

         -  Installing additional IP transmission and switching equipment.

         These measures will provide increased cost efficiency and savings by
routing a higher level of traffic on-net.

         Network Infrastructure

         GlobalNet has two Lucent Excel Exchange Plus IP gateway switches with a
total capability of 34,000 ports. The New York switch serves as a gateway for
refile and carrier exchange traffic, while the San Antonio switch serves as the
gateway to Mexico, Central and South America and can provide prepaid calling
card services. Lucent's Max TNT VOIP gateways are also used between the
GlobalNet switches and the international destinations in the network providing
the Company with a scaleable solution that allows the transport of voice, data,
and multimedia as well as QoS assurances.


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         Expanding the international backbone infrastructure is the foundation
of the cost containment measures that will ensure a continuing competitive price
structure by increasing "on-net" capability. The Company is in the process of
complementing its Internet and terrestrial services transport using satellite
transponders and teleports to cover the Latin American market. Leased private
lines and other terrestrial facilities will carry traffic where economically
feasible. The Company believes that satellite assets, appropriately deployed and
opportunity driven, can provide significant advantages in the market. The
Company's satellite resources are comprised of "C" and "KU" band on a variety of
satellites whose coverage is directly coincident with the targeted markets in
Latin and North America.

         A significant feature of satellite packet technology is its versatility
in supporting multiple applications throughout the region. The underlying
transport protocol is Internet Protocol (IP), which enables the systems to
perform a virtual circuit switch function based on IP routing within the region.

         The Company also has a fully operational research and development lab
in Marietta, Georgia. The lab is used to develop and test products prior to
launching by duplicating the network fabric for advanced troubleshooting
scenarios in a controlled environment. The lab gives GlobalNet the ability to
develop leading edge products and expedite the rollout schedule for those
products by simulating real-world conditions.

         Network Management and Information Systems

         The Company's network management and information systems enable it to:

         -  Economically and efficiently route traffic over the GlobalNet
            network and the networks of other carriers.
         -  Offer reliable services with high call completion rates and voice
            quality.
         -  Manage an advanced voice, data and video multi-service IP platform.

         These systems, particularly their ability to provide flexible, high
quality service to international destinations, provide the Company with a
competitive advantage relative to many other providers of telecommunications
services. The Company monitors its network and initiates changes to the overall
switch network and traffic routing where appropriate to optimize routing and
minimize costs. Because a substantial portion of the traffic carried terminates
internationally and completions vary by carrier, the Company monitors the
completion efficiencies of its suppliers. The Company's network is configured
with Common Channel Signaling System 7 ('SS7'). This technology reduces voice
call setup, connect time delays and provides additional technical capabilities
and efficiencies for call routing and network engineering.

         GlobalNet recently completed the deployment of its proprietary systems
management software - codenamed INTE-GRATE - that seamlessly integrates data
access for sales, operations and traffic analysis functions and significantly
enhances customer service. The INTE-GRATE system features a central data source
that eliminates duplicate entry of information and provides GlobalNet personnel
with readily


                                       11
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accessible, real-time data to meet customer needs. Additionally, INTE-GRATE
tracks rapidly changing vendor costs to determine the most cost-effective
routing and loading the new information into the network with minimal manual
intervention. The system permits GlobalNet to make substantial routing changes
in order to take advantage of pricing changes.

         GlobalNet has also deployed an advanced suite of applications to
monitor faults and availability of services throughout its rapidly expanding
high-speed "Voice-over-Internet-Protocol" (VoIP) service network. These network
applications provide real-time, proactive monitoring of faults throughout the
GlobalNet infrastructure, allowing network engineers and operations personnel to
address potential problems before they cause disruptions in service. In
addition, the system provides GlobalNet with the capability of generating
detailed network performance analysis reports that will assist in determining
which services and customers could potentially be affected by problems on the
network today and in the future.

SIGNIFICANT CUSTOMERS

         A significant portion of the Company's revenues are concentrated among
a few large customers. For the year ended December 31, 2000, the largest
customer of the Company represented 23% of total revenue, while the next three
largest customers represented 55% of total revenue. The three largest customers
of the Company represented 96% of total revenue for each of the years ended 1999
and 1998. The loss of any of the foregoing customers would have a significant
adverse impact on the Company.

         Further discussion relating to the relationship between the Company and
its significant customers may be found in Part I, Item 1 of this Form 10-K under
the subheading, "Our Revenue Would Decline Significantly If We Lose One Or More
Of Our Most Significant Customers" under the heading, "Risk Factors," which
information is hereby incorporated by reference.

COMPETITION

         The international telecommunications market is highly competitive. The
principal competitive factors include price, quality of service, network
capacity, geographic coverage, reliability of the network and customer service.

         Competition comes from:

         -  global carriers such as AT&T, MCI WorldCom, Telefonica and Telmex
            that operate large legacy networks, and
         -  newer IP-based providers such as ITXC, IBasis, GRIC and
            Deltathree.com that utilize the Internet to transport traffic.

         GlobalNet is uniquely positioned to bridge the gap, occupying a
lucrative niche between the two sets of competitors. The Company is similar to
other IP providers in that it utilizes the Internet to transport voice and data,
but has an added advantage in that it will be able to provide a broader range of
high-end services as a result of its privately owned, IP-based network. The
Company is currently taking and will continue to take steps to respond to the
competitive pressures being placed on its IP-based network services as a result
of the recent innovations in the transport of voice and data over the Internet.
The Company's future consolidated operating results and financial condition are
substantially dependent on its ability to continue to develop improvements to
its IP-based network in order to maintain perceived functional advantages over
competing service providers.

         Further discussion relating to the competitive conditions of the
international telecommunications market and the Company's competitive position
in the market place may be found in Part I, Item 1 of this Form 10-K under the
subheading, "We May Not Be Able To Succeed In The Intensely Competitive Market
For Our Services" under the heading "Risk Factors," which information is hereby
incorporated by reference.

RESEARCH AND DEVELOPMENT

         Network research and development expenses include the expenses incurred
in the development, expansion, operation and support of the Company's global IP
network. These expenses consist primarily of the fixed monthly cost of the
leased lines that comprise the Company's network, the salary and payroll related
taxes of the employees directly involved in the development and operation of the
network and the expenses incurred in the development and support of the
Company's proprietary software. The Company continues to develop new
technologies and services and to enhance existing services. Network research and
development expenses increased by approximately $3,022,000, from $129,000 for
the year ended December 31, 1999 to $3,151,000 for the year ended December 31,
2000. The increase in network research and development expenses is primarily due
to the increase in the personnel needed to expand, develop and support the
Company's global network.

EMPLOYEES

         As of December 31, 2000, GlobalNet employs 27 people of which 11 are
located in the Company's corporate offices in Lombard, Illinois, 11 in Marietta,
Georgia and 5 in San Antonio, Texas.

         The Company has 9 employees in engineering, 7 employees in operations,
2 employees in sales and marketing and 9 employees in general and
administrative positions.

         None of the Company's employees are parties to any collective
bargaining agreements, and the Company considers its relationship with its
employees to be good.

                                       12
<PAGE>   15
FOREIGN AND DOMESTIC OPERATIONS AND GEOGRAPHIC DATA

         Information regarding financial data by geographic area and the risks
associated with international operations is set forth in Part II, Item 8 of this
Form 10-K at Note 12, under the heading "Geographic and Business Segment
Information," and in Part I, Item 1 of this Form 10-K under the subheadings
"International Governmental Regulation And Legal Uncertainties Could Limit Our
Ability To Provide Our Services Or Make Them More Expensive" and "Our Operations
In Mexico And Latin American Countries May Be Less Profitable Than We Have
Anticipated" under the heading "Risk Factors," which information is hereby
incorporated by reference.

RECENT DEVELOPMENTS

Equipment Leases

         In April 2000, we entered into a $10,000,000 credit facility with
General Electric Capital Corporation to finance the lease of Lucent Technologies
telecommunications network and data transmission equipment. The Company had six
months from the time of the closing to finance equipment under the facility. The
total financed amount equal in the aggregate $6,951,000 of which approximately
$6,592,000 was outstanding as of December 31, 2000. Each lease bears interest at
an annual rate of 13.2% for a term of 36 months. In December 2000, the Company
drew down an additional $340,000 for equipment that was delivered in January
2001.

         In October 1999, we entered into certain capital leases for network
equipment. The equipment which was leased consisted of telecommunications
switching equipment and international gateway platforms. This lease bears
interest at the rate of 22% per annum and is for a term of 42 months. The
Company is currently attempting to refinance this lease.

         As of November 8, 1999, GlobalNet entered into capital leases with
Prinvest Financial Corp. for various network equipment with respect to which
GlobalNet recorded a capital lease obligation of approximately $5,268,000. A
dispute currently exists between GlobalNet and Prinvest Financial Corp. with
respect to compliance by GlobalNet under a financing and security agreement
dated as of November 8, 1999 and a lease agreement dated as of that date. In
connection with attempts to resolve the dispute, GlobalNet and Prinvest
Financial Corp. entered into a forbearance agreement dated as of October 27,
2000 which provided that until the maturity date, Prinvest Financial Corp. would
forebear from declaring accelerated the indebtedness of GlobalNet under these
capital leases, and to forebear from exercising the remedies that relate to an
acceleration under the financing agreement and the lease agreement. The maturity
date has been extended, through amendment, at least three times, with the most
recent extension to January 26, 2001. An additional extension has neither been
negotiated or executed and Prinvest Financial Corp. has not notified GlobalNet
that it has declared an acceleration, nor has Prinvest Financial Corp. sought to
exercise any of its rights or remedies under the financing agreement and lease
agreement. We are unable to determine what position, if any, Prinvest Financial
Corp. will take. As of December 31, 2000, the amount outstanding under the
capital lease facility with Prinvest Financial Corp. amounted to approximately
$3,124,000. The Company is currently working with other potential lenders on the
refinancing of this facility.

Private Placements and Restricted Stock

         On December 28, 2000, GlobalNet issued 775,000 shares of restricted
common stock to various employees, vesting at the rate of 44% on September 15,
2001; 22% on


                                       13
<PAGE>   16
May 15, 2002; and 34% on May 15, 2003.

         During February 2001, the Company effected a private placement of
700,000 shares of common stock at $1.00 per share. The Company issued warrants
to purchase 75,000 shares of common stock at $1.20 to various entities assisting
in the placement. The Company received net proceeds at the closing in the amount
of $670,000, after deducting a finder's fee of $30,000. The Company filed a
registration statement on Form S-3 to register the shares sold in the placement
and the warrants granted to the placement agents on April 2, 2001.

         On April 9, 2001, the Company sold a $2,000,000 convertible note to
Crescent International, Ltd. Crescent International also agreed to purchase from
time to time through April 9, 2002, up to $4,000,000 worth of the Company's
common stock; the number of shares and the price to be determined based upon the
Company's trading volume and stock price. At the closing, Crescent International
made an initial purchase of 365,428 shares of the Company's common stock for an
aggregate of $250,000. The Company received net proceeds at the closing in the
amount of $2,140,976, after deducting certain fees to be paid to GreenLight
(Switzerland) S.A., the investor representative of Crescent International;
Crescent International's due diligence expenses; and a portion of Crescent
International's counsel fees. The Company also paid a finder's fee of $157,500
and issued warrants to purchase 360,000 shares to J.P. Carey Securities, Inc.

         In further consideration for Crescent International entering into the
transactions described above, the Company issued an Incentive Warrant to
Crescent International representing the right to purchase 877,026 shares of the
Company's common stock at 150% of the price at which Crescent International
purchased its initial shares. The Company is required to file a registration
statement on behalf of Crescent International with respect to the shares
purchased by it, the shares that may result from the conversion of the note and
the warrant shares.

         Additional information relating to these and other recent private
placements and restricted stock is set forth in Part II, Item 5, under the
subheading, "Equity Transactions," which information is hereby incorporated by
reference.

RISK FACTORS

         The following is a summary of some of the risk factors which may have
an impact on GlobalNet's business efforts:

Risks Related to Our Operations

WE HAVE A RELATIVELY LIMITED OPERATING HISTORY UPON WHICH TO BASE YOUR
INVESTMENT DECISION, AND YOU MAY INACCURATELY ASSESS OUR PROSPECTS FOR SUCCESS.

         We were formed in 1996 as DTA Communications Network, LLC which offered
telecommunications services. In May 2000, we became GlobalNet, Inc. after a
reverse merger with Rich Earth, Inc. Due to our limited operating history, it is
difficult for us to predict future results of operations. Moreover, we cannot be
sure that we have accurately identified all of the risks to our business,
especially because we use new, and in many cases, unproven technologies and
provide new services. As a result, our past results and rates of growth may not
be a meaningful indicator of our future results of operations. Also, our
assessment of our prospects for our success may prove inaccurate.

WE HAVE A HISTORY OF OPERATING LOSSES, ANTICIPATE INCURRING LOSSES FOR THE
FORESEEABLE FUTURE AND MAY NEVER BECOME PROFITABLE.

         For each of the fiscal years ending December 31, 2000, 1999 and 1998,
we had operating losses of approximately $10,647,000, $2,536,000 and $111,000,
respectively.


                                       14
<PAGE>   17
At December 31, 2000, our total current liabilities exceeded our total current
assets by approximately $7,510,000. At December 31, 2000, we had an accumulated
deficit of approximately $15,625,000 and a total stockholders deficit of
approximately $1,485,000. While our management has addressed the conditions
which have left substantial doubt about our ability to continue as a going
concern, there is no certainty that we will be successful in implementing any of
the plans of management to restore us to profitability or to otherwise ensure
that we will be able to continue as a going concern.

FLUCTUATIONS IN OUR QUARTERLY RESULTS OF OPERATIONS THAT RESULT FROM VARIOUS
FACTORS INHERENT IN OUR BUSINESS MAY CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO FALL.

         Our revenue and results of operations have been volatile and may
continue to fluctuate significantly from quarter to quarter in the future due to
a number of factors, many of which are not in our control, including, among
others:

         -     the amount of traffic we are able to sell to our customers, and
               their decisions on whether to route traffic over our network;

         -     pricing pressure in the international long distance market;

         -     the percentage of traffic that we are able to carry over the
               Internet, or over our dedicated international private circuit
               lines, rather than over the more costly traditional
               public-switched telephone network;

         -     loss of arbitrage opportunities resulting from declines in
               international settlement rates or tariffs;

         -     our ability to negotiate changes in the termination fees charged
               by our local providers when our margins deteriorate;

         -     capital expenditures required to expand or upgrade our network;

         -     changes in call volume among the countries to which we complete
               calls;

         -     technical difficulties or failures of our network systems or
               third-party delays in expansion or provisioning system problems;
               and

         -     our ability to offer value-added services that are appealing to
               the market.

         Because of these factors, you should not rely on quarter-to-quarter
comparisons of our results of operations as an indication of our future
performance. It is possible that, in future periods, our results of operations
will be significantly lower than the estimates of public market analysts and
investors. Such a discrepancy could cause the price of our common stock to
decline significantly.

OUR PENDING LITIGATION COULD POTENTIALLY HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS OPERATIONS.

         The pending litigation discussed in Item 3 "Legal Proceedings" could
potentially


                                       15
<PAGE>   18
have a material adverse effect on our business operations.

OUR STOCK BASED COMPENSATION POLICY MAY RESULT IN FUTURE (NON-CASH) OPERATING
LOSSES DUE TO ACCOUNTING TREATMENT WE ARE REQUIRED TO ADOPT.

         As a result of the issuance by us of certain restricted shares to
officers, directors, employees and consultants, which vest over time, we have
recorded approximately $9,348,000 of deferred compensation as of December 31,
2000. As the number of restricted shares representing the deferred compensation
vests in years 2001, 2002 and 2003, the amortization of the fair value of these
restricted shares over their vesting periods, as calculated at the time of their
issuance will result in a (non-cash) charge to our consolidated statement of
operations over their vesting periods, thereby increasing the amount of our
(non-cash) operating expenses by the amount of such charge and resulting in an
increase in the amount of our losses, if any, or decreasing the amount that
would otherwise be reportable as earnings. In addition, increases in losses
attributable to the stock based compensation will increase the amount of
shareholders' deficit.

THE MARKET PRICE OF OUR COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND VOLUME
FLUCTUATIONS FOR REASONS OVER WHICH WE HAVE LITTLE CONTROL.

         The stock market has, from time to time, experienced, and is likely to
continue to experience, extreme price and volume fluctuations. Prices of
securities of Internet-related companies have been especially volatile and have
often fluctuated for reasons that are unrelated to the operating performance of
the affected companies. The market price of shares of our common stock has
fluctuated greatly since their inception of trading on the NASDAQ Small Cap
Market and could continue to fluctuate due to a variety of factors. In the past,
companies that have experienced volatility in the market price of their stock
have been the objects of securities class action litigation. If we were the
object of securities class action litigation, it could result in substantial
costs and a diversion of our management's attention and resources.

THE MARKET PRICE OF OUR COMMON STOCK MAY BE AFFECTED BY THE REGISTRATION OF
ADDITIONAL SHARES.

         We currently have 32,230,878 shares of common stock issued and
outstanding, of which 22,270,878 shares may be deemed restricted securities, as
defined under the Securities Act of 1933, as amended. These restricted
securities may be sold in the future only pursuant to registration under the
Securities Act or an exemption such as Rule 144 under the Securities Act of
1933, as amended. On April 2, 2001, we filed a registration statement on Form
S-3 for the registration of 700,000 shares (plus an additional 75,000 shares
issuable in connection with warrants) which will become eligible for immediate
resale. These shares, as well as the eligibility for additional restricted
shares to be sold in the future, either pursuant to future registrations under
the Securities Act or an exemption such as Rule 144 under the Securities Act of
1933, as amended, may have a dilutive effect on the market for the price of our
common stock.


                                       16
<PAGE>   19
THERE IS NO ASSURANCE THAT WE WILL REMAIN LISTED ON AN ACTIVE TRADING MARKET.

         Although our common stock is quoted on the NASDAQ Small Cap Market,
there can be no assurance that we will, in the future, be able to meet all the
requirements for continued quotation thereon. In the absence of an active
trading market or if our common stock cannot be traded on the NASDAQ Small Cap
Market, our common stock could instead be traded on the Electronic Bulletin
Board or in the Pink Sheets. In such event, the liquidity and stock price in the
secondary market may be adversely affected. In addition, in the event our common
stock was delisted, broker-dealers have certain regulatory burdens imposed upon
them which may discourage broker-dealers from effecting transactions in our
common stock, further limiting the liquidity of our common stock.

THE INABILITY TO OBTAIN NECESSARY ADDITIONAL CAPITAL IN THE FUTURE ON ACCEPTABLE
TERMS COULD DELAY US FROM EXECUTING OUR BUSINESS PLAN OR PREVENT US FROM DOING
SO ENTIRELY.

         We expect to need additional capital in the future to fund our
operations, finance investments in equipment and corporate infrastructure,
expand our network, increase the range of services we offer and respond to
competitive pressures and perceived opportunities. Cash flow from operations,
and cash on hand may not be sufficient to cover our operating expenses and
capital investment needs. We cannot assure you that additional financing will be
available on terms acceptable to us, if at all. A failure to obtain additional
funding could prevent us from making expenditures that are needed to allow us to
grow or maintain our operations. Because GlobalNet is internally financed,
increases in business can temporarily reduce the Company's working capital due
to cash flow lags.

         If we raise additional funds by selling equity securities, the relative
equity ownership of our existing investors could be diluted or the new investors
could obtain terms more favorable than previous investors. If we raise
additional funds through debt financing, we could incur significant borrowing
costs. The failure to obtain additional financing when required could result in
us being unable to grow as required to attain profitable operations.

WE MAY NEVER GENERATE SUFFICIENT REVENUE TO ATTAIN PROFITABILITY IF
TELECOMMUNICATIONS CARRIERS AND OTHER COMMUNICATIONS SERVICE PROVIDERS ARE
RELUCTANT TO USE OUR SERVICES, INCLUDING ANY NEW SERVICES, IN SUFFICIENT VOLUME.


                                       17
<PAGE>   20
         If the market for Internet telephony and new services does not develop
as we expect, or develops more slowly than expected, our business, financial
condition and results of operations will be materially and adversely affected.

         Our customers may be reluctant to use our services for a number of
reasons, including:

         -     perceptions that the quality of voice transmitted over the
               Internet is low;

         -     perceptions that Internet telephony is unreliable; and

         -     our inability to deliver traffic over the Internet with
               significant cost advantages.

         The growth of our business depends on carriers and other communications
service providers generating an increased volume of international voice and fax
traffic and selecting our network to carry at least some of this traffic. If the
volume of international voice and fax traffic fails to increase, or decreases,
and these third-parties do not employ our network, our ability to become
profitable will be materially and adversely affected.

         We cannot assure you that communications service providers and their
end-user customers will be receptive to, and subscribe for, any unified
communications services we are able to offer, or any other additional services
we elect to deploy on our network. Any perceived problems with the reliability
or functionality of any new services that we offer could discourage
communications service providers from offering these services to their
customers. In addition, the development of new services, such as unified
communications, may require substantial capital expenditures to be made well in
advance of generating any revenue from such services or demonstrating any market
acceptance of such services. If carriers and communications service providers do
not employ our network to offer any new services to their customers, or if their
customers do not subscribe for the services when offered, our financial
condition and results of operations will be materially adversely affected.

         We cannot assure you that end-users will continue to purchase services
from our customers or that our customers will maintain a demand for our
services.

WE MAY FACE QUALITY AND CAPACITY PROBLEMS OVER OUR NETWORK DUE TO FAILURES BY
THIRD PARTIES.

         Vendors. We rely upon third-party vendors to provide us with the
equipment and software that we use to transfer and translate calls from
traditional voice networks to the Internet, and vice versa. We cannot assure you
that we will be able to continue purchasing such equipment and software from our
current vendors on acceptable terms, if at all. If we become unable to purchase
from our current vendors the equipment needed to maintain and expand our network
as currently configured, we may not be able to maintain or expand our network to
accommodate growth and we may consequently be unable to grow revenues
sufficiently to become profitable.


                                       18
<PAGE>   21
         Parties that Maintain Phone and Data Lines. Our business model depends
on the availability of the Internet to transmit voice and fax calls, and to
provide other value-added services. Third parties maintain, and in many cases
own, the traditional voice networks as well as data networks and other
components that comprise the Internet. Some of these third parties are national
telephone companies. They may increase their charges for using these lines at
any time and decrease our profitability. They may also fail to properly maintain
their lines and disrupt our ability to provide service to our customers. Any
failure by these third parties to maintain these lines and networks that leads
to a material disruption of our ability to complete calls over the Internet
could discourage our customers from using our network, which could have the
effect of delaying or preventing our ability to become profitable.

         Local Communications Service Providers. We maintain relationships with
local communications service providers in many countries, some of whom own the
equipment that translates voice to data in that country. We rely upon these
third parties to both provide lines over which we complete calls and to increase
their capacity when necessary as the volume of our traffic increases. There is a
risk that these third parties may be slow, or fail, to provide lines, which
would affect our ability to complete calls to those destinations. We cannot
assure you that we will be able to continue our relationships with these local
service providers on acceptable terms, if at all. Because we rely upon entering
into relationships with local service providers to expand into additional
countries, we cannot assure you that we will be able to increase the number of
countries to which we provide service. We also may not be able to enter into
relationships with enough overseas local service providers to handle increases
in the volume of calls that we receive from our customers. Finally, any
technical difficulties that these providers suffer would affect our ability to
transmit calls to the countries that those providers help serve.

         Strategic Relationships. We depend in part on our strategic
relationships to expand our distribution channels and develop and market our
services. In particular, we depend in large part on our joint marketing and
product development efforts with in-country service providers to achieve market
acceptance and brand recognition in certain markets. Our strategic relationship
partners may choose not to renew existing arrangements on commercially
acceptable terms, if at all. In general, if we lose this key strategic
relationship, or if we fail to develop new relationships in the future, our
ability to expand the scope and capacity of our network, and to maintain
state-of-the-art technology, would be materially adversely affected.

WE MAY NOT BE ABLE TO SUCCEED IN THE INTENSELY COMPETITIVE MARKET FOR OUR
SERVICES.

         The market for Internet voice, fax and other value-added services is
extremely competitive and will likely become more competitive. Internet protocol
and Internet telephony service providers, such as IBasis, Inc. and ITXC Corp.,
route traffic to destinations worldwide and compete directly with us. Also,
Internet telephony service providers, such as Net2Phone, that presently focus on
retail customers may, in the future


                                       19
<PAGE>   22
enter our market and compete with us. In addition, major telecommunications
carriers, such as AT&T, Deutsche Telekom, MCI WorldCom and Qwest Communications,
have all entered or announced plans to enter the Internet telephony market. Many
of these companies are larger than we are and have substantially greater
managerial and financial resources than we do. Intense competition in our
markets can be expected to continue to put downward pressure on prices and
adversely affect our profitability. We cannot assure you that we will be able to
compete successfully against our competitors and we may lose customers or fail
to grow our business as a result of this competition.

WE ARE SUBJECT TO DOWNWARD PRICING PRESSURES AND A CONTINUING NEED TO
RENEGOTIATE OVERSEAS RATES WHICH COULD DELAY OR PREVENT OUR PROFITABILITY.

         As a result of numerous factors, including increased competition and
global deregulation of telecommunications services, prices for international
long distance calls have been decreasing. This downward trend of prices to
end-users has caused us to lower the prices we charge communications service
providers for call completion on our network. If this downward pricing pressure
continues, we cannot assure you that we will be able to offer Internet telephony
services at costs lower than, or competitive with, the traditional voice network
services with which we compete. Moreover, in order for us to lower our prices,
we have to renegotiate rates with our overseas local service providers who
complete calls for us. We may not be able to renegotiate these terms favorably
enough, or fast enough, to allow us to continue to offer services in a
particular country. The continued downward pressure on prices and our failure to
renegotiate favorable terms in a particular country would have a material
adverse effect on our ability to operate our network and business profitably.

A VARIETY OF RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS COULD MATERIALLY
ADVERSELY AFFECT OUR BUSINESS.

         Because we provide substantially all of our services internationally,
we are subject to additional risks related to operating in foreign countries.
These risks include:

         -     unexpected changes in tariffs, trade barriers and regulatory
               requirements relating to Internet access or Internet telephony;
         -     economic weakness, including inflation, or political instability
               in particular foreign economies and markets;
         -     difficulty in collecting accounts receivable; and
         -     foreign taxes.

         These and other risks associated with our international operations may
materially adversely affect our ability to attain or maintain profitable
operations.

         During the fiscal year ended December 31, 2000, a significant portion
of our revenue was generated by delivering calls to Latin America, especially
Mexico. Many countries in these geographic regions have experienced political
and economic instability


                                       20
<PAGE>   23
over the past decade. Repeated political or economic instability in countries to
which we deliver substantial volumes of traffic could lead to difficulties in
completing calls through our regional service providers or decreased call volume
to such countries.

IF WE ARE NOT ABLE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGE IN A
COST-EFFECTIVE MANNER, THE RELATIVE QUALITY OF OUR SERVICE COULD SUFFER.

         The technology upon which our services depend is changing rapidly.
Significant technological changes could render the equipment which we use
obsolete, and competitors may begin to offer new services that we are unable to
offer. We must adapt to our rapidly changing market by continually improving the
responsiveness, reliability, services and features of our network and by
developing new features and applications to meet customer needs. If we are
unable to successfully respond to these developments or do not respond in a
cost-effective way, we may not be able to offer competitive services.

WE MAY NOT BE ABLE TO EXPAND AND UPGRADE OUR NETWORK ADEQUATELY TO ACCOMMODATE
FUTURE GROWTH.

         Our business requires that we handle a large number of international
calls simultaneously. As we expand our operations, we expect to handle
significantly more calls. We will need to expand and upgrade our hardware and
software to accommodate such increased traffic. If we do not expand and upgrade
quickly enough, we will not have sufficient capacity to handle the traffic and
our operating performance would suffer. Consequently, we could develop a
negative reputation with our customers and lose business.

IF WE FAIL TO MANAGE OUR GROWTH, WE COULD LOSE CUSTOMERS.

         We have grown rapidly to date and expect to continue to grow rapidly.
In order to increase the number of our customers and the size of our operations,
we will need to improve our administrative, accounting and operating systems and
controls. We may need to redesign several internal systems. Our attention to
these matters may distract us from other aspects of our business. Moreover,
failure to implement new systems and controls may hamper our ability to provide
services to customers and may impair the quality of our services which could
result in the loss of customers.

OUR REVENUE WOULD DECLINE SIGNIFICANTLY IF WE LOSE ONE OR MORE OF OUR MOST
SIGNIFICANT CUSTOMERS.

         A significant portion of our revenues are concentrated among a few
large customers. For the year ended December 31, 2000, our largest customer
represented approximately $18.3 million or 23% of total revenue, while the next
three largest customers represented approximately $42.8 million or 55% of total
revenue. Our three largest customers represented 96% of total revenue for each
of the years ended 1999 and 1998. The loss of any of the foregoing customers
could have a significant adverse impact


                                       21
<PAGE>   24
on us.

WE DEPEND ON OUR KEY PERSONNEL AND MAY HAVE DIFFICULTY RETAINING THE KEY
PERSONNEL WE NEED TO EXECUTE OUR GROWTH PLANS.

         GlobalNet is presently dependent upon the executive abilities of its
Chairman and Chief Executive Officer, Robert J. Donahue, its President, Daniel
M. Wickersham, and its other executive officers. Our business and operations to
date chiefly have been implemented under the direction of these individuals, who
presently are, and in the future will be, responsible for the implementation of
our anticipated plans and programs. While we have entered into employment
agreements with our principal executive officers, the loss or unavailability of
the services of one or more of our principal executives would have an adverse
effect on us. Given our present financial condition, we may encounter difficulty
in our ability to recruit and ultimately hire any replacement or additional
executive officers having similar background, experience and qualifications as
those of our current executive officers.

WE WILL NEED TO ATTRACT SKILLED PERSONNEL TO EXECUTE OUR GROWTH PLANS.

         Our future success will depend, in large part, on our ability to
attract, retain and motivate highly skilled employees, particularly engineering
and technical personnel. Competition for such employees in our industry is
intense. We have from time to time in the past experienced, and we expect to
continue to experience in the future, difficulty in hiring and retaining
employees with appropriate qualifications. We may not be able to retain our
employees or attract, assimilate or retain other highly qualified employees in
the future. If we do not succeed in attracting and retaining skilled personnel,
we may not be able to grow at a sufficient rate to attain profitable operations.

Risks Related to the Internet and the Internet Telephony Industry.

IF THE INTERNET DOES NOT CONTINUE TO GROW AS A MEDIUM FOR VOICE AND FAX
COMMUNICATIONS, OUR BUSINESS WILL SUFFER.

         The technology that allows voice and fax communications over the
Internet, and the delivery of other value-added services, is still in its early
stages of development. Historically, the sound quality of calls placed over the
Internet was poor. As the Internet telephony industry has grown, sound quality
has improved, but the technology requires further refinement. Additionally, as a
result of the Internet's capacity constraints, callers could experience delays,
errors in transmissions or other interruptions in service. Transmitting
telephone calls over the Internet must also be accepted as an alternative to
traditional voice and fax service by communications service providers. Because
the Internet telephony market is new and evolving, predicting the size of this
market and its growth rate is difficult. If our market fails to develop, then we
will be unable to grow our customer base and our results of operations will be
adversely affected.


                                       22
<PAGE>   25
IF THE INTERNET INFRASTRUCTURE IS NOT ADEQUATELY MAINTAINED, WE MAY BE UNABLE TO
MAINTAIN THE QUALITY OF OUR SERVICES AND PROVIDE THEM IN A TIMELY AND CONSISTENT
MANNER.

         Our future success will depend upon the maintenance of the Internet
infrastructure, including a reliable network backbone with the necessary speed,
data capacity and security for providing reliability and timely Internet access
and services. To the extent that the Internet continues to experience increased
numbers of users, frequency of use or bandwidth requirements, the Internet may
become congested and be unable to support the demands placed on it and its
performance or reliability may decline thereby impairing our ability to complete
calls using the Internet at consistently high quality. The Internet has
experienced a variety of outages and other delays as a result of failures of
portions of its infrastructure or otherwise. Any future outages or delays could
adversely affect our ability to complete calls. Moreover, critical issues
concerning the commercial use of the Internet, including security, cost, ease of
use and access, intellectual property ownership and other legal liability
issues, remain unresolved and could materially and adversely affect both the
growth of Internet usage generally and our business in particular.

WE CANNOT BE CERTAIN THAT OUR ABILITY TO PROVIDE OUR COMMUNICATIONS SERVICES
USING THE INTERNET WILL NOT BE ADVERSELY AFFECTED BY COMPUTER VANDALISM.

         Recently, computer vandals have caused certain leading Internet sites
to shut down temporarily and have materially affected the performance of the
Internet during key business hours by bombarding targeted sites with numerous
false requests for data. While we do not operate any websites like those
recently affected, we do rely on the Internet to deliver our international
communications services. If the overall performance of the Internet is seriously
downgraded by such website attacks or other acts of computer vandalism, our
ability to deliver our communication services over the Internet could be
adversely impacted, which could cause us to have to increase the amount of
traffic we have to carry over alternative networks, including the more costly
public-switched telephone network. In addition, traditional business
interruption insurance may not cover losses we could incur because of any such
disruption of the Internet. While some insurers are beginning to offer insurance
products purporting to cover these losses, we do not have any of this insurance
at this time.

INTERNATIONAL GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES COULD LIMIT OUR
ABILITY TO PROVIDE OUR SERVICES OR MAKE THEM MORE EXPENSIVE.

         The regulatory treatment of Internet telephony outside of the United
States varies widely from country to country. A number of countries currently
prohibit or limit competition in the provision of traditional voice telephony
services. Some countries prohibit, limit or regulate how companies provide
Internet telephony. Some countries


                                       23
<PAGE>   26
have indicated they will evaluate proposed Internet telephony service on a
case-by-case basis and determine whether to regulate it as a voice service or as
another telecommunications service, and in doing so potentially imposing
settlement rates on Internet telephony providers. Finally, many countries have
not yet addressed Internet telephony in their legislation or regulations.
Increased regulation of the Internet and/or Internet telephony providers, or the
prohibition of Internet telephony in one or more countries, could limit our
ability to provide our services or make them more expensive.

         In addition, as we make our services available in foreign countries,
and as we work to enable sales by our customers to end-users in foreign
countries, such countries may claim that we are required to qualify to do
business in that particular country, that we are otherwise subject to
regulation, including requirements to obtain authorization, or that we are
prohibited in all cases from conducting our business in that foreign country.
Our failure to qualify as a foreign corporation in a jurisdiction in which we
are required to do so or to comply with foreign laws and regulations could
seriously restrict our ability to provide services in such jurisdiction, or
limit our ability to enforce contracts in that jurisdiction. Our customers also
currently are, or in the future may become, subject to these same requirements.
We cannot assure you that our customers are currently in compliance with any
such requirements or that they will be able to continue to comply with any such
requirements. The failure of our customers to comply with applicable laws and
regulations could prevent us from being able to conduct business with them.
Additionally, it is possible that laws may be applied by the United States
and/or other countries to transport services provided over the Internet,
including laws governing:

         -  sales and other taxes;
         -  user privacy;
         -  pricing controls;
         -  characteristics and quality of products and services;
         -  consumer protection;
         -  cross-border commerce, including laws that would impose tariffs,
            duties and other import restrictions;
         -  copyright, trademark and patent infringement; and
         -  claims based on the nature and content of Internet materials,
            including defamation, negligence and the failure to meet necessary
            obligations.

         If foreign governments or other bodies begin to regulate or prohibit
Internet telephony, this regulation could have a material adverse effect on our
ability to attain or maintain profitability.

OUR OPERATIONS IN MEXICO AND LATIN AMERICAN COUNTRIES MAY BE LESS PROFITABLE
THAN WE HAVE ANTICIPATED.

         The Company's Latin American strategy is founded on the deregulation of
countries in the region. This deregulation may not occur or could be delayed in
each of


                                       24
<PAGE>   27
the targeted counties.

         Operations in each of the targeted countries will be less profitable or
prevented completely if there is non-performance or malfeasance on the part of
any of the partners in the targeted countries, as the Company's business plan
relies on cooperation from local partnerships.

         There are additional economic risks in operating in Latin American
countries. Changes in a targeted country's national or local economy could
adversely impact our business. In addition, exchange rate changes in each of
these countries could also negatively affect the Company.

         Political unrest or civil war is a possibility and could adversely
affect the Company.

         Inherent in the strategy of selecting highly profitable emerging
markets to conduct business is that these markets attract other companies
seeking deregulation, and may result in markets with increased competition.
This increased competition may result in reduced profitability for the Company.

THE TELECOMMUNICATIONS INDUSTRY IS SUBJECT TO DOMESTIC GOVERNMENTAL REGULATION
AND LEGAL UNCERTAINTIES COULD LIMIT OUR ABILITY TO PROVIDE OUR SERVICES OR MAKE
THEM MORE EXPENSIVE.

         While the Federal Communications Commission has tentatively decided
that information service providers, including Internet telephony providers, are
not telecommunications carriers for regulatory purposes, various companies have
challenged that decision. Congress is dissatisfied with the conclusions of the
FCC and the FCC could impose greater or lesser regulation on our industry. The
FCC is currently considering, for example, whether to impose surcharges or other
regulations upon certain providers of Internet telephony, primarily those that,
unlike us, provide Internet telephony services to end-users located within the
United States.

         Aspects of our operations may be, or become, subject to state or
federal regulations governing universal service funding, disclosure of
confidential communications, copyright and excise taxes. We cannot assure you
that government agencies will not increasingly regulate Internet-related
services. Increased regulation of the Internet may slow its growth. This
regulation may also negatively impact the cost of doing business over the
Internet and materially adversely affect our ability to attain or maintain
profitability.


                                       25
<PAGE>   28
ITEM 2. PROPERTIES

         GlobalNet's principal executive office is located in Lombard, Illinois,
where the Company leases approximately 6,700 square feet at a cost of $9,668 per
month. The lease expires on February 28, 2004.

         GlobalNet's engineering department and research and development lab is
located in Marietta, Georgia, where the Company leases approximately 3,700
square feet of office space. Monthly lease payments amount to $4,500 per month
and the lease expires on August 31, 2001, however, it is renewable at the
Company's option. We currently intend to reoccupy the space at that time.

         GlobalNet's operations department and international gateway for Latin
America are located in San Antonio, Texas, where GlobalNet leases approximately
6,100 square feet of office space. The monthly lease payments amount to $4,905
per month and the lease expires on April 30, 2005.

         The Company also leases space in Garden City, New York in accordance
with a co-location agreement with MCI Worldcom Network Services, Inc., where it
has its international gateway for the rest of the world. Monthly payments under
the co-location agreement amount to $9,100 per month and the lease expires on
September 19, 2001, however, it is renewable at the option of MCI Worldcom.

         We believe our facilities are sufficient to meet our current and
reasonably anticipated future requirements or that additional or substitute
space will be available on commercially reasonable terms. See Note 6 of Notes to
Consolidated Financial Statements.

ITEM 3. LEGAL PROCEEDINGS

         GlobalNet is involved in a variety of legal proceedings that affect its
business. These include proceedings relating to private sales of GlobalNet's
common stock, the financing arrangements with respect to our equipment leases,
certain contractual disputes and other litigation proceedings. The nature of
these proceedings, and the effect that adverse determinations in the proceedings
could have on GlobalNet and its business, financial condition and results of
operations, are described below.

Rubin v. Gushlak

         On December 26, 2000, an action entitled Rubin v. Gushlak, et. al, Case
No. 00-13406, was filed in the United States District Court for the Central
District of California. This action is against Myron Gushlak, a former director
of GlobalNet until his resignation in April 2001, and 13 other named defendants,
including GlobalNet. The action arises out of the purchase by the plaintiff of
1,000,000 shares of the Company's common stock at a price of $5 per share in a
private transaction which Mr. Gushlak allegedly facilitated. The primary relief
sought in the action is the rescission of the contract of purchase; and


                                       26
<PAGE>   29
damages in the alternative. The action alleges violations of Sections 5 and 12
of the Securities Act of 1933, as amended, and alleged violations of Section
10(b) of the Securities and Exchange Act of 1934 and common law fraud. The
complaint alleges that defendant Gushlak allegedly induced the plaintiff to
purchase shares of GlobalNet's common stock and, in doing so, allegedly violated
various provisions of the federal securities laws. While alleging various
violative conduct and activity on the part of Mr. Gushlak, the complaint asserts
that several of the named defendants, allegedly made untrue statements of
material facts or omitted to state facts necessary to be stated in order to make
certain facts stated not misleading. The complaint also alleges that GlobalNet
failed to cooperate with the plaintiff in its efforts to confirm Gushlak's
beneficial ownership of shares. The action is only in its formative stages and
discovery or substantive proceedings have not as yet been initiated. We believe
that the Company has good and meritorious defenses to the action.

         On or about April 2, 2001, the Plaintiff filed an Amended Complaint in
the action, setting forth various additional allegations principally relating to
alleged wrongful conduct and activity by all defendants other than the Company
and setting forth affirmative specified allegations that the wrongful acts and
conduct which is complained of was allegedly undertaken and carried out by all
defendants other than GlobalNet. The only specific allegation relating to the
Company is that the Company had not cooperated with the Plaintiff in Plaintiff's
efforts to confirm the beneficial ownership of shares and to supply to the
Plaintiff books and records of the Company's transfer agent, and otherwise
failed to take action to effect the reversal of the sale of the shares to
Plaintiff. The time for GlobalNet to answer the Amended Complaint has not
expired, and the Company intends to make a substantive motion seeking dismissal
of the Complaint, as well as other relief.


The Selway Group Inc.

         On November 20, 2000, an action was initiated in the United States
District Court for the Northern District of Illinois against GlobalNet by the
Selway Group Inc. This action alleges that the plaintiff is owed 3% of the gross
revenues derived by GlobalNet from a telecommunications intercommunication
agreement entered into between GlobalNet and Protel, S.A. de C.V. The action
seeks unspecified monetary damages in excess of the monetary federal
jurisdictional limit. GlobalNet has moved to dismiss the complaint for lack of
jurisdiction and, at the present time, the motion remains before the


                                       27
<PAGE>   30
court. GlobalNet believes that it has good and meritorious defenses to this
action which it intends to assert if the court determines that jurisdiction
exists. The action is in its formative stages and no discovery or other
substantive proceedings in the action have been undertaken.

Justice Telcom Corporation

         On January 2, 2001, GlobalNet commenced an action in the Supreme Court
of the State of New York against Justice Telcom Corporation a/k/a Justice
Technology Corp. for the non-payment of services rendered by GlobalNet.
Subsequent to the commencement of this action, GlobalNet learned that a company
known as Total Access.com Inc. allegedly purchased the assets and liabilities of
Justice Telecom. Pending settlement discussions, GlobalNet granted an extension
of time to answer to February 19, 2001. No answer has been received by
GlobalNet, nor have there been any communications to GlobalNet relating to the
settlement discussions. GlobalNet has applied to the court for a default
judgment in the amount of $109,309.

North American Gateway Inc.

         On January 2, 2001, GlobalNet commenced an action in the Supreme Court
of the State of New York against North American Gateway Inc. for the non-payment
of services rendered by GlobalNet. The defendant defaulted in appearing or
answering, and GlobalNet has applied to the court for a default judgment in the
amount of $99,798.

Wholesale Telecom Corporation

         On December 23, 2000, GlobalNet commenced an action in the Supreme
Court of the State of New York against Wholesale Telecom Corporation for the
non-payment of services rendered by GlobalNet in the amount of $563,578. The
defendant has sought to dismiss the action on various jurisdictional grounds and
to otherwise stay the action pending arbitration. The motion presently remains
outstanding before the court, which has not issued its decision. This action is
only in the formative stages and no discovery or other proceedings have been
initiated.

Other Litigation

         We are involved in various other legal proceedings which arise in the
normal course of business. These matters include contract disputes and other
matters. We could incur significant legal fees in connection with these matters
but based upon currently available information, GlobalNet believes that the
resolution of these cases is not likely to have a material adverse effect on our
business, financial position or future results of operations.


                                       28
<PAGE>   31
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
fourth quarter of 2000.


                                       29
<PAGE>   32
                                     PART II

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

         Our common stock is listed and traded on the NASDAQ Small Cap Market.
For the period January 1999 through May 2000 (the pre-reverse merger period),
shares of the Company traded on the Over the Counter Bulletin Board as Rich
Earth, Inc., a publicly traded shell company. There are no available historical
quotations for Rich Earth common stock during the pre-reverse merger period. As
a result of the reverse merger between Rich Earth and GlobalNet International,
Inc., shares of the Company continued to trade on the Over the Counter Bulletin
Board, but under the GlobalNet name, from May 2000 through November 2000. On
November 24, 2000, our common stock commenced trading on the NASDAQ Small Cap
Market. The following table sets forth the high and low closing bid quotations
per share on the Over the Counter Bulletin Board or NASDAQ Small Cap Market, as
the case may be, based upon information supplied by The Wall Street Journal.

<TABLE>
<CAPTION>
                     PERIOD                                  MARKET PRICE
                     ------                                  ------------
                                                      HIGH                  LOW
                                                      ----                  ---
<S>                                                  <C>                 <C>
         2000:
         Second Quarter                              $ 26.88             $ 17.25
         Third Quarter                                 25.50               15.25
         Fourth Quarter                                14.75                0.63

         2001:
         First Quarter                               $  2.77             $  0.78
         Second Quarter (through
         April 12, 2001)                                1.27                0.72
</TABLE>

         On April 12, 2001, the last reported sale price of GlobalNet common
stock on the NASDAQ Small Cap Market was $1.27. We had approximately 1,882
holders of record of our common stock on that date, including various banks and
brokers holding our common stock in "street name" for the benefit of their
customers.

         We have never declared or paid any cash dividends on our common stock.
We presently intend to retain all future earnings for use in our business and do
not anticipate paying any cash dividends on our common stock in the foreseeable
future.

EQUITY TRANSACTIONS

         The Company consummated the following equity transactions, each exempt
from the registration requirements under Section 4(2) and Regulation D of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder:

         During the period from March 2000 through July 2000, we sold 1,205,450
shares of common stock in two transactions. The first transaction at $10 per
unit for an aggregate of $6,000,000, consisted of 600,000 shares of common stock
and warrants to purchase 300,000 shares of common stock exercisable at $15 per
share for a period of six months from the date of grant. The second placement of
605,450 units at $10 per unit consisted of the sale of 605,450 shares of common
stock and warrants to purchase 605,450 shares of common stock, exercisable at
$15 per share. We also issued warrants to purchase 310,000 shares of common
stock exercisable at $15 per share to various individuals and firms assisting in
these placements. The aggregate of the 905,450 warrants issued in the two
private placements and the 310,000 warrants issued to the individuals and firms
assisting in the private placements expired without being exercised and were no
longer outstanding at December 31, 2000. On December 7, 2000, we issued an
aggregate of 1,215,450 warrants, exercisable at $5 per share, to the individuals
who formerly held the expired warrants. The net proceeds for the private
placements amount to $11,640,106 after deducting a placement fee of $414,394.

         On May 15, 2000, GlobalNet issued an aggregate of 2,025,000 shares of
restricted stock to various employees, directors and consultants, vesting at the
rate of 44% on September 15, 2001; 22% on May 15, 2002; and 34% on May 15, 2003.
Of these shares, 650,000 shares were forfeited in the fourth quarter of 2000.

         On December 28, 2000, GlobalNet issued 775,000 shares of restricted
common stock to various employees, vesting at the rate of 44% on September 15,
2001; 22% on May 15, 2002; and 34% on May 15, 2003.

         During February 2001, the Company effected a private placement of
700,000 shares of common stock of $1.00 per share. The Company issued warrants
to purchase 75,000 shares of common stock at $1.20 to various entities assisting
in the placement. The Company received net proceeds at the closing in the amount
of $670,000, after deducting a finder's fee of $30,000. The Company filed a
registration statement on Form S-3 to register the shares sold in the placement
and the warrants granted to the placement agents on April 2, 2001.

         On April 9, 2001, we entered into a Securities Purchase Agreement with
Crescent International Ltd. pursuant to which we sold, and Crescent
International purchased, a $2,000,000 Convertible Note due April 9, 2004.
Crescent International also agreed to purchase, from time to time through April
9, 2002, up to $4,000,000 worth of the our Common Stock; the number of shares
and purchase price to be determined based upon trading volumes for our Common
Stock and the market prices for our Common Stock for the 22 trading day period
prior to the time a sale is to be made. At the closing, Crescent International
made an initial purchase of 365,428 shares of our Common Stock for an aggregate
of $250,000. Under the terms of the Securities Purchase Agreement, we may sell
up to an additional $3,750,000 of our Common Stock to Crescent International at
the prices and subject to the limitations as to the amount as provided for in
the Securities Purchase Agreement. The Securities Purchase Agreement contains
"anti-shorting" provisions that prohibit Crescent International from directly or
indirectly engaging in short sales of the shares purchased, the note conversion
shares and the warrant shares issued pursuant to warrants granted to Crescent
International .

         GlobalNet received net proceeds at the closing in the amount of
$2,140,976, after deducting certain fees to be paid to GreenLight (Switzerland)
S.A., the investor representative of Crescent International; Crescent
International's due diligence expenses; and a portion of Crescent
International's counsel fees. We also paid a finder's fee of $157,500 and issued
warrants to purchase 360,000 shares to J.P. Carey Securities, Inc. as a finder's
fee in connection with the transaction.

         At the closing, GlobalNet issued and delivered its Convertible Note
payable to the order of Crescent International in the amount of $2,000,000 and
due April 9, 2004. The note does not bear interest unless we are in default in
delivering conversion shares to Crescent International, or fail to pay the
principal of the note when due, in which case the note will bear interest at a
fixed rate of 8% per annum calculated from April 9, 2001.

         GlobalNet retains the right to redeem the note at certain times and
under certain circumstances at redemption prices ranging from 112.5% to 140%,
depending upon the time when any notice of redemption is given. Additionally, we
can force the conversion of the note into shares of our Common Stock if we meet
certain requirements, including a significant appreciation in our Common Stock
price.

         The holder of the note may convert the note in whole or in part at a
conversion price equal to the lower of 106% of the average of the bid prices
during the 10 trading days preceding April 9, 2001 and 94% of the average of the
lowest three consecutive bid prices for our Common Stock for the 22 trading day
period preceding a conversion date. The conversion price and the number of note
conversion shares is subject to certain standard anti-dilution adjustments
including reclassification, consolidation, merger or mandatory share exchange;
subdivision or combination of shares; stock dividends; and the issuance of
additional capital shares by us at prices less than the conversion price.

         In furtherance of the transaction, GlobalNet entered into a
Registration Rights Agreement, whereby it is required to file a registration
statement on behalf of Crescent International with respect to the shares
purchased by it, the note conversion shares, and warrant shares issuable
pursuant to warrants issued to Crescent International. Similar registration
statements are to be filed for each subsequent purchase of securities made by
Crescent International. The failure of GlobalNet to effect its registration
statements as required under the Registration Rights Agreement may subject it to
certain financial penalties.

         In further consideration for Crescent International entering into the
Securities Purchase Agreement, GlobalNet issued an Incentive Warrant to Crescent
International representing the right to purchase 877,026 shares of the its
Common Stock at $1.0221 per share (150% of the price at which Crescent
International purchased its initial shares). The Incentive Warrant is
exercisable for a five-year period commencing April 9, 2001, and provides for
adjustment in the price and number of warrant shares upon the occurrence of
certain events triggering anti-dilution adjustments, and Crescent International
may not exercise its warrant if, at the time of exercise, the number of shares
that it would receive, together with all other shares of the Company's Common
Stock which it beneficially owns, would result in Crescent International owning
more than 9.9% of the Company's Common Stock as would be outstanding on the
exercise date.

         The Company also issued a Protective Warrant to Crescent International
which only becomes exercisable on the effective date of the registration
statement which the Company is obligated to file relating to the initial shares
purchased by Crescent International, and then only if the price for the
Company's Common Stock on such effective date is lower than the price for the
Company's Common Stock on the date of Crescent International's initial purchase.
In such case, the Protective Warrant only becomes exercisable to purchase a
number of shares determined by subtracting the amount paid by Crescent
International for its initial purchase of the Company's Common Stock, i.e.
$250,000, divided by the purchase price, from an amount which is equal to
250,000 divided by the price of the Common Stock for the Company as computed on
the effective date of the Company's registration statement. Under the terms of
the Protective Warrant, if the price for the Company's Common Stock as computed
on the effective date of the registration statement filed on behalf of Crescent
International is higher than the purchase price for the Company's Common Stock,
as computed on the date Crescent International purchased such shares, the
Protective Warrant does not become exercisable.

         The foregoing description of the private placement with Crescent
International does not purport to be a complete description and is qualified in
its entirety by reference to a Current Report on Form 8-K, dated April 9, 2001,
filed with the Securities and Exchange Commission on April 13, 2001, which
information is hereby incorporated by reference.

                                       30
<PAGE>   33

ITEM 6. SELECTED FINANCIAL DATA

         The selected consolidated financial data presented below for each of
the five years in the period ended December 31, 2000 has been derived from our
consolidated financial statements. The consolidated financial statements for
each of the three years in the period ended December 31, 2000 were audited. The
consolidated financial statements for the years ended December 31, 1996 and
December 31, 1997 are unaudited. The selected consolidated financial data should
be read in conjunction with the Consolidated Financial Statements and the Notes
thereto and other financial information appearing elsewhere in this Report.

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                   ---------------------------------------------------------------------------------
                                                       1996             1997             1998             1999             2000
                                                   ------------     ------------     ------------     ------------     ------------
                                                    (unaudited)      (unaudited)
                                                   ------------     ------------
<S>                                                <C>              <C>              <C>              <C>              <C>
Statement of Operations Data:
  Total revenues ..............................    $       --       $    792,654     $  4,046,246     $ 24,926,891     $ 78,090,535

Income loss from continuing operations .............       --           (256,082)        (111,490)      (2,535,640)     (10,646,993)
  Net income (loss) per common share ..........                            (0.01)           (0.01)           (0.17)           (0.47)

Balance Sheet Data:
  Total assets ................................    $    241,000     $    452,518     $    210,692     $  6,605,400     $ 19,732,888

  Long-term obligations .......................            --               --               --          3,773,443        5,680,002
</TABLE>

         Prior to May 30, 2000, when the Company completed a reverse merger, the
financial results were those of GlobalNet International, Inc. (formerly DTA
Communications Network, L.L.C.). After May 30, 2000, the financial results
presented are ours. For a description of the reverse merger, please refer to
Note 1 to the consolidated financial statements. All per share data is
calculated based upon 20,000,000 shares outstanding prior to the reverse merger
on May 30, 2000 as these shares were received by the former owners of GlobalNet
International, Inc.



                                       31
<PAGE>   34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

ORGANIZATIONAL HISTORY

         GlobalNet was formed on May 30, 2000 as a result of a "reverse merger"
transaction, whereby GlobalNet International, Inc. (GlobalNet International)
merged with and into a subsidiary of Rich Earth, Inc. (Rich Earth) pursuant to
an agreement and plan of merger, whereby 20,000,000 shares of Rich Earth common
stock were issued in exchange for 100% of the common stock of GlobalNet
International in a transaction accounted for as a reverse acquisition of Rich
Earth by GlobalNet International. Prior to the reverse merger, Rich Earth was a
non-operating public shell corporation with nominal assets. Following the
reverse merger, the management of GlobalNet International controlled the merged
company and the principal shareholders of GlobalNet International became
principal shareholders of the merged company. Following the closing of the
reverse merger, Rich Earth changed its name to GlobalNet, Inc. As a result of
the reverse merger transaction, GlobalNet International continued as an
operating entity and as a wholly-owned subsidiary of GlobalNet, Inc., and the
historical financial statements of GlobalNet, Inc. replaced those of Rich Earth.

OVERVIEW

         GlobalNet provides international voice, data and Internet services over
a private, managed Internet Protocol (IP) network to international carriers and
other communication service providers in the United States and Latin America.
GlobalNet's mission is to become the premier provider of high quality,
competitively priced IP based voice, fax, and data services to Internet Service
Providers (ISPs), PTT's, and other Telecommunications Services Providers (TSPs)
serving the Small - Medium Enterprise (SME) Market in Latin America.

         GlobalNet was formed in 1996 to capitalize on the growth of the
Internet Protocol as a communications transport medium for IP Telephony and
other enhanced services. To date, the Company has focused primarily on
wholesaling international voice and facsimile communications services between
the United States and Latin American countries, predominately Mexico. GlobalNet
has been successful in establishing and maintaining relationships with Tier 1
and Tier 2 carriers as a result of its ability to procure consistent sources of
supply in the capacity constrained telecommunications corridors linking Latin
America and the United States. This has been accomplished through the
development of partnerships with several Latin American telecommunications
companies. Leveraging these relationships, the Company has grown its revenues
from $793,000 in 1997 to $78,091,000 in 2000, an annualized compound growth
rate of over 350 percent.


                                       32
<PAGE>   35
RESULTS OF OPERATIONS

2000 COMPARED TO 1999

REVENUE. Our primary source of revenue is the fees that we receive from
customers for completing calls over our network. This revenue is dependent on
the volume of voice and fax traffic carried over the network, which is measured
in minutes. We charge our customers fees per minute of traffic that are
dependent on the length and destination of the call and recognize this revenue
in the period in which the call is completed. We also derive revenue from
supplying the underlying services, including value-added applications and the
use of the Company's network, to issuers of prepaid phone cards.

         Net revenue increased by 213% or $53,164,000, from $24,927,000 for
the year ended December 31, 1999 to $78,091,000 for the year ended December 31,
2000. The increase in revenue was primarily due to the increase in number of
customers as well as to the increase of the traffic from existing customers.
GlobalNet's customer base increased from 11 customers in 1999 to 29 customers in
2000. Additionally, as a percentage of total revenues, the largest customer
decreased from 82% in 1999 to 23% in 2000.

         In April 1999, the Company started providing prepaid phone card
services. As a percentage of total revenues, prepaid card revenues represented
20.7% and 10.9% for the years ended December 31, 2000 and December 31, 1999,
respectively.

         In the fourth quarter of 2000, the Company decided to exit the prepaid
card business due to its lack of profitability. As a result, as a percentage of
total revenues, GlobalNet's core business, the wholesale Voice over IP (VoIP),
increased from 73% in the third quarter of 2000 to 98% in the fourth quarter.
Wholesale VoIP revenues increased by 34.4%, from $17,223,000 for the three
months ended September 30, 2000 to $23,096,000 for the three months ended
December 31, 2000.

DATA COMMUNICATIONS AND TELECOMMUNICATIONS. Data communications and
telecommunications cost is comprised primarily of termination costs, purchased
minutes, and other expenses associated with data communications and
telecommunications. Termination fees are paid to local service providers to
terminate calls received from our network. This traffic is measured in minutes,
and the per minute rates charged for terminating calls are negotiated with the
local service provider and included in our contract with our local service
provider. Our contracts with our providers typically provide us with the right
to negotiate the per minute termination fees.

         Data communications and telecommunications cost increased by 194%
or $49,032,000, from $25,299,000 for the year ended December 31, 1999 to
$74,331,000 for the year ended December 31, 2000. This increase resulted
primarily from a significant increase in traffic (consistent with the increased
revenue discussed above), which in turn increased the termination costs and
purchased minutes. As a percentage of net revenue, data communications and
telecommunications costs decreased by 6.3 percentage points,


                                    33
<PAGE>   36
from 101.5% for the year ended December 31, 1999 to 95.2% for the year ended
December 31, 2000. The negative gross margins in 1999 were primarily due to the
losses experienced by the Company's prepaid card programs.

         The gross margin for the fourth quarter of 2000 increased to $1,776,000
or 7.5% of revenues, from the 7.0% of revenues for the previous quarter. The
improvement in gross margins for the quarter and the year is primarily due to
the Company's addition of new direct routes and the increased competitiveness of
the existing routes. Additionally, in the fourth quarter, the Company decided to
exit the prepaid card business due to its lack of profitability.

NETWORK RESEARCH AND DEVELOPMENT. Network research and development expenses
include the expenses incurred in the development, expansion, operation and
support of the Company's global IP network. These expenses consist primarily of
the fixed monthly cost of the leased lines that comprise the Company's network,
the salary and payroll related taxes of the employees directly involved in the
development and operation of the network and the expenses incurred in the
development and support of the Company's proprietary software.

         Network research and development expenses increased by approximately
$3,022,000, from $129,000 for the year ended December 31, 1999 to $3,151,000
for the year ended December 31, 2000. The increase in network research and
development expenses is primarily due to the increase in the personnel needed to
expand, develop and support the Company's global network.

         Additionally, in the third quarter of 2000, the Company completed the
development and initial deployment of "INTE-GRATE", an internally-developed
systems management software. "INTE-GRATE" is the Company's proprietary software
that integrates the data access for sales, operations and traffic analysis
functions and significantly enhances customer service. This software tracks
rapidly changing vendor costs to determine the most cost-effective routing and
permits GlobalNet to make substantial routing changes in order to take advantage
of pricing changes. The Company did not capitalize any software development
costs.

SELLING AND MARKETING. Selling and marketing expenses include the expenses
incurred in the development and promotion of the Company's image, products and
services. Selling and marketing expenses include primarily the salaries, payroll
taxes, benefits and commissions paid to the sales personnel as well as the fees
paid to investor relations firms and consultants.

         Selling and marketing expenses increased from $132,000 for the year
ended December 31, 1999 to $1,052,000 for the year ended December 31, 2000. The
increase in selling and marketing expenses is primarily due to the addition of
new sales and marketing personnel and the retention of an outside investor
relations firm.


                                       34
<PAGE>   37
BAD DEBT EXPENSE. Bad debt amounted to $482,000 for the year ended December 31,
2000. The bad debt corresponds to three customers and represents 0.6% of total
revenues. The Company did not experience any bad debt in 1999.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses include
the expenses incurred for general corporate functions, including administration,
finance and accounting, facilities, human resources, and professional services.
General and administrative expenses of $4,318,000 increased by $3,298,000 for
the year ended December 31, 2000 as compared to the corresponding period in
1999.

         The increase in general and administrative expenses was primarily due
to the increase in headcount and salary expense that resulted from the expansion
of the Company's global network. Additionally, professional fees (i.e.,
accounting and legal) increased significantly as a result of the Company
completing its reverse merger in the second quarter of 2000.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses of
$2,903,000 for the year ended December 31, 2000 were $2,020,000 higher than
those of the corresponding period in 1999. The increase in depreciation expense
is due to the acquisition of additional property and equipment. GlobalNet's
property and equipment (before accumulated depreciation) increased by 151.1% or
$8,054,000, from $5,332,000 as of December 31, 1999 to $13,386,000 as of
December 31, 2000.

         Additionally, in the first quarter of 2000, the Company recorded
$2,000,000 of intangible assets in the acquisition of the 25% minority interest
in GlobalNet L.L.C. The Company is amortizing the intangible assets on a
straight-line basis over a five-year period. The amortization expense associated
with the intangible assets amounted to approximately $333,000 for the year ended
December 31, 2000.

NON-CASH STOCK COMPENSATION. The non-cash stock compensation expense resulted
primarily from the issuance of restricted stock to certain employees,
consultants and directors in May 2000. The stock was issued to motivate and
retain key employees and has a vesting period of three years.

INTEREST EXPENSE. Interest expense (net of interest income) increased from
$752,000 for the year ended December 31, 1999 to $1,299,000 for the year ended
December 31, 2000. As a percentage of revenue, interest expense decreased from
3.0% for the year ended December 31, 1999 to 1.7% for the year ended December
31, 2000. The interest expense consists primarily of the capital leases used by
the Company to finance the acquisition of new network equipment.

         The capital leases outstanding as of December 31, 2000 amounted to
$9,716,000, of which approximately $6,592,000 corresponded to a credit facility
with General Electric Capital Corporation and $3,124,000 to a facility with
Prinvest Corp. The Company is currently negotiating other credit facilities to
finance the acquisition of


                                       35
<PAGE>   38
additional equipment and to refinance its current capital leases and reduce its
financing costs.

INCOME TAXES. No income tax benefit was recorded for the year ended December 31,
2000 due to the uncertainty of the realization of deferred tax assets.

1999 COMPARED TO 1998

NET REVENUE. Net revenue increased by $20,881,000 or 516.1%, from $4,046,000
for the year ended December 31, 1998 to $24,927,000 for the year ended
December 31, 1999. The increase in net revenue is primarily due to the increase
in the number of customers and the increase in the traffic from existing
customers.

DATA COMMUNICATIONS AND TELECOMMUNICATIONS. Data communications and
telecommunications cost increased from $3,370,000 for the year ended December
31, 1998 to $25,299,000 for the year ended December 31, 1999 primarily as a
result in the increase in the traffic handled by the Company's network.

         As a percentage of net revenue, data communications and
telecommunications cost increased from 83.3% for the year ended December 31,
1998 to 101.5% for the year ended December 31, 1999. In April 1999, the Company
started providing prepaid phone card services. The negative gross margins in
1999 are primarily due to the losses associated with the prepaid card programs.

NETWORK RESEARCH AND DEVELOPMENT. Network research and development expenses
amounted to approximately $129,000 for the year ended December 31, 1999. In
1998, the Company was not a facility-based carrier and did not have network
research and development expenses.

SELLING AND MARKETING. Selling and marketing expenses amounted to approximately
$132,000 for the year ended December 31, 1999. In 1998, the Company had only
four employees who work in operational, sales and marketing and administrative
functions. The Company did not have a clear segregation of duties among those
employees and, therefore, recorded all the expenses as "general and
administrative".

BAD DEBT EXPENSE. The Company did not experience any bad debt in 1999 or 1998.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased by
approximately $232,000, from $788,000 for the year ended December 31, 1998 to
$1,020,000 for the year ended December 31, 1999. As a percentage of net
revenues, general and administrative expenses decreased from 19.5% for the year
ended December 31, 1998 to 4.1% for the year ended December 31, 1999.


                                       36
<PAGE>   39
         The increase in general and administrative expenses in dollar terms is
primarily due to the increase in headcount from four employees in 1998 to nine
employees in 1999. The decrease as a percentage of total revenues is due to the
significant increase in revenues in 1999.

DEPRECIATION. Depreciation expense amounted to approximately $883,000 for the
year ended December 31, 1999. The Company did not record any depreciation
expense in 1998 since it did not own any equipment.

OTHER EXPENSES. Other expenses (net of other income) decreased from $175,000 for
the year ended December 31, 1998 to $41,000 for the year ended December 31,
1999. The amounts paid were for legal expenses related to an affiliated entity
that filed for bankruptcy, and for amounts due to a creditor of the affiliated
entity. Currently, there are no obligations or claims against the Company
related to that affiliated entity.

INTEREST EXPENSE. Interest expense (net of interest income) increased from
$8,000 for the year ended December 31, 1998 to $752,000 for the year ended
December 31, 1999. The interest expense incurred in 1999 corresponds primarily
to capital leases entered in that year. The Company was not leasing any
equipment in 1998.

LIQUIDITY AND CAPITAL RESOURCES

         Our liquidity and capital needs are primarily related to the
development and implementation of our network infrastructure, our network
research and development activities, our marketing efforts and our general and
administrative functions. Our capital needs have been met primarily through the
issuance of common stock and through equipment financing through capital leases.

         During March, April and May 2000, Rich Earth issued approximately
1,200,000 shares of common stock in connection with the sale of units to
investors in two private placement transactions resulting in net proceeds of
over $11.6 million. The Company acquired the cash held by Rich Earth in its
merger on May 30, 2000.

         During February 2001, the Company effected a private placement of
700,000 shares of common stock at $1.00 per share. The Company received net
proceeds at the closing in the amount of $670,000, after deducting a finder's
fee of $30,000.

         On April 9, 2001, the Company sold a $2,000,000 convertible note to
Crescent International, Ltd. Crescent International also agreed to purchase from
time to time through April 9, 2002, up to $4,000,000 worth of the Company's
common stock; the number of shares and the price to be determined based upon the
Company's trading volume and stock price. At the closing, Crescent International
made an initial purchase of 365,428 shares of the Company's common stock for an
aggregate of $250,000. The Company received net proceeds at the closing in the
amount of $2,140,976, after deducting certain fees to be paid to GreenLight
(Switzerland) S.A., the investor representative of Crescent International;
Crescent International's due diligence expenses; and a portion of Crescent
International's counsel fees. The Company also paid a finder's fee of $157,500
and issued warrants to purchase 360,000 shares to J.P. Carey Securities, Inc.

         Additional information relating to these private placements is set
forth in Part II, Item 5, under the subheading, "Equity Transactions," which
information is hereby incorporated by reference.


         The Company maintains credit facilities with GE Capital and Prinvest
Corp., to finance the lease of telecommunications network and data transmission
equipment.

         GlobalNet is currently negotiating other credit facilities to finance
the acquisition of additional equipment and to refinance its current capital
leases and reduce financing costs. Considering the Company's deficit working
capital, the Company may need to seek additional capital through the issuance of
equity securities and/or facilities within the next 12 months.


                                       37
<PAGE>   40
CASH FLOW DATA - YEAR ENDED DECEMBER 31, 2000 AND 1999

         During the year ended December 31, 2000, net cash used in operating
activities totaled $3,856,000, as compared to net cash used in operating
activities totaling $265,000 in 1999. Cash used in operating activities in 2000
was primarily the result of net losses and increases in accounts receivable and
other current assets. The cash loss (i.e., net loss before depreciation and
amortization and non-cash compensation expense) amounted to approximately
$6,543,000 and $2,395,934 for the years ended December 31, 2000 and December 31,
1999, respectively.

         Net cash used in investing activities amounted to approximately
$676,000 and $241,000 for the years ended December 31, 2000 and December 31,
1999, respectively. Cash used in investing activities was primarily the result
of the purchase of miscellaneous furniture and computer equipment needed to
support the increase in headcount. The Company financed all its purchases of
telecommunications equipment through capital leases. Purchases of
telecommunications equipment amounted to approximately $7,356,000 and $5,092,000
for the years ended December 31, 2000 and December 31, 1999, respectively.

         During the year ended December 31, 2000, net cash provided by financing
activities of $6,773,000 consisted principally of the $9,513,000 (net of the
$2,127,000 used to purchase the 25% minority interest in GlobalNet L.L.C.) of
collected proceeds from the Company's private placements, net of $2,123,000 and
$617,000 of payments on capital leases and term loan obligations, respectively.

RECENTLY ISSUED ACCOUNTING STANDARDS

         During 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities (as amended by SFAS No. 137, Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133 and SFAS No. 138, Accounting for Certain Derivative
Instruments and Hedging Activities), which is effective for all fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes a comprehensive standard
for the recognition and measurement of derivative instruments and hedging
activities. The Company does not expect the adoption of the new standard to have
a material effect on our consolidated financial position, liquidity, or results
of operations.


                                      38
<PAGE>   41

"SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         This report includes "forward-looking statements" within the meaning of
various provisions of the Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical facts, included in this report
that address activities, events or developments that the Company expects or
anticipates will or may occur in the future, future capital expenditures
(including the amount and nature thereof), business strategy and measures to
implement strategy, including any changes to operations, goals, expansion and
growth of the Company's business and operations, plans, references to future
success and other such matters are forward-looking statements and involved a
number of risks and uncertainties. Among the factors that could cause actual
results to differ materially are the following: the availability of sufficient
capital to finance the Company's business plan on terms satisfactory to the
Company, competitive factors, changes in costs, including termination and
transmission costs, general business and economic conditions and other risk
factors described herein or from time to time in the Company's reports filed
with the Securities Exchange Commission. Consequently, all of the
forward-looking statements made in this report, which speak only as of the date
made, are qualified by these cautionary statements. See "Risk Factors" in Item
1.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We have minimal interest rate risk. Our capital lease obligations
contain fixed rates of interest ranging from 13.2% to 22%, which are not
subject to market fluctuations.

         As all of our assets are located in the United States, we have no
direct exposure related to foreign currency exchange risk. To the extent that
foreign currency prices change significantly, such changes could impact our
pricing decisions.

         To date, GlobalNet has not engaged in trading market risk trading
instruments or in purchasing hedging instruments that could expose us to market
risk (i.e., interest rate, foreign currency exchange, commodity price or equity
price risk).


                                       39
<PAGE>   42
     ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEPENDENT AUDITORS' REPORT



     The Board of Directors
     GlobalNet, Inc.:


     We have audited the accompanying consolidated balance sheets of GlobalNet,
     Inc. and subsidiary (the Company) as of December 31, 2000 and 1999 and the
     related consolidated statements of operations, stockholders' deficit, and
     cash flows for each of the years in the three-year period ended December
     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 auditing standards generally
     accepted in the United States of America. Those standards require that we
     plan and perform the audit to obtain reasonable assurance about whether the
     financial statements are free of material misstatement. An audit includes
     examining, on a test basis, evidence supporting the amounts and disclosures
     in the financial statements. An audit also includes assessing the
     accounting principles used and significant estimates made by management, as
     well as evaluating the overall 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 financial position of
     GlobalNet, Inc. and subsidiary as of December 31, 2000 and 1999, and the
     results of their operations and their cash flows for each of the years in
     the three-year period ended December 31, 2000, in conformity with
     accounting principles generally accepted in the United States of America.

     The accompanying financial statements have been prepared assuming that the
     Company will continue as a going concern. As discussed in Note 15 to the
     financial statements, the Company has suffered recurring losses from
     operations and has working capital and net capital deficiencies that 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
     15. The financial statements do not include any adjustments that might
     result from the outcome of this uncertainty.



      /s/ KPMG LLP
      -------------------
          KPMG LLP

     Chicago, Illinois
     March 12, 2001, except as to Notes 13, 15 and 16,
     which are as of April 9, 2001








                                       40
<PAGE>   43
                          GLOBALNET, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets

                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                      ASSETS                                 2000               1999
                                                                         ------------       ------------
<S>                                                                      <C>                <C>
Current assets:
    Cash                                                                 $  2,545,459            304,626
    Restricted cash                                                           157,872            473,019
    Accounts receivable, net of allowance for doubtful
      accounts of $364,000 and $0, respectively                             5,050,121          1,199,283
    Due from related party                                                         --             41,319
    Prepaid expenses and other current assets                                 273,989            137,427
                                                                         ------------       ------------

             Total current assets                                           8,027,441          2,155,674

Property and equipment, net                                                10,038,779          4,449,726
Intangible assets, net                                                      1,666,668                 --
                                                                         ------------       ------------

             Total assets                                                $ 19,732,888          6,605,400
                                                                         ============       ============

                       LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable                                                     $ 11,070,623          2,925,798
    Accrued expenses                                                          431,862             94,694
    Salaries and wages payable                                                     --            176,083
    Deferred revenue                                                               --          1,582,661
    Term loan                                                                      --            617,039
    Current portion of capital lease obligations                            4,035,682          1,114,677
                                                                         ------------       ------------

             Total current liabilities                                     15,538,167          6,510,952

Capital lease obligations, net of current portion                           5,680,002          3,773,443

Stockholders' deficit:
    Common stock; 100,000,000 shares authorized, $0.001 par value;
      31,165,450 shares issued and outstanding at December 31, 2000            31,165                 --
    Additional paid-in-capital                                             23,457,290                 --
    Accumulated deficit                                                   (15,625,769)                --
    Deferred compensation                                                  (9,347,967)                --
    Members' deficit                                                               --         (3,678,995)
                                                                         ------------       ------------

             Total stockholders' deficit                                   (1,485,281)        (3,678,995)
                                                                         ------------       ------------

             Total liabilities and stockholders' deficit                 $ 19,732,888          6,605,400
                                                                         ============       ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       41
<PAGE>   44
                         GLOBALNET, INC. AND SUBSIDIARY

                      Consolidated Statements of Operations

                  Years ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                                     2000               1999               1998
                                                                 ------------       ------------       ------------
<S>                                                              <C>                <C>                <C>
Revenue                                                          $ 78,090,535         24,926,891          4,046,246

Operating expenses:
    Data communications and telecommunications                     74,330,916         25,298,531          3,370,153
    Network research and development (exclusive of $266,667
      for the year ended December 31, 2000 reported below as
      non-cash stock compensation)                                  3,151,171            129,454                 --
    Selling and marketing (exclusive of $46,499 for the year
      ended December 31, 2000 reported below as non-cash
      stock compensation)                                           1,051,814            131,815                 --
    General and administrative (exclusive of $2,187,214 for
      the year ended December 31, 2000 reported below as
      non-cash stock compensation)                                  4,318,335          1,020,092            787,583
    Bad debt expense                                                  482,007                 --                 --
    Depreciation and amortization                                   2,902,905            882,639                 --
    Non-cash stock compensation                                     2,500,380                 --                 --
                                                                 ------------       ------------       ------------

             Total operating expenses                              88,737,528         27,462,531          4,157,736
                                                                 ------------       ------------       ------------

             Operating loss                                       (10,646,993)        (2,535,640)          (111,490)

    Other expense                                                          --            (40,865)          (174,780)
    Interest income (expense), net                                 (1,299,452)          (752,068)            (8,070)
                                                                 ------------       ------------       ------------

             Loss before minority interest and income taxes       (11,946,445)        (3,328,573)          (294,340)

    Minority interest                                                      --             50,000                 --
    Income taxes                                                          327                 --                 --
                                                                 ------------       ------------       ------------

             Net loss                                            $(11,946,772)        (3,278,573)          (294,340)
                                                                 ============       ============       ============

    Pro forma weighted average number of shares
      outstanding                                                  25,223,877         20,000,000         20,000,000
                                                                 ============       ============       ============

    Pro forma basic and diluted loss per share                   $      (0.47)             (0.16)             (0.01)
                                                                 ============       ============       ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       42
<PAGE>   45
                         GLOBALNET, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                 GLOBALNET,
                                                                                    INC.
                                       --------------------------------------------------------------------------------------------
                                              Common Stock                                                    Treasury Stock
                                       ----------------------------     Additional     Accumulated     ----------------------------
                                          Shares          Amount      paid-in-capital    deficit          Shares          Amount
                                       ------------    ------------   ---------------  ------------    ------------    ------------
<S>                                    <C>             <C>            <C>              <C>             <C>             <C>
Balance at December 31, 1997                     --    $         --    $         --    $         --              --    $         --

Net Loss                                         --              --              --              --              --              --
                                       ------------    ------------    ------------    ------------    ------------    ------------

Balance at December 31, 1998                     --              --              --              --              --              --

Issuance of member's interests by
subsidiary                                       --              --              --              --              --              --

Net loss                                         --              --              --              --              --              --
                                       ------------    ------------    ------------    ------------    ------------    ------------

Balance at December 31, 1999                     --              --              --              --              --              --

Exchange of members' interests
 for common stock                                --              --              --              --

Contribution by shareholders                     --              --              --              --              --              --

Issuance of restricted stock                     --              --              --              --              --              --

Exchange of common shares in
 connection with merger with Rich
 Earth, Inc.                             19,875,000          19,875      16,180,002      (3,678,997)        125,000             125

Capital of Rich Earth, Inc. at
 time of merger                          10,997,061          10,997      10,179,183              --              --              --

Issuance of common stock from
 private placement, net                     168,389             168       1,449,758              --              --              --

Forfeiture of restricted stock by
 employees upon termination                (650,000)           (650)     (5,200,000)             --         650,000             650

Issuance of restricted stock from
 treasury                                   775,000             775         581,250              --        (775,000)           (775)

Issuance of options and warrants
 to nonemployees                                 --              --         267,097              --              --              --

Amortization of deferred
 compensation                                    --              --              --              --              --              --

Net loss                                         --              --              --     (11,946,772)             --              --

                                       ------------    ------------    ------------    ------------    ------------    ------------

Balance at December 31, 2000             31,165,450    $     31,165    $ 23,457,290    $(15,625,769)             --    $         --
                                       ============    ============    ============    ============    ============    ============
</TABLE>

<TABLE>
<CAPTION>
                                                                                GLOBALNET
                                                                              INTERNATIONAL,
                                                                                   INC.
                                       --------------------------------------------------------------------------------------------
                                               Common Stock                                                   Treasury Stock
                                       ----------------------------     Additional     Accumulated     ----------------------------
                                          Shares          Amount      paid-in-capital    deficit          Shares          Amount
                                       ------------    ------------   ---------------  ------------    ------------    ------------
<S>                                    <C>             <C>            <C>              <C>             <C>             <C>
Balance at December 31, 1997                     --    $         --    $         --    $         --              --    $         --

Net Loss                                         --              --              --              --              --              --
                                       ------------    ------------    ------------    ------------    ------------    ------------

Balance at December 31, 1998                     --              --              --              --              --              --

Issuance of member's interests by
 subsidiary                                      --              --              --              --              --              --

Net loss                                         --              --              --              --              --              --
                                       ------------    ------------    ------------    ------------    ------------    ------------

Balance at December 31, 1999                     --              --              --              --              --              --

Exchange of members' interests
 for common stock                             2,000               2              --      (3,678,997)

Contribution by shareholders                   (215)             --              --              --             215              --

Issuance of restricted stock                    203              --      16,200,000              --            (203)             --

Exchange of common shares in
 connection with merger with Rich
 Earth, Inc.                                 (1,988)             (2)    (16,200,000)      3,678,997             (12)             --

Capital of Rich Earth, Inc. at
 time of merger                                  --              --              --              --              --              --

Issuance of common stock from
 private placement, net                          --              --              --              --              --              --

Forfeiture of restricted stock by
 employees upon termination                      --              --              --              --              --              --

Issuance of restricted stock from
 treasury                                        --              --              --              --              --              --

Issuance of options and warrants
 to nonemployees                                 --              --              --              --              --              --

Amortization of deferred
 compensation                                    --              --              --              --              --              --

Net loss                                         --              --              --              --              --              --

                                       ------------    ------------    ------------    ------------    ------------    ------------

Balance at December 31, 2000                     --    $         --    $         --    $         --              --    $         --
                                       ============    ============    ============    ============    ============    ============
</TABLE>

<TABLE>
<CAPTION>
                                           DTA
                                      COMMUNICATIONS
                                       NETWORK, LLC
                                       ------------
                                          Members'       Deferred         Total
                                          deficit      compensation      deficit
                                       ------------    ------------    ------------
<S>                                   <C>              <C>             <C>
Balance at December 31, 1997           $   (256,082)   $         --    $   (256,082)

Net Loss                                   (294,340)             --        (294,340)
                                       ------------    ------------    ------------

Balance at December 31, 1998               (550,422)             --        (550,422)

Issuance of member's interests by
 subsidiary                                 150,000              --         150,000

Net loss                                 (3,278,573)             --      (3,278,573)
                                       ------------    ------------    ------------

Balance at December 31, 1999             (3,678,995)             --      (3,678,995)

Exchange of members' interests
 for common stock                         3,678,995              --              --

Contribution by shareholders                     --              --              --

Issuance of restricted stock                     --     (16,200,000)             --

Exchange of common shares in
 connection with merger with Rich
 Earth, Inc.                                     --              --              --

Capital of Rich Earth, Inc. at
 time of merger                                  --              --      10,190,180

Issuance of common stock from
 private placement, net                          --              --       1,449,926

Forfeiture of restricted stock by
 employees upon termination                      --       5,200,000              --

Issuance of restricted stock from
 treasury                                        --        (581,250)             --

Issuance of options and warrants
 to nonemployees                                 --         (58,388)        208,709

Amortization of deferred
 compensation                                    --       2,291,671       2,291,671

Net loss                                         --              --     (11,946,772)

                                       ------------    ------------    ------------

Balance at December 31, 2000           $         --    $ (9,347,967)   $ (1,485,281)
                                       ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       43
<PAGE>   46
                         GLOBALNET, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                                                2000               1999               1998
                                                                            ------------       ------------       ------------
<S>                                                                         <C>                <C>                <C>
Cash flows from operating activities:
    Net loss                                                                $(11,946,772)        (3,278,573)          (294,340)
    Adjustments to reconcile net loss to net cash
      provided by (used in) operating activities:
        Depreciation and amortization                                          2,902,905            882,639                 --
        Provision for doubtful accounts                                          482,007
        Non-cash stock compensation                                            2,500,380                 --                 --
        Minority interest                                                             --            (50,000)                --
        Changes in assets and liabilities:
           Restricted cash                                                       315,147           (473,019)                --
           Accounts receivable                                                (4,332,845)        (1,199,283)           141,735
           Due from related party                                                 41,319            (33,375)             6,660
           Prepaid expenses and other current assets                            (136,562)          (131,949)            (5,478)
           Accounts payable                                                    8,144,825          2,478,323            329,190
           Salaries and wages payable                                           (176,083)           (66,307)            57,721
           Deferred revenue                                                   (1,582,661)         1,511,412            (96,751)
           Accrued expenses                                                      (67,819)            94,694                 --
                                                                            ------------       ------------       ------------

             Net cash provided by (used in) operating activities              (3,856,159)          (265,438)           138,737
                                                                            ------------       ------------       ------------

Cash flows from investing activities-
    purchase of property and equipment                                          (675,724)          (240,530)                --
                                                                            ------------       ------------       ------------

             Net cash used in investing activities                              (675,724)          (240,530)                --
                                                                            ------------       ------------       ------------

Cash flows from financing activities:
    Proceeds from term loan                                                           --            734,517                 --
    Repayments of principal on term loan                                        (617,039)          (117,478)                --
    Principal payments on capital lease obligations                           (2,123,153)          (203,715)                --
    Advances from Rich Earth, Inc.
     prior to merger with Rich Earth, Inc.                                       800,000                 --                 --
    Cash acquired from merger with Rich Earth, Inc.                            7,262,982                 --                 --
    Proceeds from private placements                                           1,449,926                 --                 --
    Contribution from minority interest of subsidiary                                 --            200,000                 --
                                                                            ------------       ------------       ------------

             Net cash provided by financing activities                         6,772,716            613,324                 --
                                                                            ------------       ------------       ------------

             Net increase in cash                                              2,240,833            107,356            138,737

Cash at beginning of year                                                        304,626            197,270             58,533
                                                                            ------------       ------------       ------------

Cash at end of year                                                         $  2,545,459            304,626            197,270
                                                                            ============       ============       ============

Supplemental disclosure of cash flow information -
    cash paid for interest                                                  $  1,434,000            657,374               8,070
                                                                            ============       ============       ============

Supplemental disclosure of noncash investing and financing activities:
    Payment for purchase of 25% minority interest and certain assets
     of GlobalNet L.L.C. by Rich Earth, Inc. on behalf
     of the Company                                                            2,127,198                 --                 --
                                                                            ============       ============       ============
    Cancellation of notes payable to Rich Earth, Inc. in connection
     with Merger with Rich Earth, Inc.                                         2,927,198                 --                 --
                                                                            ============       ============       ============
    Equipment acquired under capital leases                                    7,355,704          5,091,835                 --
                                                                            ============       ============       ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       44
<PAGE>   47
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999



  (1)   NATURE OF ORGANIZATION AND BUSINESS

        GlobalNet, Inc. ("GlobalNet" or the "Company") provides global
        telecommunications, including high quality voice, fax, and other
        value-added applications over the Internet and other networks.

        GlobalNet was formed on May 30, 2000, when GlobalNet International, Inc.
        ("GII") merged with a subsidiary of Rich Earth, Inc. ("Rich Earth")
        pursuant to an agreement (the "Merger Agreement") whereby 20,000,000
        shares of Rich Earth common stock were exchanged for 100% of the common
        stock of GII in a transaction accounted for as a reverse acquisition
        ("Merger") of Rich Earth by GII using the purchase method of accounting.
        Prior to raising approximately $2.5 million to fund an acquisition by
        GII in a contemplated transaction as described herein, Rich Earth was a
        non-operating public shell corporation with nominal assets. GII
        management now controls the combined company after the transaction.
        After the closing of the merger, Rich Earth changed its name to
        GlobalNet, Inc.

        As a result of the reverse merger, the operating entity, GII, will
        continue as the operating entity under the GlobalNet, Inc. name, and its
        historical financial statements will replace those of Rich Earth.

        GII was formed in March 2000, when the members of DTA Communications
        Network, L.L.C. ("DTA") exchanged their members' interests in DTA for
        common stock of GII, a newly formed C-corporation ("Reorganization").
        DTA was organized in Illinois on May 22, 1996 as a limited liability
        company. On April 20, 1999, DTA and a Texas limited liability company
        formed an Illinois limited liability company, later named GlobalNet
        L.L.C. DTA's interest in GlobalNet L.L.C. was 75% at December 31, 1999.
        GlobalNet L.L.C. was formed to provide wholesale carrier voice and fax,
        value-added applications, and third-generation application service
        provider (ASP) products via an international Internet protocol-based
        network.

        On March 6, 2000, DTA agreed to purchase and subsequently did purchase
        the remaining 25% minority interest and certain assets from the minority
        owner of GlobalNet, L.L.C. for $2,000,000 and $127,198, respectively.
        The purchase of the minority interest increased DTA's interest in
        GlobalNet L.L.C. to 100% and was accounted for under the purchase method
        of accounting. The assets acquired have been recorded at their estimated
        fair values at the date of acquisition. The acquired customer base
        related to the transaction was $1,000,000 and is being amortized over a
        period of five years. Goodwill related to the transaction was $1,000,000
        and is being amortized over a period of five years. The effect on the
        pro forma results of operations had the acquisition occurred at the
        beginning of 2000 was not significant.

        The Company is subject to risks and uncertainties common to growing
        telecommunications-based companies, including rapid technological
        changes, low costs to customers of switching from carrier to carrier,
        failed alliances, and pricing pressures in the international long
        distance market.

  (2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

              PRINCIPLES OF CONSOLIDATION

              The 2000 consolidated financial statements include the accounts of
              GlobalNet, Inc. and its wholly-owned subsidiary, GlobalNet
              International, Inc. and Rich Earth, Inc. from May 30, 2000, the
              date of acquisition.

                                       45
<PAGE>   48
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


              The 1999 consolidated financial statements include the accounts of
              DTA Communications Network, L.L.C., and its majority-owned
              subsidiary, GlobalNet L.L.C. from its date of formation in 1999,
              whereas the 1998 consolidated financial statements consist only of
              DTA Communications Network, L.L.C.

              ISSUANCE OF MEMBERS' INTERESTS BY SUBSIDIARY

              Prior to the Merger Agreement, the Company accounted for issuances
              of members' interests by its subsidiary as equity transactions,
              thereby recording the amount in excess of the parent's carrying
              value to members' equity.

              USE OF ESTIMATES

              The preparation of financial statements in conformity with
              accounting principles generally accepted in the United States of
              America requires management to make estimates and assumptions that
              affect the reported amounts of assets and liabilities and the
              disclosure of contingent assets and liabilities at the date of the
              financial statements, and the reported amounts of revenue and
              expenses during the reporting period. Actual results may differ
              from those estimates.

              RECLASSIFICATION

              Certain reclassifications have been made to the prior year
              consolidated financial statements to conform to the 2000
              presentation.

              RESTRICTED CASH

              At December 31, 2000, $157,872 was held in an account which the
              Company's lessor had primary control of. The lessor deducts
              monthly payments due on the lease from this account. Additional
              disbursements from this account must be approved by the lessor.

              FAIR VALUE OF FINANCIAL INSTRUMENTS

              Financial instruments consist principally of cash, accounts
              receivable, accounts payable and capital leases. The estimated
              fair value of these instruments approximates their carrying value.

              ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

              The allowance for doubtful accounts receivable was $364,000 at
              December 31, 2000, and $-0- at December 31, 1999 and 1998.
              Provisions for bad debts were $482,007 for 2000 and $-0- for 1999
              and 1998. Write-offs of uncollectible accounts were $118,007 for
              2000 and $-0- for 1999 and 1998.

                                       46

<PAGE>   49
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


              ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

              Statement of Financial Accounting Standards ("SFAS") No. 121,
              Accounting for the Impairment of Long-Lived Assets and for
              Long-Lived Assets to be Disposed Of, requires that long-lived
              assets and certain identifiable intangibles to be held and used by
              any entity be reviewed for impairment whenever events or changes
              in circumstances indicate that the carrying amount of an asset may
              not be recoverable. If an indication of a potential impairment
              exists, recoverability of the respective assets is determined by
              comparing the forecasted undiscounted net cash flows of the
              operation to which the assets relate, to the carrying amount,
              including associated intangible assets, of such operation. If the
              operation is determined to be unable to recover the carrying
              amount of its assets, then intangible assets are written down
              first, followed by the other long-lived assets of the operation,
              to fair value. Fair value is determined based on the discounted
              cash flows or appraised values, depending on the nature of the
              assets. In determining the estimated future cash flows, the
              Company considers current and projected future levels of income as
              well as business trends, prospects and market and economic
              conditions.

              The carrying amount of the Company's long-lived assets at December
              31, 2000 and 1999 primarily represent the original amounts
              invested less the recorded depreciation and amortization.
              Management believes the carrying amount of these investments is
              not impaired.

              REVENUE RECOGNITION

              The Company recognizes revenue from two types of telecommunication
              services. The majority of the Company's revenue consists of the
              sale of wholesale carrier voice and fax, via an international
              network. Revenue is recognized as services are rendered. In order
              to mitigate risk of loss, several customers prepay for their
              services, in which case revenue is deferred and is recognized as
              services are rendered.

              The remaining revenue is generated from supplying underlying
              services, including value added applications and the use of the
              Company's network, to issuers of prepaid phone cards. Those
              issuers prepay for some or all of the services provided. Payments
              received in advance for such services are recorded as deferred
              revenue and are recognized as the prepaid phone cards are used.
              These cards may expire without being fully used as they have lives
              of up to three months after the first use. The unused value is
              referred to as breakage and is recorded as revenue at the date of
              expiration. Subsequent to October 2000, the Company no longer
              provided prepaid phone service.

              In December 1999, the Securities and Exchange Commission (SEC)
              released Staff Accounting Bulletin ("SAB") No. 101, Revenue
              Recognition in Financial Statements. SAB No. 101 summarizes some
              views of the SEC on applying accounting principles generally
              accepted in the United States of America to revenue recognition in
              financial statements. The SEC believes that revenue is realized or
              realizable and earned when all of the following criteria are met:
              persuasive evidence of an arrangement exists, delivery has
              occurred or services have been rendered, the seller's price to the
              buyer is fixed or determinable and collectibility is reasonable
              assured. The Company believes that its current revenue recognition
              policy complies with the SEC guidelines.



                                       47
<PAGE>   50
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


              RESEARCH AND DEVELOPMENT EXPENSES

              The Company charges research and development expenses incurred in
              the development, expansion, operation and support of the Company's
              global IP network to network research and development as incurred.

              STOCK-BASED COMPENSATION

              SFAS No. 123, Accounting for Stock-Based Compensation, requires
              the measurement of the fair value of stock options or warrants to
              be included in the consolidated statements of operations or
              disclosed in the notes to consolidated financial statements. The
              Company has determined that it will account for stock-based
              compensation for employees under the intrinsic value-based method
              of Accounting Principles Board ("APB") Opinion No. 25, Accounting
              for Stock Issued to Employees, and elect the disclosure-only
              alternative under SFAS No. 123. The Company accounts for
              stock-based compensation for nonemployees under the fair value
              method prescribed by SFAS No. 123.

              DERIVATIVES

              In June 1998, the Financial Accounting Standards Board issued
              Statement No. 133, (SFAS 133 "Accounting for Derivative
              Instruments and Hedging Activities," ("SFAS 133") which was later
              amended by Statement No. 137, "Accounting for Derivative
              Instruments and Hedging Activities - Deferral of the effective
              date of FASB Statement No. 133" and by Statement No. 138,
              "Accounting for Certain Derivative Instruments and Certain Hedging
              Activities - an Amendment of FASB Statement No. 133"
              (collectively, the "Standard"). The Standard requires companies to
              record derivative instruments on the balance sheet as assets or
              liabilities measured at fair value. The accounting treatment of
              gains and losses resulting from changes in the value of
              derivatives depends on the use of the derivatives and whether they
              qualify for hedge accounting. The Standard is required to be
              adopted for financial statements issued for the fiscal year ending
              December 31, 2001. As the Company does not currently engage in
              derivatives or hedging transactions, there will be no impact to
              the Company's results of operations, financial position or cash
              flows upon the adoption of SFAS 133.

              INCOME TAXES

              Subsequent to the Reorganization, the Company accounts for income
              taxes in accordance with the provisions of Statement of Financial
              Accounting Standards No. 109 ("Statement 109"), "Accounting for
              Income Taxes". Under the asset and liability method of Statement
              109, deferred tax assets and liabilities are recognized for the
              future tax consequences attributable to the difference between the
              financial statement carrying amounts of existing assets and
              liabilities and their respective tax bases and operating loss and
              tax credit carryforwards. Deferred tax assets and liabilities are
              measured using enacted tax rates expected to apply to taxable
              income in the years in which those temporary differences are
              expected to be recovered or settled. Under Statement 109, the
              effect on deferred tax assets and liabilities of a change in tax
              rates is recognized in income in the period that includes the
              enactment date.

              Prior to the Reorganization, the Company operated in the form of a
              limited liability company and accordingly, the Company's income
              tax liabilities were the responsibility of its members.




                                       48
<PAGE>   51
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999

              NET LOSS PER SHARE

              Basic earnings per share is based on the weighted average number
              of shares outstanding and excludes the dilutive effect of
              unexercised common stock equivalents. Diluted earnings per share
              is based on the weighted average number of shares outstanding and
              includes the dilutive effect of unexercised common stock
              equivalents to the extent they are not anti-dilutive.

              Shares issuable from securities that could potentially dilute
              basic earnings per share in the future that were not included in
              the computation of earnings per share because their effect was
              anti-dilutive were: 2,301,000 stock options, 1,215,450 warrants,
              and 2,150,000 shares of unvested restricted common stock at
              December 31, 2000.

              The pro forma weighted-average number of shares outstanding for
              the years ended December 31, 2000, 1999 and 1998 represent the
              weighted-average number of shares of GlobalNet International Inc.
              as if the exchange of common shares in the merger with Rich Earth,
              Inc. was in effect as the beginning of all periods presented.


              COMPREHENSIVE INCOME

              In June 1997, the Financial Accounting Standards Board (FASB)
              issued SFAS No. 130, Reporting Comprehensive Income. The Company
              does not have any components of comprehensive income (loss) other
              than its reported net loss.

(3)     INCOME TAXES

              No provision for U.S. federal and state income taxes was recorded
              prior to March 2000, as such liability was the responsibility of
              the members of DTA, rather than of the Company. As a result of the
              change from an L.L.C. to a C-corporation, the Company recorded an
              initial net deferred income tax asset of $5,825,052 to reflect the
              establishment of deferred tax assets and liabilities. However, due
              to the lack of certainty of recovery, a full valuation allowance
              was recorded against the initial and subsequent net deferred
              income taxes. The remaining provisions for income taxes for the
              year ended December 31, 2000 relate to the period subsequent to
              March 2000.

              At December 31, 2000, the Company has federal net operating loss
              carryforwards approximating $10,020,000. Such losses are available
              to offset future taxable income and expire in 2020. In addition,
              if certain substantial changes in the Company's ownership are
              deemed to have occurred, there would be an annual limitation on
              the amount of carryforwards which could be utilized.



                                       49
<PAGE>   52
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


        The provision for income taxes consist of the following during the year
ended December 31, 2000:

<TABLE>
<CAPTION>
                                                                      AMOUNT
                                                                      ------
<S>                                                                   <C>
        Current taxes:
           Federal                                                    $   --
           State                                                         327
                                                                      ------
            Total                                                        327
        Deferred taxes:
           Federal                                                        --
           State                                                          --
                                                                      ------
             Total                                                        --
                                                                      ------
        Provision for income taxes                                    $  327
                                                                      ======
</TABLE>

The total tax provision for the year ended December 31, 2000 differs from the
amount computed by applying the federal income tax rate of 35% to the loss
before income taxes for the following reasons:

<TABLE>
<CAPTION>
<S>                                                               <C>
        Expected income tax benefit at federal income tax rate    $(4,181,256)
        Increase (decrease) in taxes resulting from
           State income tax benefit                                  (699,259)
           Meals and entertainment                                      7,508
           Deferred income recognized on LLC tax return            (1,056,718)
           Amortization of goodwill                                   105,000
           Change in valuation allowance                            5,825,052
                                                                  -----------
                                                                  $       327
                                                                  ===========
</TABLE>
                                       50
<PAGE>   53

                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


     Deferred tax assets (liabilities) are comprised of the following at
December 31, 2000:

<TABLE>
<S>                                                           <C>
Deferred tax assets
  Non-cash stock compensation expense.......................  $ 1,045,975
  Professional fees related to merger.......................      627,490
  Continuing operations NOL carryforward....................    4,193,248
                                                              -----------
          Total deferred tax assets.........................    5,866,713
Valuation allowance.........................................   (5,825,052)
                                                              -----------
Deferred tax liabilities:
  Depreciation..............................................  $   (39,927)
  Federal impact of state NOL carryforward..................       (1,734)
                                                              -----------
          Total deferred tax liabilities....................      (41,661)
                                                              -----------
          Net deferred income taxes.........................  $        --
                                                              ===========
</TABLE>

     The net change in the total valuation allowance for the year ended December
31, 2000 was an increase of $5,825,052. In assessing the realizability of
deferred tax assets, the Company considers whether it is more likely than not
that some portion or all of the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the period in which these temporary differences
become deductible. This assessment was performed considering the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax
planning strategies. Due to the Company's operating losses, there is uncertainty
surrounding whether the Company will ultimately realize its deferred tax
assets. Accordingly, these assets have been fully reserved.




                                       51
<PAGE>   54
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


(4)     PROPERTY AND EQUIPMENT

        Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                             2000          1999
                                                         -----------   -----------
<S>                                                      <C>           <C>
        Leasehold improvements                           $    40,362   $        --
        Network equipment under capital leases            12,623,269     5,267,565
        Furniture and equipment                              827,360        64,800
                                                         -----------   -----------

                                                          13,490,991     5,332,365

        Less accumulated depreciation and amortization     3,452,212       882,639
                                                         -----------   -----------

                 Property and equipment, net             $10,038,779   $ 4,449,726
                                                         ===========   ===========
</TABLE>

        Property and equipment are stated at cost. Equipment held under capital
        leases is stated at the lower of fair value of the asset or the net
        present value of the minimum lease payments at the inception of the
        lease. Depreciation and amortization expense is calculated using the
        straight-line method over the estimated useful lives of the assets which
        range from three to five years.

        Depreciation and amortization for the years ended December 31, 2000,
        1999 and 1998 was $2,569,573, $882,639, and $-0-, respectively.
        Accumulated depreciation of assets recorded under capital leases was
        $3,338,965 and $877,926 at December 31, 2000 and 1999, respectively.

  (5)   INTANGIBLE ASSETS

        On March 6, 2000, DTA agreed to purchase and subsequently did purchase
        the remaining 25% minority interest and certain assets from the minority
        owner of GlobalNet L.L.C. for $2,000,000 and $127,198, respectively. As
        a result, the Company recorded intangible assets of $2,000,000, which
        are being amortized over useful lives of five years. The purchase price
        has been allocated $1,000,000 to acquired customer base and $1,000,000
        to goodwill. The Company has recorded $333,332 of intangible asset
        amortization for the year ended December 31, 2000.

  (6)   LEASES AND COMMITMENTS

        The Company leases various office facilities, cars and equipment under
        operating leases with remaining terms of up to 4.5 years. Rent expense
        under operating leases was $315,658, $27,950, and $9,754 for the years
        ended December 31, 2000, 1999, and 1998, respectively.

        In April 2000, the Company entered into a $10,000,000 credit facility
        with General Electric Capital Corporation (GE Capital) to finance the
        lease of telecommunications network and data transmission equipment. The
        credit facility had a term of six months at which time any unused
        portions of the credit facility expired. During 2000, the Company
        utilized $6,950,717 under the credit facility Each lease bears interest
        at an annual rate of 13.2% and has a 36-month lease term. The
        obligations under capital leases are secured by the underlying leased
        assets.

                                       52
<PAGE>   55
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


        In November 1999, GlobalNet entered into capital leases with Prinvest
        Financial Corp. (Prinvest) for various network equipment with respect to
        which GlobalNet recorded a capital lease obligation of approximately
        $5,267,565. The leases have a 42-month term, with annual interest at a
        rate of 22%. The leased equipment secures all leases. The lease
        agreements contains a purchase option of $1 at the end of the lease. The
        lease is secured by a first priority interest in substantially all the
        Company's assets, including, but not limited to accounts receivable,
        general intangibles, and fixed assets. The lease is also secured by a
        second priority interest in the Company's assets under capital leases
        with other lessors.

        Future minimum lease payments under capital leases and noncancelable
        operating leases at December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                       OPERATING       CAPITAL
                                                      -----------    -----------
<S>                                                   <C>            <C>
2001                                                  $   359,972    $ 4,877,197
2002                                                      194,200      4,943,601
2003                                                      191,887      1,844,339
2004                                                       81,411             --
2005 and thereafter                                        19,620             --
                                                      -----------    -----------

       Total future minimum lease payments            $   847,090     11,665,137
                                                      -----------

Less amount representing interest                                      1,949,453
                                                                     -----------

       Net present value of minimum lease payments                     9,715,684

Less current portion                                                   4,035,682
                                                                     -----------
Long-term portion, net of current portion                            $ 5,680,002
                                                                     ===========
</TABLE>

        During December 2000, the Company entered into a capital lease agreement
        for network equipment totaling $337,194. This equipment was accepted by
        the Company during January 2001, which serves as the commencement date
        of the capital lease. The lease term is 36 months with a purchase option
        of $1 at the end of the term.

        Additionally, the Company renewed its operating lease for office space
        in Georgia for an additional six month period beginning March 1, 2001.

 (7)    RELATED PARTIES

        On June 28, 2000 (Purchase Date) and in connection with the Merger
        described in Note 1, an officer of the Company sold 700,000 shares of
        the Company's common stock to a director of the Company for $1 per share
        in accordance with a stock purchase agreement dated May 22, 2000, as
        amended on June 28, 2000.

        During 2000, the Company paid $271,997 to a law firm for legal services
        provided by a partner who is a director of the Company.

                                       53
<PAGE>   56
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


        During the years ended December 31, 1999, and 1998, the majority owner
        borrowed funds from the Company totaling $39,606, and $16,627,
        respectively. The majority owner repaid the funds in full during 2000.
        At December 31, 2000 and 1999, amounts due from the majority owner were
        $-0- and $41,319, respectively.

 (8)    TERM LOAN

        On October 1, 1999, GlobalNet, Inc. entered into a term loan for
        $734,517 at an annual interest rate of 19.75%, payable in periodic
        installments. In July 2000, the term loan matured and was paid in full
        by the Company.

 (9)    STOCKHOLDERS'EQUITY

             Common Stock

        On May 30, 2000, GlobalNet Inc. was formed when GlobalNet International,
        Inc. (GII) merged with a subsidiary of Rich Earth, Inc. (Rich Earth) in
        a transaction accounted for as a reverse acquisition of Rich Earth by
        GII using the purchase method of accounting pursuant to an agreement
        (the Merger Agreement) whereby 20,000,000 shares of Rich Earth common
        stock were exchanged for 100% of the common stock of GlobalNet
        International Inc. At the time of the Merger, Rich Earth had 9,960,000
        common shares issued and outstanding.

        During the period from March 2000 through July 2000, 1,205,450 shares of
        common stock were issued in connection with two private placement
        transactions. The first private placement transaction sold 600,000 units
        at $10 a unit and resulted in the issuance of 600,000 common shares and
        grant of warrants to purchase an additional 300,000 shares of common
        stock at $15 per share. The second private placement transaction sold
        605,450 units at $10 a unit and resulted in the issuance of 605,450
        shares of common stock and the grant of warrants to purchase an
        additional 605,450 shares of common stock at $15 per share.

        STOCK-BASED COMPENSATION

              Warrants

        During 2000, the Company's board of directors approved and the Company
        issued warrants to purchase 905,450 shares of common stock at $15 per
        share to investors from the private placement transactions. In
        connection with the private placements, the Company granted additional
        warrants to purchase 310,000 shares of common stock at $15 per share to
        underwriters for services performed, resulting in a total of 1,215,450
        warrants granted to "Original Warrant Holders". The warrants had a
        six-month expiration period and expired unexercised on November 30,
        2000. The warrants were issued as part of the private placement and
        therefore no expense has been recorded related to these warrants.

                                       54
<PAGE>   57
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999

        On December 14, 2000, the Company's board of directors authorized the
        grant of one warrant to purchase one share of common stock at $5 per
        share for each warrant the Original Warrant Holders were originally
        granted, for a total of 1,215,450 warrants. The warrants were fully
        exercisable and nonforfeitable at the date of grant and expire on
        November 30, 2001. The Company estimated the fair value of each warrant
        using the Black-Scholes option-pricing model using the following
        assumptions: term of one year, expected volatility of 75%, expected
        dividend yield of 0%, and a risk free interest rate of 5.73%. The fair
        value of $48,981 was recorded as expense on the date of grant. All
        warrants were outstanding and exercisable at December 31, 2000.

              Restricted Common Stock

        On May 15, 2000, the Company's board of directors authorized the
        issuance of 2,150,000 shares of restricted common stock to employees,
        directors, and consultants. Shares aggregating 2,025,000 were granted on
        May 15, 2000 at an estimated fair value of $16,200,000, which will be
        amortized over the vesting period of three years.

        During the fourth quarter of 2000, three employees that were granted a
        total of 650,000 shares of restricted common stock with an estimated
        fair value of $5,200,000 were terminated resulting in the forfeiture of
        the shares. All amounts recorded as stock-based compensation during 2000
        related to these 650,000 shares were reversed in the period of
        forfeiture.

        On December 28 2000, the Company issued 775,000 shares of restricted
        common stock to employees at an estimated fair value of $581,250, which
        will be amortized over the vesting period. The shares vest at a rate of
        44% on September 15, 2001, 22% on May 15, 2002 and 34% on May 15, 2003.

        The Company recorded $2,291,671 of stock based compensation during 2000
        related to issuances of restricted common stock. At December 31, 2000,
        there were 2,150,000 restricted common shares outstanding and none were
        vested.

              Stock Incentive Plan

        On May 3, 2000, the Company's board of directors adopted the "2000 Stock
        Plan," (the "Plan") under which the maximum aggregate number of shares
        that may be subject to option and sold under the plan is 3,000,000
        shares. Under the terms of the Plan, options vest based on the vesting
        period as determined by the plan administrator.

        The Company granted 1,540,000 and 226,000 options to employees on May
        15, 2000, and December 28, 2000, respectively. A total of 360,000
        options were canceled during 2000. All employee options have a term of 5
        years from the date of vesting and vest 33% on May 15, 2001, 33% on May
        15, 2002 and the remainder on May 15, 2003.

                                       55
<PAGE>   58
                        GLOBALNET, INC. AND SUBSIDIARY
                  Notes to Consolidated Financial Statements
                          December 31, 2000 and 1999


        On May 15, 2000, the Company granted 50,000 options to members of its
        board of directors. These options have a term of 5 years from the date
        of vesting and vest 33% on May 15, 2001, 33% on May 15, 2002 and the
        remainder on May 15, 2003. In addition, each current non-employee
        Director was granted 100,000 options on September 14, 2000, and all
        future non-employee Directors will receive 50,000 options upon their
        initial elections, while all current non-employees will receive an
        annual grant of 25,000 options on the date of the annual stockholders'
        meeting. These options will vest on the second anniversary of the grant
        date and expire on the 10th anniversary of the grant date.

        During 2000, the Company granted 145,000 options to consultants for
        services provided. Options for 35,000 shares of common stock were
        immediately vested, while the remaining 110,000 options vest over a
        period of six months to three years and have terms from 5 to 10 years.
        The Company recorded $159,728 of non-cash stock compensation related to
        these options during 2000 and $58,388 was recorded as deferred
        compensation at December 31, 2000.

        Stock option activity for the year ended December 31, 2000, is as
        follows:

<TABLE>
<CAPTION>
                                                                          WEIGHTED      WEIGHTED
                                                                          AVERAGE     AVERAGE FAIR
                                                          NUMBER OF       EXERCISE      VALUE ON
                                                            SHARES          PRICE      GRANT DATE
                                                          ----------     ----------    ----------
<S>                                                       <C>            <C>          <C>
        Outstanding, December 31, 1999                            --             --

        Granted                                            2,661,000     $     9.43    $    5.04

        Forfeited                                           (360,000)          7.80
                                                          ----------     ----------

        Outstanding, December 31, 2000                     2,301,000     $     9.68
                                                          ==========     ==========
</TABLE>


        The following table summarizes information relating to currently
        outstanding and exercisable stock options as of December 31, 2000:

<TABLE>
<CAPTION>
                                                          WEIGHTED AVERAGE
                                           OPTIONS           REMAINING          WEIGHTED AVERAGE
          RANGE OF EXERCISE PRICES       OUTSTANDING      CONTRACTUAL LIFE       EXERCISE PRICE
          ------------------------       -----------      ----------------       --------------
<S>                                      <C>              <C>                   <C>
        $ 0.75-0.77                         266,000             6.23               $     0.75

        $ 8.00                            1,285,000             6.25               $     8.00

        $ 12.00-16.00                       750,000             9.71               $    15.73
        --------------------------        ---------             ----               ----------
        $  0.75-16.00                     2,301,000             7.38               $     9.68
        ==========================        =========             ====               ==========
</TABLE>
        There were no options exercisable at December 31, 2000

                                       56
<PAGE>   59
                         GLOBALNET, INC. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999

        At December 31, 2000, options to purchase 699,000 common shares were
        available for future grants under the Plan.

        SFAS No. 123, Accounting for Stock-Based Compensation, requires
        the measurement of the fair value of stock options or warrants to be
        included in the consolidated statements of operations or disclosed in
        the notes to the consolidated financial statements. The Company has
        determined that it will continue to account for stock-based compensation
        for employees under the APB Opinion No. 25 and elect the disclosure-only
        alternative under SFAS No. 123 for options granted in 2000, using the
        Black-Scholes option-pricing model to estimate the fair value of the
        option grants.

        The following weighted average assumptions were used during 2000:

<TABLE>
<S>                                                           <C>
        Risk-free interest rate                                    6.40%
        Expected dividend yield                                       0%
        Expected lives                                        3.60 years
        Volatility                                                   66%
</TABLE>

        Had compensation expense from the Company's Plan been determined
        consistent with SFAS No. 123, net loss and net loss per share would have
        been approximately as follows:

<TABLE>
<S>                                                        <C>
        Net loss applicable to common stockholders
                As reported                                 $11,946,772
                Pro forma                                    13,906,445
                                                            ===========
        Basic and diluted net loss per share
                As reported                                 $     (0.47)
                Pro forma                                         (0.55)
                                                            ===========
</TABLE>

        STOCK SPLIT

        All share information has been adjusted to reflect a 10,000 to 1
        exchange as a result of the Merger.

(10)    AGREEMENT WITH OPERADORA PROTEL, S.A. DE C.V.

        On August 1, 1999, the Company entered into a five-year agreement
        (Agreement) with Operadora Protel, S.A. DE C.V., a Mexico corporation
        (Protel), whereby Protel provides the platform for prepaid debit card
        calls and the use of its network for traffic originating and terminating
        between Mexico and the United States.

        In addition, the Agreement provides that Protel and GlobalNet L.L.C.
        agree to share equally in the gross profits generated from services
        provided under the agreement. Accordingly, the Company adjusts its cost
        of revenue to reflect each month, amounts due to or from Protel under
        the Agreement.

                                       57
<PAGE>   60
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999

        During October 2000, the two companies agreed to terminate the
        Agreement. Subsequent to October 2000, the Company did not generate
        revenue or incur expenses related to this Agreement.

        The Company continues to conduct business with Protel to provide
        wholesale carrier voice and fax telecommunication services in Mexico.

(11)    CREDIT AND BUSINESS CONCENTRATIONS

        SFAS No. 105, Disclosure of Information About Financial Instruments With
        Off-Balance Sheet Risk, requires disclosure of any significant
        off-balance-sheet and credit risk concentrations. The Company has no
        significant off-balance-sheet concentrations such as foreign exchange
        contracts, option contracts or other foreign hedging arrangements. The
        Company maintains the majority of its cash in one financial institution.

        Although the Company has been able to significantly expand and diversify
        its customer base during 2000, a significant portion of the Company's
        revenues are still concentrated among a few large customers. In 2000,
        the largest customer represented 23% of total revenue while the next
        three largest customers represented 55% of total revenue in 2000. The
        three largest customers represented 96% of total revenue in 1999 and
        1998. Accounts receivable from these customers were approximately
        $2,293,429 and $666,886 at December 31, 2000 and 1999, respectively.

        The Company currently uses one primary wholesale carrier voice and fax
        telecommunication services provider. Accounts payable to this supplier
        was $7,052,970 at December 31, 2000, net of the Company's receivable
        from the supplier of $517,309. An unfavorable change in this supplier's
        payment terms or a change in primary supplier could have an adverse
        effect on the Company's business and liquidity.

(12)    GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION

        The Company has adopted SFAS No. 131, Disclosures about Segments of an
        Enterprise and Related Information, which establishes standards for
        reporting information regarding operating segments in annual financial
        statements and requires select information for those segments to be
        presented in interim financial reports issued to stockholders. SFAS No.
        131 also establishes standards for related disclosures about products
        and services and geographic areas. Operating segments are identified as
        components of an enterprise about which separate discrete financial
        information is available for evaluation by the chief operating decision
        maker, or decision-making group, in deciding how to allocate resources
        and assess performance. The Company's chief decision-maker, as defined
        under SFAS No. 131 is the Chief Executive Officer. To date, the Company
        has viewed its operations and manages its business as one operating
        segment- telecommunication services. The Company eliminated its prepaid
        phone card service during October 2000. The Company recorded revenues
        of approximately $16,201,000 during the year ended December 31, 2000
        from the prepaid card service.

                                       58
<PAGE>   61
                         GLOBALNET, INC. AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                           December 31, 2000 and 1999


     Data relating to the Company's operations by geographic area is set forth
     below:


<TABLE>
<CAPTION>
                           UNITED STATES         MEXICO         OTHER        TOTAL
<S>                         <C>                 <C>           <C>          <C>
     2000
      Revenues              $        --         37,312,408    40,778,127   78,090,535
      Identifiable assets    10,038,779                 --            --   10,038,779

     1999
      Revenues                       --         12,565,945    12,360,946   24,926,891
      Identifiable assets     4,449,726                 --            --    4,449,726

     1998
      Revenues                       --          4,046,246            --    4,046,246
      Identifiable assets            --                 --            --           --
</TABLE>

     The Company's revenues are primarily generated by providing
     telecommunication services to Mexico and other Latin America countries on
     behalf of the Company's customers. However, all of the tangible assets of
     the Company are located in the United States.

(13) LITIGATION

     The Company is from time to time subject to routine litigation incidental
     to its business. The Company believes that the results of the following
     asserted and potential litigation and other potential legal proceedings
     will not have a material adverse effect on its business, financial
     condition, results of operations, or liquidity of the Company.

     Rubin v. Gushlak - On December 26, 2000, an action entitled Rubin v.
     Gushlak, et al, Case No. 00-13406, was filed in the United States District
     Court for the Central District of California, which was subsequently
     amended on April 2, 2001. This action is against Myron Gushlak, a director
     of GlobalNet until his resignation on April 4, 2001, and thirteen other
     named defendants, including GlobalNet. The action arises out of the
     purchase by the plaintiff of 1,000,000 shares of the Company's common stock
     at a price of $5 per share in a private transaction which Mr. Gushlak
     allegedly facilitated. The primary relief sought in the action is the
     rescission of the contract of purchase; and damages in the alternative. The
     complaint alleges that defendant Gushlak allegedly induced the plaintiff to
     purchase shares of GlobalNet's common stock and, in doing so, allegedly
     violated various provisions of the federal securities laws. The complaint
     also alleges that GlobalNet failed to cooperate with the plaintiff in its
     efforts to confirm Gushlak's beneficial ownership of shares. The action is
     only in its formative stages and discovery or substantive proceedings have
     not as yet been initiated.



                                       59
<PAGE>   62

                         GlobalNet, Inc. and Subsidiary

                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999

     The Selway Group, Inc. -- On November 20, 2000, an action was initiated in
the United States District Court for the Northern District of Illinois against
GlobalNet by the Selway Group Inc. This action alleges that the plaintiff is
owed 3% of the gross revenues derived by GlobalNet from a telecommunications
intercommunication agreement entered into between GlobalNet and Protel, S.A. de
C.V. The action seeks unspecified monetary damages in excess of the monetary
federal jurisdiction limit. GlobalNet has moved to dismiss the complaint for
lack of jurisdiction and, at the present time, the motion remains before the
court. GlobalNet believes that it has good and meritorious defenses to this
action which it intends to assert if the court determines that jurisdiction
exists. The action is in its formative stages and no discovery or other
substantive proceedings in the action have been undertaken.

     Prinvest Financial Corp. -- As of November 8, 1999, GlobalNet entered into
capital leases with Prinvest Financial Corp. (Prinvest) for various network
equipment with respect to which GlobalNet recorded a capital lease obligation of
approximately $5,268,000. A dispute currently exists between GlobalNet and
Prinvest Financial Corp. with respect to compliance by GlobalNet under a
financing and security agreement dated as of November 8, 1999 and a lease
agreement dated as of that date. As of December 31, 2000, the amount outstanding
under the capital lease facility with Prinvest Financial Corp. amounted to
approximately $3,124,000. In an attempt to resolve the dispute, GlobalNet and
Prinvest entered into a forbearance agreement on October 27, 2000 whereby
Prinvest would forebear from declaring acceleration of the indebtedness of
GlobalNet under these leases. This forbearance agreement expired on January 26,
2001. As of April 9, 2001, no formal proceedings have been initiated.

                                        60
<PAGE>   63
                         GLOBALNET, INC. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


(14)    QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

        The following tables set forth an unaudited summary of quarterly
        financial data for the years ended December 31, 2000 and 1999. This
        quarterly information has been prepared on the same basis as the annual
        consolidated financial statements and, in management's opinion, reflects
        all adjustments necessary for a fair presentation of the information for
        the periods presented. The operating results for any quarter are not
        necessarily indicative of results for a full fiscal year.

<TABLE>
<CAPTION>
        2000                                      FIRST          SECOND           THIRD          FOURTH
                                                 QUARTER         QUARTER         QUARTER         QUARTER
                                               ------------    ------------    ------------    ------------
<S>                                            <C>             <C>             <C>             <C>
        Total revenues                         $ 14,486,390    $ 16,283,132    $ 23,635,285    $ 23,685,728
        Operating expenses                       14,929,518      19,926,349      26,767,990      27,113,671
        Operating loss                             (443,128)     (3,643,217)     (3,132,705)     (3,427,943)
        Net loss                                   (725,575)     (3,899,091)     (3,492,707)     (3,829,399)
        Pro forma basic and diluted loss
            per share                                 (0.04)          (0.17)          (0.12)           (0.13)
</TABLE>

<TABLE>
<CAPTION>
        1999                                      FIRST          SECOND           THIRD          FOURTH
                                                 QUARTER         QUARTER         QUARTER         QUARTER
                                               ------------    ------------    ------------    ------------
<S>                                            <C>             <C>             <C>             <C>
        Total revenues                         $  1,639,078    $  3,289,554    $  5,517,418    $ 14,480,841
        Operating expenses                        1,637,937       3,248,054       6,233,789      16,342,751
        Operating income (loss)                       1,141          41,500        (716,371)     (1,861,910)
        Net income (loss)                             6,141         (58,220)     (1,025,658)     (2,200,836)
        Pro forma basic and diluted loss
            per share                                  0.00           (0.00)           (0.05)         (0.11)
</TABLE>

(15)    MANAGEMENT'S PLANS AND INTENTIONS FOR CONTINUING OPERATIONS

        The Company has negative working capital at December 31,2000 and has
        experienced negative operating cash flows as well as continuing net
        losses since its inception in 1996. This raises substantial doubt about
        the Company's ability to continue as a going concern.

        Management is exploring different alternatives to address the Company's
        short-term and long-term financing needs. Such alternatives include
        issuing stock in private placements, securing additional vendor
        financing and securing a working capital credit facility. As discussed
        in Note 16, the Company recently closed two private placements
        generating net proceeds of approximately $2,811,000. Additionally, the
        Company has a commitment from an existing shareholder to purchase an
        additional $3,750,000 worth of common stock subject to certain trading
        volume and stock price conditions. There can be no assurances, however,
        these funds will be sufficient, or that the Company will be successful
        in completing additional private placements or in securing additional
        financing.

        Management continues to believe that the Company is well suited to take
        advantage of the current market opportunities. The Company will continue
        to aggressively pursue business in higher-margin geographic regions,
        increase margins and monitor costs in order to accelerate its path to
        profitability.

                                       61
<PAGE>   64
                         GLOBALNET, INC. AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999

(16)    SUBSEQUENT EVENTS

          February Private Placement

        During February 2001, the Company effected a private placement of
        700,000 shares of common stock at $1 per share. The Company issued
        warrants to purchase 75,000 shares of common stock at $1.20 to various
        entities assisting in the private placement. The Company received net
        proceeds at the closing in the amount of $670,000, after deducting a
        placement fee of $30,000. The Company filed a registration statement on
        Form S-3 to register the shares sold in the placement and the warrants
        granted to the placement agents on April 2, 2001.

          April Private Placement

        On April 9, 2001 (Closing Date), the Company entered into a securities
        purchase agreement (Agreement) whereby the Company issued a $2,000,000
        convertible note and the purchaser agreed to purchase from time to time
        through April 9, 2002, up to $4,000,000 of the Company's common stock.
        The number of shares and the price is to be determined based upon the
        Company's average current trading volume and stock price as defined in
        the Agreement. On the Closing Date, the purchaser made an initial
        purchase of 365,428 shares of the Company's common stock for an
        aggregate of $250,000. The Company received net proceeds of $2,140,976,
        after deducting related expenses. In addition, the Company paid a
        placement fee of $157,500 and issued a warrant to purchase 360,000
        shares of the Company's common stock, at $0.75 per share, to a firm in
        connection with the Agreement.

        In addition, the Company issued an incentive warrant to the purchaser
        representing the right to purchase 877,026 shares of the Company's
        common stock for $1.0221 per share. On the Closing Date, the Company
        also entered into a registration rights agreement with the purchaser
        whereby the Company is required to file a registration statement on
        behalf of the purchaser with respect to the shares purchased by it, the
        shares that may result from the conversion of the note, and the warrant
        shares.


                                       62
<PAGE>   65
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         On May 30, 2000, GlobalNet selected KPMG LLP to serve as its
independent public accountants for fiscal 2000 and, accordingly, terminated
Anderson, Anderson & Strong (Anderson), Rich Earth, Inc.'s independent public
accountants. The decision to engage KPMG and terminate Anderson was approved by
the Audit Committee and the Board of Directors of GlobalNet.

         Anderson's reports on Rich Earth, Inc.'s financial statements for the
1999 fiscal year did not contain an adverse opinion or disclaimer opinion, nor
were they qualified or modified as to uncertainty, audit scope or accounting
principles. During the 1999 fiscal year and through May 30, 2000, there was no
disagreement with Anderson regarding any matter of accounting principles or
practices, financial statement disclosure or audit scope or procedure, which
disagreement, if not resolved to the satisfaction of Anderson, would have caused
Anderson to make reference thereto in their reports.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         GlobalNet was formed on May 30, 2000 as a result of a "reverse merger"
transaction, whereby GlobalNet International, Inc. merged with and into a
subsidiary of Rich Earth, Inc. pursuant to an agreement and plan of merger,
whereby 20,000,000 shares of Rich Earth common stock were issued in exchange for
100% of the common stock of GlobalNet International in a transaction accounted
for as a reverse acquisition of Rich Earth by GlobalNet International. Prior to
the reverse merger, Rich Earth was a non-operating public shell corporation with
nominal assets. Following the reverse merger, the management of GlobalNet
International controlled the merged company and the principal shareholders of
GlobalNet International became principal shareholders of the merged company.
Following the closing of the reverse merger, Rich Earth changed its name to
GlobalNet, Inc. As a result of the reverse merger transaction, GlobalNet
International continued as an operating entity and as a wholly-owned subsidiary
of GlobalNet, and the historical financial statements of GlobalNet replaced
those of Rich Earth. Each of the Directors and Executive Officers listed below
became Directors and Executive Officers of GlobalNet as a result of the "reverse
merger" transaction.

Directors

       Listed below are the Directors of the Company whose one-year terms expire
at the 2001 annual meeting of shareholders.

<TABLE>
<CAPTION>
        Name                  Age                       Position
        ----                  ---                       --------
<S>                           <C>          <C>
Robert J. Donahue              61          Chairman and Chief Executive Officer
Daniel M. Wickersham           55          President
Pere Valles                    30          Chief Financial Officer
</TABLE>

                                       63
<PAGE>   66
<TABLE>
<S>                            <C>         <C>
Colum P. Donahue               27          Chief Operating Officer and Secretary
Carmine F. Adimando            56          Director
Jonathan S Greenhill           53          Director
Richard E. Wilson              58          Director
Paul Fritz                     59          Director
Robert H. Kohn                 43          Director
Philip R. Zimmermann           47          Director
Myron Gushlak(1)               31          Director
</TABLE>

(1)    On April 4, 2001, Mr. Gushlak tendered his resignation from the Board of
Directors.  Mr. Gushlak served as a Director of the Company during the period
covered by this Report.  At this time, the Company has no immediate plans to
fill Mr. Gushlak's vacant Board seat.

       All Officers are also Directors and serve at the discretion of the Board
of Directors. None of the Officers or Directors are related to each other,
except for Colum P. Donahue who is the son of Robert J. Donahue.

         Robert J. Donahue. Mr. Donahue founded GlobalNet in 1996, and has been
serving as Chairman and Chief Executive Officer since that time. His career
began in 1961 in the defense unit of GTE Automatic Electric, where he was
introduced to various aspects of telecommunications. In 1977, Mr. Donahue became
Vice President of United Telephone. That same year, he founded Donahue Telecom
Associates, Inc. and his experience in the international telecommunications
arena began. That enterprise provided customized telecom consulting services to
major multinational corporations. In 1986, Mr. Donahue founded Standard Telecom,
Inc., which served as a major rebiller for telecommunications giants including
Sprint and AT&T, and was one of the original fifteen charter members of the TRA.
In 1995, Mr. Donahue founded DTA Communications Networks, LLC, now merged with
GlobalNet, which provided international transport and billing services.

         Mr. Donahue is presently involved in a lawsuit involving DTA
Communications LLC (which was owned by Mr. Donahue and which filed for Chapter 7
bankruptcy in 1997) in which Mr. Donahue is suing a former customer of DTA
Communications LLC for $500,000. DTA Communications LLC does not, and never has
had any relationship with GlobalNet.

         Daniel M. Wickersham. Mr. Wickersham joined the Company in January 2000
as President with more than 30 years of telecommunications industry experience.
He brings international and domestic hands-on expertise in telecommunication and
information technology, ranging from engineering, operating and business
management to sales/marketing. Previously, Mr. Wickersham was President and COO
of WorldPort Communications, Inc. Telecommunication network experience includes
Tenneco, U.S. Army, several Bell


                                       64
<PAGE>   67
Operating Companies and a number of local cable organizations. In parallel with
his civilian accomplishments, Mr. Wickersham recently retired form the U.S. Army
Active Reserve as a Lieutenant Colonel with over 30 years of continuous combined
Active and Active Reserve service. His career was mostly comprised of service as
a signal Corp Officer with a specialty in Telecommunications and Information
Management.

         Pere Valles. Mr. Valles joined the Company as Chief Financial Officer
in August 2000. Prior to that, Mr. Valles was a Senior Manager in KPMG LLP's
Transaction Services Group in Miami, Florida. At KPMG, Mr. Valles provided
acquisition advisory and financial due diligence services to corporations and
private equity groups doing international transactions in the U.S., Latin
America and Europe. His primary focus was on the telecommunications industry in
Latin America.

         Colum P. Donahue. Mr. Donahue began his career in telecommunications
with DTA Communications Network, LLC, now merged with GlobalNet. Starting in
technical support, Mr. Donahue gained hands-on experience in every aspect of
telecom business. He was responsible for the start-up activities and service
coordination of new and existing international networks. Mr. Donahue was also
responsible for establishing new customers, arranging for network
interconnection and negotiating international carrier rates. In his position at
GlobalNet as Chief Operating Officer, Mr. Donahue supervises and directs all
network support activities in the U.S. and abroad, including the design and
implementation of the GlobalNet Networks Operations Center.

         Carmine F. Adimando. Mr. Adimando was elected a Director in May 2000.
Mr. Adimando is Chairman and President of CARMCO Investments, LLC. Mr. Adimando
is also Chairman of Cordillers Asset Management, a money management firm in
Denver, Colorado. Mr. Adimando retired from Pitney Bowes in 1996 where he had
been Vice President, Treasurer and Chief Financial Officer. Prior to joining
Pitney Bowes, Mr. Adimando held positions with American Airlines, Burndy
Corporation, Deloitte, Haskins & Sells and Morgan Guaranty Trust. He is a member
of the board of Directors of Sensory Science, Inc. and Counsel Press, LLC. He is
on the Board of Oversees of the University of Connecticut School of Business and
the Board of Regents of Sacred Heart University. He is also on the Advisory
Board for the Franciscan Friars of the Atonement and Board of Directors of St.
Vincent's Hospital Foundation, Fairfield, CT.

         Jonathan S. Greenhill. Mr. Greenhill was elected a Director in
May 2000. Mr. Greenhill is a partner and principal in the New York firm of
Greenhill Partners, P.C., specializing in commercial transactions, litigation,
and insurance defense. Mr. Greenhill was admitted to practice in New York and in
U.S. District court for the Southern and Eastern Districts of New York (1981)
and the U.S. Court of Appeals, 4th Circuit (1996). Prior to entering private
practice, Mr. Greenhill served for a decade in the U.S. Foreign Service, as a
Political and Economic officer, in Latin America and Europe, and was Assistant
Director of the Public Affairs Program at the University of Denver. He is a
member of the Association of the Bar of the City of New York, the American Bar
Association, the Loss Executives Association and the Johns Hopkins Alumni, New
York Board of Directors.


                                       65
<PAGE>   68
         Richard E. Wilson. Mr. Wilson was elected a Director in May 2000. Mr.
Wilson is currently the Chief Executive Officer and President of the North
American division of Open Telecommunications, an Australian telecommunications
software and consulting company. Prior to that, Mr. Wilson was President of REW
& Associates, a consulting firm that specializes in international carriers, both
foreign and domestic. From 1993 to 1996, he was Vice President of Acquisitions
for Midcom, a $200 million provider of long distance services. Mr. Wilson was
founder of Feek's Telcom and sold this company to McCaw Communications. He has
also held management positions for Communications Network, Inc. and Motorola.
Mr. Wilson was one of the founders and has been Chairman/Board of Directors of
the Telecommunications Resellers Association (TRA) and a past President of TRA.

         Paul Fritz. Mr. Fritz was elected a Director in May 2000. Mr. Fritz is
the founder, Chairman and President of CCC Technology, Elk Grove Village,
Illinois. His company is one of the leading distributors of voice and data
equipment for Lucent Technologies. CCC Technology markets, installs and
maintains systems throughout the United States. Mr. Fritz has held positions
with Rolm/IBM Corporation as Vice President of Marketing, Nortel as Director of
Sales, CENTEL Corporation as Director of Sales and Marketing, and marketing
positions with Ameritech.

         Robert H. Kohn. Mr. Kohn was elected a Director in May 2000. Mr. Kohn
is a co-founder and Chairman of the Board of Emusic. Prior to 1998, he was Vice
President, Business Development and General Counsel of Pretty Good Privacy,
Inc., a developer and marketer of Internet encryption and security software.
From 1987 until 1996, he was Senior Vice President of Corporate Affairs of
Borland International, a software company. Mr. Kohn served as chief legal
counsel for Ashton-Tate Corporation and as an attorney for Ruden & Richman, an
entertainment law firm whose clients included Frank Sinatra, Liza Minelli, Cher
and Warner Brothers Music. He was also an Associate Editor of the Entertainment
Law Reporter, for which he continues to serve as a member of the Advisor Board.
A Member of the California Bar Association, Mr. Kohn co-authored Kohn on Music
Licensing, a treatise on music industry laws for lawyers, music publishers and
songwriters. Mr. Kohn is also an adjunct Professor of Law at the Monterey
College of Law, where he teaches Corporate Law.

         Philip R. Zimmermann. Mr. Zimmermann became a Director in July 2000.
Mr. Zimmermann currently serves as Chief Cryptographer at Hush Communications,
and is also consulting with a number of companies (including GlobalNet) and
industry organizations on matters of cryptography. Mr. Zimmermann is the creator
of Pretty Good Privacy (PGP), the most widely used email encryption software in
the world. Before founding PGP Inc, Zimmermann was a software engineer with more
than 20 years of experience, specializing in cryptography and data security,
data communications, and real-time embedded systems. He has received numerous
technical and humanitarian awards for his pioneering work in cryptography.
InfoWorld named Zimmermann one of the Top 10 Innovators in E-business (2000). He
received the Louis Brandeis Award (1999) from Privacy International, a Lifetime
Achievement Award (1998) from Secure


                                       66
<PAGE>   69
Computing Magazine, and the Norbert Wiener Award (1996) from Computer
Professionals for Social Responsibility for promoting the responsible use of
technology. He also received the Chrysler Award for Innovation in Design (1995),
the Pioneer Award (1995) from the Electronic Frontier Foundation, the PC Week IT
Excellence Award (1996), and the Network Computing Well-Connected Award (1996)
for "Best Security Product." PGP was selected by Information Week as one of the
Top 10 Most Important Products of 1994. Time Magazine also named Zimmermann one
of the "Net 50", the 50 most influential people on the Internet (1995).

         Myron Gushlak. Mr. Gushlak was elected a Director in May 2000. Mr.
Gushlak currently serves as Managing Director of Imperium Capital, a San
Francisco based private venture capital Company that provides financing and
ongoing management to technology companies, with a specific focus on the
media/entertainment and telephony. Accomplishments include the initial funding
and public listing of Emusic.com, the leading provider of downloadable music;
and the initial funding and public listing of netValue Holdings, Inc., a leading
public internet incubator. He also is a co-founder and on the board of directors
of Laugh.com, Sticky Networks, a multiplayer search tool company founded by the
former CEO of Infoseek; and, is on the board of advisors of netValue Holdings,
Inc. Also, Mr. Gushlak sits on the board of directors of Netmaster, Inc. a
Canadian based Linux software company. Prior to this, he was a broker at one of
Canada's largest independent brokerage firms.

         On April 4, 2001, Mr. Gushlak tendered his resignation from the Board
of Directors. Mr. Gushlak served as a Director of the Company during the period
covered by this Report. At this time, the Company has no immediate plans to fill
Mr. Gushlak's vacant Board seat.

         Messrs. Adimando, Greenhill and Wilson served on the Company's
Compensation Committee during 2000. Messrs. Adimando, Kohn and Gushlak served
on the Company's Audit Committee during 2000.

Executive Officers and Significant Employees

         The following sets forth certain information regarding executive
officers and certain significant employees of the Company. Information
pertaining to executive officers who are both a director and executive officer
of the Company may be found in the section entitled "Directors."

         Fred Bigney. Mr. Bigney joined the Company in May 2000, bringing with
him 25+ years of experience in traffic analysis, routing, provisioning, contract
negotiations, and a wide variety of other experiences. Prior to joining the
company, Mr. Bigney worked as VP-Network Planning for World Access, where he
managed the routing, buying, provisioning, and traffic analysis departments. He
was also involved in vendor bill approvals, sales support, and vendor
negotiations. The 8 years prior to World Access, were spent with LCI (now Qwest)
involved with traffic management, provisioning, 800 portability, mergers and
acquisitions, billing, and engineering. His work experience prior to LCI
included assignments with other carriers and companies, all focused in the
Telecommunications arena. Mr. Bigney is currently Vice President of Network
Planning for the Company.


                                       67
<PAGE>   70
         Ted Broa. Mr. Broa began his telecommunications career 21 years ago by
installing large PBX's and paging equipment in California. Mr. Broa has
experience in engineering, installation and maintenance of telecommunications
equipment. He has diverse experience in telecommunication equipment from small
key systems, large PBX systems, Tandem switches to satellite and microwave
technology. He has been certified in installation and maintenance of
telecommunications equipment by Siemens, NEC, Lucent, Toshiba, Newbridge, Cisco
and many more. Mr. Broa was responsible for designing, installing and
maintaining two large hubs in the San Antonio area. For the last ten years, Mr.
Broa has extensively worked with networks throughout Mexico and Central America.
As Director of Operations, Mr. Broa oversees the daily operation and personnel,
along with maintenance of the San Antonio, New York and Latin American hubs for
GlobalNet. Mr. Broa is currently Director of Operations for the Company.

     Mike Dombrowski. Mr. Dombrowski joined as the Company's Director of
Engineering in March 2000. Mr. Dombrowski has a broad range of knowledge in
infrastructure engineering and operations. Mr. Dombrowski was Director of
Network Optimization for WorldPort Communications, where he developed and
managed global translations and least cost routing for the global network.
During his tenure at WorldPort he also deployed the OSS and Support network to
manage the global network. While at WorldPort, he also directed the
implementation, installation and turn-up of WorldPort's global switching
platform. Prior to this, for 18 years, he held various positions in the sales
support and network operations organization for Sprint Communications.

         Donna Janick. Ms. Janick is the Director of Administration. Her
responsibilities include, but are not limited to: Assistant to the Chairman and
CEO of GlobalNet, the administration of all payroll, the initiation, set up and
administration of employee benefit plans, all administrative and essential
support activities including office and systems management, communications,
training, contract administration and purchasing, investor relations and Board
of Directors. She has been with GlobalNet since its inception and has more than
fifteen years of experience in telecommunications. Prior to her time at
GlobalNet she served with Standard TelCom, Inc. and DTA Communications Network,
LLC for more than ten years.

         Chuck Roelle. Mr. Roelle is the Company's Controller and he reports
directly to the Chief Financial Officer of GlobalNet. His responsibilities
include, but are not limited to, accounting matters for the Company, billing for
customers and collections of payments, vendor payments, approval of Company
expenditures, expense budgeting and cash flow forecasting, reconciling
accounting books alongside financial auditors, reconciling bank accounts and
supervising accounts payable department. He has been with the Company since
1999.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
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 securities ownership and changes in such ownership with the
Securities and Exchange Commission. Officers,


                                       68
<PAGE>   71
directors and greater than ten percent shareholders also are required by rules
promulgated by the Securities and Exchange Commission to furnish the Company
with copies of all Section 16(a) forms they file.

         Based solely upon a review of the copies of such forms furnished to the
Company, the absence of a Form 3 or Form 5 or written representations that no
Forms 5 were required, the Company believes that, during the fiscal year 2000,
its officers, directors and greater than ten percent beneficial owners did not
timely comply with all applicable Section 16(a) filing requirements for the
reasons set forth below:

        On May 30, 2000 GlobalNet International, Inc. ("GII"), a privately held
company of which the officers, directors and greater than ten percent beneficial
owners were each principal officers, directors and greater than ten percent
beneficial owners, merged into a subsidiary of Rich Earth, Inc. ("Rich Earth")
in a "reverse merger" transaction (the "Merger"). As a result of the Merger,
GII, continued as the operating entity under the GlobalNet, Inc. ("GlobalNet" or
the "Issuer") name, and its historical financial statements replaced those of
Rich Earth. Prior to the Merger, Rich Earth filed a Form 10 with the Securities
and Exchange Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Exchange Act") causing Rich Earth to become subject to
the reporting requirements under the Exchange Act. Immediately prior to the
Merger, the officers, directors and greater than ten percent beneficial owners
were each officers, directors and greater than ten percent beneficial owners of
GII. Immediately after giving effect to the Merger, the officers, directors and
greater than ten percent beneficial owners each became an officer, director
and/or ten percent beneficial owner of GlobalNet. All of the officers, directors
and greater than ten percent beneficial owners ownership interests in the
Company were reported in the Schedule 14C Definitive Information Statement (the
"Information Statement") filed with the Commission pursuant to Section 14(c) of
the Exchange Act by Issuer (f/k/a Rich Earth). It was only recently, after
Issuer engaged a new law firm as its outside counsel, that the officers,
directors and greater than ten percent beneficial owners were advised of their
ongoing reporting obligations under the Exchange Act. With the exception of any
filings required to be made by Myron Gushlak, a former director of the Company,
and to the knowledge of the Company, all officers, directors and greater than
ten percent beneficial owners have filed the requisite information under Section
16(a) of the Exchange Act. The failure to timely file such filings with the
Commission was not willful or deliberate, but rather was the result of the
officers, directors and greater than ten percent beneficial owners not being
made aware of the ongoing reporting provisions set forth in the Exchange Act.

Indemnification of Officers and Directors

         Article 15 of our Articles of Incorporation provides for us to
indemnify any and all directors and officers whom it shall have power to
indemnify under Section 78.751 of the Nevada Revised Statutes from and against
any and all of the expenses, liabilities or other referred to in or covered by
such Section shall not be deemed exclusive of any other rights to which the
persons so indemnified may be entitled under our By-laws, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity by holding such
office, and shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such person.

ITEM 11. EXECUTIVE COMPENSATION

         GlobalNet was formed on May 30, 2000 as a result of a "reverse merger"
transaction, whereby GlobalNet International, Inc. merged with and into a
subsidiary of Rich Earth, Inc. pursuant to an agreement and plan of merger,
whereby 20,000,000 shares of Rich Earth common stock were issued in exchange for
100% of the common stock of GlobalNet International in a transaction accounted
for as a reverse acquisition of Rich Earth by GlobalNet International. Prior to
the reverse merger, Rich Earth was a non-


                                       69

<PAGE>   72
operating public shell corporation with nominal assets. Following the reverse
merger, the management of GlobalNet International controlled the merged company
and the principal shareholders of GlobalNet International became principal
shareholders of the merged company. Following the closing of the reverse merger,
Rich Earth changed its name to GlobalNet, Inc. As a result of the reverse merger
transaction, GlobalNet International continued as an operating entity and as a
wholly-owned subsidiary of GlobalNet, Inc., and the historical financial
statements of GlobalNet, Inc. replaced those of Rich Earth. However, the
information provided in this Item 11 is presented on an annualized basis rather
than pro rated over the period of time such executive was with the Company.

       All Officers are also Directors and serve at the discretion of the Board
of Directors. None of the Officers or Directors are related to each other,
except for Colum P. Donahue who is the son of Robert J. Donahue.


         Summary of Compensation

         The following table summarizes compensation information for the last
three fiscal years for (i) Robert J. Donahue, the Chief Executive Officer, and
(ii) the four most highly compensated executive officers other than the Chief
Executive Officer who were serving as executive officers of the Company at the
end of the fiscal year (collectively, the "Named Executive Officers"):

<TABLE>
<CAPTION>
                                        Annual Compensation               Long-term Compensation
                                  -------------------------------       --------------------------
                                                                        Restricted       Options
                                                                        Stock Awards     (No. of
                                  Annualized                              (No. of       underlying
Name and Position       Year        Salary       Bonus[15]  Other         shares)         shares)
-----------------       ----      ----------     -----      -----       ------------    ----------
<S>                     <C>       <C>            <C>        <C>         <C>             <C>
Robert J. Donahue       1998       168,000         -        6,750  [1]       -               -
       CEO and          1999       207,000       5,000      6,750  [1]       -               -
       Chairman         2000       230,000         -        6,750  [1]    75,000   [2]    250,000  [3]

    Daniel M.
   Wickersham           1998         N/A          N/A        N/A            N/A             N/A
    President           1999         N/A          N/A        N/A            N/A             N/A
                        2000       200,000         -        3,200  [4]    425,000  [5]    225,000  [6]

   Pere Valles          1998         N/A          N/A        N/A            N/A             N/A
       CFO              1999         N/A          N/A        N/A            N/A             N/A
                        2000       175,000         -        1,250  [7]    425,000  [8]    150,000  [9]

Colum P. Donahue        1998        14,000                  5,000            -               -
       COO and          1999        37,000       5,000      5,000            -               -
       Secretary        2000       150,000         -        5,800 [10]    75,000  [11]    200,000 [12]

   Fred Bigney          1998         N/A          N/A        N/A            N/A             N/A
  VP of Network         1999         N/A          N/A        N/A            N/A             N/A
   Planning             2000       180,000         -          -           125,000 [13]    100,000 [14]

</TABLE>

                                       70

<PAGE>   73
[1] The Company leases a vehicle that is used by Robert Donahue.

[2] On December 28, 2000, the Company granted Robert J. Donahue 75,000 shares of
common stock. The stock vests in the following manner: 44% on September 15,
2001, 22% on May 15, 2002 and 34% on May 15, 2003.

[3] On May 15, 2000, the Company granted Robert J. Donahue 250,000 options to
purchase common stock at an exercise price of $8.00 per share. The options vest
in the following manner: 33% on May 15, 2001, 33% on May 15, 2002 and 33% on May
15, 2003.

[4] Daniel M. Wickersham receives a car allowance of $800 per month.

[5] On May 15, 2000, the Company granted Daniel M. Wickersham 375,000 shares of
common stock. On December 28, 2000, the Company granted Daniel M. Wickersham an
additional 50,000 shares of common stock. The stock vests in the following
manner: 44% on September 15, 2001, 22% on May 15, 2002 and 34% on May 15, 2003.

[6] On May 15, 2000, the Company granted Daniel M. Wickersham 225,000 options to
purchase common stock at an exercise price of $8.00 per share. The options vest
in the following manner: 33% on May 15, 2001, 33% on May 15, 2002 and 33% on May
15, 2003.

[7] The Company leases a vehicle that is used by Pere Valles.

[8] On December 28, 2000, the Company granted Pere Valles 425,000 shares of
common stock. The stock vests in the following manner: 44% on September 15,
2001, 22% on May 15, 2002 and 34% on May 15, 2003.

[9] On December 28, 2000, the Company granted Pere Valles 150,000 options to
purchase common stock at an exercise price of $0.75 per share. The options vest
in the following manner: 33% on May 15, 2001, 33% on May 15, 2002 and 33% on May
15, 2003.

[10] The Company leases a vehicle that is used by Colum P. Donahue.

[11] On December 28, 2000, the Company granted Colum P. Donahue 75,000 shares of
common stock. The stock vests in the following manner: 44% on September 15,
2001, 22% on May 15, 2002 and 34% on May 15, 2003.

[12] On May 15, 2000, the Company granted Colum P. Donahue 200,000 options to
purchase common stock at an exercise price of $8.00 per share. The options vest
in the following manner: 33% on May 15, 2001, 33% on May 15, 2002 and 33% on May
15, 2003.

[13] On May 15, 2000, the Company granted Fred Bigney 100,000 shares of common
stock. On December 28, 2000, the Company granted Mr. Bigney an additional 25,000
shares of common stock. The stock vests in the following manner: 44% on
September 15, 2001, 22% on May 15, 2002 and 34% on May 15, 2003.

[14] On May 15, 2000, the Company granted Fred Bigney 100,000 options to
purchase common stock at an exercise price of $8.00 per share. The options vest
in the following manner: 33% on May 15, 2001, 33% on May 15, 2002 and 33% on May
15, 2003.

[15] The Company currently is in the process of determining whether to
distribute bonuses to certain executive officers and significant employees for
the fiscal year ended December 31, 2000 and reserves the right to distribute
such bonuses in the future.

                                       71


<PAGE>   74
Option Grants in Last Fiscal Year

       The following table provides information about option grants to the Named
Executive Officers during the fiscal year 2000.

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                   NUMBER OF SECURITIES
                         SHARES                        UNDERLYING                 VALUE OF UNEXERCISED
                        ACQUIRED     VALUE             UNEXERCISED                   IN-THE-MONEY
                           ON       REALIZED        OPTIONS AT FISCAL              OPTIONS AT FISCAL
                        EXERCISE    --------           YEAR-END (#):                   YEAR-END($):
       NAME                (#)        ($)       EXERCISABLE/UNEXERCISABLE[1]    EXERCISABLE/UNEXERCISABLE
       ----                ---        ---       ----------------------------    -------------------------
<S>                     <C>         <C>         <C>                             <C>
Robert J. Donahue           --         --                 250,000                           --
Daniel M. Wickersham        --         --                 225,000                           --
Pere Valles                 --         --                 150,000                      $78,000[2]
Colum P. Donahue            --         --                 200,000                           --
Fred Bigney                 --         --                 100,000                           --
</TABLE>

Notes:

[1]  The options have the following vesting schedule: 33% on May 15, 2001. 33%
     on May 15, 2002 and the remainder on May 15, 2003.

[2]  As of April 11, 2001, the value of unexercised "in-the-money" options held
     by Mr. Valles amounts to approximately $78,000. This amount is calculated
     based on the difference between the stock price on April 12, 2001 ($1.27)
     and the exercise price of the options ($0.75) multiplied by the number of
     options held by Mr. Valles (150,000). These options are subject to the
     vesting schedule described in [1] above.

Options Exercised And Year-End Option Holdings

     The options to purchase shares of common stock held by Executive Officers
were unvested as of December 31, 2000. The Executive Officers did not exercise
any of their options in the fiscal year 2000.

Compensation of Directors


                                      72

<PAGE>   75


         Outside directors do not receive any cash remuneration for serving as
directors. All directors are eligible to participate in our stock option plan.
Each of Messrs. Adimando, Greenhill, Wilson, Fritz, Kohn, Gushlak and Zimmerman
were granted options to purchase 100,000 shares of Common Stock at an exercise
price of $16.00 per share upon appointment to the board of directors. These
options vest on September 14, 2002.

         On April 4, 2001, Mr. Gushlak resigned from the board of directors, at
which time he forfeited unvested options to purchase 100,000 shares of Common
Stock.

Employment Agreements

         The Company entered in employment agreements with its Executive
Officers and the following key employees:

<TABLE>
<CAPTION>
                                                                       Date        Expiration
    Employee                         Position                         Entered         Date
    --------                         --------                         -------         ----
<S>                           <C>                                    <C>           <C>
Robert J. Donahue             Chief Executive Officer and            15-May-00     15-May-03
                                Chairman
Daniel M. Wickersham          President                              15-May-00     15-May-03
Pere Valles                   Chief Financial Officer                28-Dec-00     15-May-03
Colum P. Donahue              Chief Operating Officer and            15-May-00     15-May-03
                                Secretary
Fred Bigney                   VP of Network Planning                 15-May-00     15-May-03
Mike Dombrowski               Director of Engineering                15-May-00     15-May-03
Ted Broa                      Director of Operations                 15-May-00     15-May-03
Chuck Roelle                  Controller                             15-May-00     15-May-03
Donna Janick                  Director of Administration             15-May-00     15-May-03
</TABLE>


         The table summarizes the principal terms of the employment agreements:

<TABLE>
<CAPTION>
                                                                                  Option Grants
                                                                          ---------------------------
                                         Base          Restricted         No. of             Exercise    Severance
     Employee                           Salary        Stock Grants        options              price      Payment
     --------                           ------        ------------        -------              -----      -------
<S>                                     <C>           <C>                <C>                 <C>         <C>
Robert J. Donahue                       230,000          75,000           250,000               8.00     18 Months
Daniel M.  Wickersham                   200,000         425,000           225,000               8.00     12 Months
Pere Valles                             175,000         425,000           150,000               0.75     12 Months
Colum P. Donahue                        150,000          75,000           200,000               8.00     12 Months
Fred Bigney                             180,000         125,000           100,000               8.00      6 Months
Mike Dombrowski                         125,000          35,000           100,000               8.00      6 Months
Ted Broa                                110,000          75,000            75,000               8.00      6 Months
Chuck Roelle                             75,000         115,000           100,000               8.00      6 Months
Donna Janick                             70,000         125,000           100,000               8.00     12 Months
</TABLE>

       The stock granted to the employees vests in the following manner: 44% on
September 15, 2001, 22% on May 15, 2002 and 34% on May 15, 2003. The options
have the following vesting schedule: 33% on May 15, 2001, 33% on May 15, 2002
and 33% on May 15, 2003.

       The Company may terminate the employment agreements only for cause. In
case of termination without cause, the employee is entitled to the severance
payment shown on the table above and to the acceleration in the vesting of the
stock and options granted.

Compensation Committee Interlocks and Insider Participation

         The members of the compensation committee during 2000 were Carmine F.
Adimando, Jonathan S. Greenhill and Richard E. Wilson. None of Messrs. Adimando,
Greenhill or Wilson was ever an officer or an employee of the Company or any of
its subsidiaries, and none of them had any relationship requiring disclosure by
the Company under Item 404 of Regulation S-K for 2000.

Company Stock Performance

         Our common stock is listed and traded on the NASDAQ Small Cap Market.
For the period January 1999 through May 2000 (the pre-reverse merger period),
shares of the Company traded on the Over the Counter Bulletin Board as Rich
Earth, Inc., a publicly traded shell company. There are no available historical
quotations for Rich Earth common stock during the pre-reverse merger period. As
a result of the reverse merger between Rich Earth and GlobalNet International,
Inc., shares of the Company continued to trade on the Over the Counter Bulletin
Board, but under the GlobalNet name, from May 2000 through November 2000. On
November 24, 2000, our common stock commenced trading on the NASDAQ Small Cap
Market. Due to the limited trading history of our common stock on the NASDAQ
Small Cap Market, there are no reliable parameters with which to chart our stock
performance over the prior three years. See Part II, Item 5, relating to the
market for our common equity, which information is hereby incorporated by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       The following table sets forth information with respect to the beneficial
ownership of our Common Stock as of April 12, 2001 with respect to (i) each
stockholder known by us to be the beneficial owner of more than 5% of our Common
Stock; (ii) each of our directors; (iii) each Named Executive Officer listed in
the Summary Compensation Table under the heading "Executive Compensation" and
(iv) all directors and executive officers as a group. On the table date,
32,230,878 shares of Common Stock were issued and outstanding. Unless otherwise
indicated, all persons named as beneficial owners of Common Stock have sole
voting power and sole investment power with respect to the shares indicated as
beneficially owned.


                                       73
<PAGE>   76

<TABLE>
<CAPTION>
                                                                       SHARES            PERCENTAGE OF
                                                                    BENEFICIALLY          COMMON STOCK
              NAME OF BENEFICIAL OWNER (1)                             OWNED            OUTSTANDING (2)
              ----------------------------                             -----            ---------------
<S>                                                                 <C>                 <C>
              Robert J. Donahue
              119 West Adams
              Villa Park, Illinois 60181                             8,237,748               25.6%[1]

              Colum P. Donahue
              2S572 Route 53
              Glen Ellyn, IL 60137                                   2,201,240                6.8%[2]

              Daniel M. Wickersham
              1889 Pine Log Church
              Brasstown, NC 28902                                     425,000                 1.3%[3]

              Pere Valles
              820 Muirhead Avenue
              Naperville, Illinois 60565                              425,000                 1.3%[4]

              Paul Fritz
              833 Cumberland Avenue
              Park Ridge, Illinois 60068                             1,296,846                4.0%[5]

              Myron Gushlak
              P.O. Box 31485 SMB
              Casa Coyoba/Cayman Islands                              700,000                 2.2%[6]

              Carmine F. Adimando
              47 Cherry Gate Lane
              Trumbull, Connecticut 6611                              175,000                    *[7]
</TABLE>


                                       74

<PAGE>   77

<TABLE>
<S>                                                                <C>                        <C>
              Jonathan S. Greenhill
              819 The Parkway
              Mamaroneck, New York 10543                               45,000                   *   [8]

              Richard E. Wilson
              6252 Harbour Heights Parkway
              Mukilteo, Washington 98275                                 -                      *   [9]

              Robert H. Kohn
              1991 Broadway
              Redwood City, California 94063                             -                      *   [10]

              Philip R. Zimmermann
              1536 Vancouver Avenue
              Burlingame, California 94014                               -                      *   [11]

              Fred Bigney
              3003 Stonebrook Road
              Lisle, Illinois 60148                                   125,000                   *   [12]

              All Directors and Named Executive Officers as a
              Group (12 persons in number)                         13,630,834                 42.3%

              Crescent International, Ltd
              84 Avenue Louis-Casai
              1216 Geneva, Cointrin
              Switzerland                                           3,164,279                 9.2%  [13]


</TABLE>

*        Less than one percent.

[1] Includes 75,000 shares of restricted common stock granted on December 28,
2000 with the following vesting schedule: 42% on September 15, 2001, 22% on May
15, 2002 and 34% on May 15, 2003. Additionally, on May 15, 2000, Mr. Donahue was
granted 250,000 options to purchase shares of common stock at $8.00 per share.
The options have the following vesting schedule.

[2] Includes 75,000 shares of restricted common stock granted on December 28,
2000 with the following vesting schedule: 42% on September 15, 2001, 22% on May
15, 2002 and 34% on May 15, 2003. Additionally, on May 15, 2000, Mr. Donahue was
granted 200,000 options to purchase shares of common stock at $8.00 per share.
The options have the following vesting schedule: 33% on May 15, 2001, 33% on May
15, 2002 and 33% on May 15, 2003.

[3] Includes 425,000 shares of restricted common stock (375,000 shares granted
on May 15, 2000 and 50,000 shares granted on December 28, 2000) with the
following vesting schedule: 42% on September 15, 2001, 22% on May 15, 2002 and
34% on May 15, 2003. Additionally, on May 15, 2000, Mr. Wickersham was granted
225,000 options to purchase shares of common stock at $8.00 per share. The
options have the following vesting schedule: 33% on May 15, 2001, 33% on May 15,
2002 and 33% on May 15, 2003.

[4] Includes 425,000 shares of restricted common stock granted on December 28,
2000 with the following vesting schedule: 42% on September 15, 2001, 22% on May
15, 2002


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<PAGE>   78

and 34% on May 15, 2003. Additionally, on December 28, 2000, Mr. Valles was
granted 150,000 options to purchase shares of common stock at $0.75 per share.
The options have the following vesting schedule: 33% on May 15, 2001, 33% on May
15, 2002 and 33% on May 15, 2003.

[5] In addition to shares shown above, on September 14, 2000, Mr. Fritz was
granted 100,000 options to purchase shares of common stock at $16.00 per share
as compensation for serving as a Director. The options vest on September 14,
2002.

[6] On June 28, 2000, Myron Gushlak bought from Robert J. Donahue 700,000 shares
of common stock at $1.00 per share in accordance with a stock purchase agreement
executed on May 22, 2000 and previously disclosed on Form 8-K filed on July 28,
2000. Additionally, on September 14, 2000, Mr. Fritz was granted 100,000 options
to purchase shares of common stock at $16.00 per share as compensation for
serving as a Director. On April 4, 2001, Myron Gushlak resigned from the Board
of Directors before the options had vested.

[7] In addition to shares shown above, on September 14, 2000, Mr. Adimando was
granted 100,000 options to purchase shares of common stock at $16.00 per share
as compensation for serving as a Director. The options vest on September 14,
2002.

[8] In addition to shares shown above, on September 14, 2000, Mr. Greenhill was
granted 100,000 options to purchase shares of common stock at $16.00 per share
as compensation for serving as a Director. The options vest on September 14,
2002.

[9] On September 14, 2000, Mr. Wilson was granted 100,000 options to purchase
shares of common stock at $16.00 per share as compensation for serving as a
Director. The options vest on September 14, 2002.

[10] On September 14, 2000, Mr. Kohn was granted 100,000 options to purchase
shares of common stock at $16.00 per share as compensation for serving as a
Director. The options vest on September 14, 2002.

[11] On September 14, 2000, Mr. Zimmermann was granted 100,000 options to
purchase shares of common stock at $16.00 per share as compensation for serving
as a Director, and 50,000 options to purchase shares of common stock at $12.00
per share for consulting work. The options that Mr. Zimmermann received as a
Director vest on September 14, 2002. The options for the consulting work have
the following vesting schedule: 33% on May 15, 2001, 33% on May 15, 2002 and 33%
on May 15, 2003.

[12] Includes 125,000 shares of restricted common stock (100,000 shares granted
on May 15, 2000 and 25,000 shares granted on December 28, 2000) with the
following vesting schedule: 42% on September 15, 2001, 22% on May 15, 2002 and
34% on May 15, 2003. Additionally, on May 15, 2000, Mr. Bigney was granted
100,000 options to purchase shares of common stock at $8.00 per share. The
options have the following vesting schedule: 33% on May 15, 2001, 33% on May 15,
2002 and 33% on May 15, 2003.

[13] Includes (i) 500,000 shares of common stock purchased in the private
placement that the Company effected in February 2001, (ii) 365,428 shares of
common stock purchased on April 9, 2001, and (iii) 2,298,851 shares of common
stock that could result from the conversion of the $2,000,000 note that Crescent
International purchased on April 9, 2001. Crescent International could
potentially convert the note at a 6% premium on the average closing bid prices
for the ten days preceding April 9, 2001 (i.e., approximately $0.87). In the
calculation of Crescent International's ownership percentage, we included the
2,298,851 shares that would results from the conversion of the note in total
shares outstanding.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       GlobalNet was formed on May 30, 2000 as a result of a "reverse merger"
transaction, whereby GlobalNet International, Inc. merged with and into a
subsidiary of Rich Earth, Inc. pursuant to an agreement and plan of merger,
whereby 20,000,000 shares


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<PAGE>   79

of Rich Earth common stock were issued in exchange for 100% of the common stock
of GlobalNet International in a transaction accounted for as a reverse
acquisition of Rich Earth by GlobalNet International. Prior to the reverse
merger, Rich Earth was a non-operating public shell corporation with nominal
assets. Following the reverse merger, the management of GlobalNet International
controlled the merged company and the principal shareholders of GlobalNet
International became principal shareholders of the merged company. Following the
closing of the reverse merger, Rich Earth changed its name to GlobalNet, Inc. As
a result of the reverse merger transaction, GlobalNet International continued as
an operating entity and as a wholly-owned subsidiary of GlobalNet, and the
historical financial statements of GlobalNet replaced those of Rich Earth.

       On June 28, 2000 and in connection with the reverse merger transaction,
Mr. Donahue sold Mr. Gushlak, a then outside director of GlobalNet and a
Managing Director of Imperium Capital (USA), 700,000 shares of GlobalNet common
stock for $1.00 per share in accordance with a Stock Purchase Agreement dated
May 22, 2000, as amended on June 28, 2000 (as amended, the "SPA").

       Greenhill Partners, P.C., of which Jonathan S. Greenhill, a Director of
GlobalNet, is a partner, from time to time renders legal services, including but
not limited to advice relating to certain litigation matter involving GlobalNet,
to GlobalNet. For the period covered by this Report, the Company paid Greenhill
Partners an aggregate amount of $271,996.56 for services rendered to GlobalNet.

       Pere Valles, the Company's Chief Financial Officer, was a Senior Manager
in KPMG LLP's Transaction Services Group prior to joining GlobalNet in August
2000. Mr. Valles was never involved in the audit of GlobalNet while he was with
KPMG. However, he was the project manager responsible for advising GlobalNet in
a potential acquisition that it considered in Mexico in June 2000, but never
pursued.

         Employment Agreements

         See Part III, Item 11, under the subheading "Employment Agreements,"
for information relating to certain employment agreements between the Company
and its executive officers and significant employees, which information is
hereby incorporated by reference.

                                       77

<PAGE>   80

              REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
                      DIRECTORS ON EXECUTIVE COMPENSATION

Compensation of Directors and Executive Officers

         The Compensation Committee of the board of directors (the "Committee")
is composed solely of non-employee directors. The Committee is responsible for
setting and administering the policies that determine the compensation of the
Chief Executive Officer ("CEO") and other executive officers of the Company.

         Compensation Philosophy

         The Company's executive compensation policies seek to attract, retain,
motivate and reward executive officers who contribute to the Company's success.
By aligning the financial interests of its executive officers with the
performance of the Company, the executive compensation policies ensure a direct
relationship between executive pay and


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<PAGE>   81

shareholder value, as well as motivating executive officers to achieve the
Company's business objectives and rewarding individual performance. The Company
continues to operate under the 2000 Stock Plan, which was adopted at a meeting
of the shareholders on May 3, 2000.

         The Committee considers the following factors in setting compensation
level and individual objectives:

         -        The level of compensation paid to executive officers in
                  similar positions in companies of similar maturity, size and
                  product offerings - To ensure that pay is competitive, the
                  Committee, from time to time, compares the Company's executive
                  compensation packages with those offered by other companies in
                  the same or similar industries or with other similar
                  attributes. Compensation surveys used by the Committee
                  typically include public and private companies comparable in
                  size, products or industry to the Company.

         -        Corporate performance - Corporate performance is evaluated by
                  factors such as performance relative to competitors,
                  performance relative to business conditions and progress in
                  meeting the Company's objectives and goals as typically
                  reflected in the annual operating plan.

         -        The individual performance of each executive officer -
                  Individual performance includes meeting individual performance
                  objectives and demonstration of job knowledge, skills and
                  teamwork.

         -        The responsibility and authority of each position relative to
                  other positions.

         The Committee considers these factors as a whole in establishing
executive compensation. Specifically, these components are established as
follows:

Base Salary

         Base salaries are established for each executive officer at levels that
are intended to be competitive with salaries for comparable positions at other
software and computer industry companies of similar maturity, size and product
offerings. The Company seeks to pay salaries to executive officers that are
commensurate with their qualifications, duties and responsibilities and that are
competitive in the marketplace. In conducting periodic compensation reviews, the
Committee considers each individual executive officer's achievements in meeting
Company financial and business objectives during the prior fiscal year, the
executive officer's performance of individual responsibilities and the Company's
financial position and overall performance. The Committee periodically considers
the low, midpoint and upper ranges of base salaries published by compensation
surveys in establishing base salaries for each executive officer.

Annual Incentive

                                       79

<PAGE>   82


         Annual incentives for executive officers reflect the Company's belief
that management's contribution to shareholder returns comes from achieving
operating results that maximize the Company's revenue growth, earnings and cash
flow over a multi-year time horizon. The Company believes that the achievement
of its performance objectives depends on: (i) delivering outstanding products
and services to its clients; (ii) establishing and maintaining a position of
strength in its chosen markets; (iii) effective generation and use of cash; and
(iv) movement toward profitability. For purposes of annual incentive
compensation, progress toward these performance objectives is measured against
the results established in the Company's annual operating plan, which is
approved by the board of directors.

         The Company believes that this incentive compensation structure closely
links the incentives paid to its executive officers with the results necessary
to create long-term value for shareholders.

Long-Term Incentive

         The Committee also endorses the position that stock ownership by
management is beneficial in aligning management and shareholder interests in
enhancing shareholder value. In that regard, stock options also are used to
retain executive officers and motivate them to improve long-term stock market
performance. Stock options will have value only if the Company's stock price
increases. As part of its periodic review of compensation, the Compensation
Committee reviews the stock option holdings of the Company's officers and senior
executives, and recommends additional stock option grants as appropriate.

         The Committee determines the number of options to be granted to
executive management based on: (i) competitive practice within the peer group
used in determining base salary; (ii) historical performance of the executive
officer; and (iii) the amount of prior grants held by the executive officer,
including the number of vested and unvested options. When using comparative
data, the Company targets its option grants in the mid to high range of
comparable companies.

Deductibility of Executive Compensation

         Section 162(m) of the Internal Revenue Code generally limits the
Company's ability to deduct for federal income tax purposes in excess of $1.0
million of compensation paid to certain Named Executive Officers in any taxable
year. Compensation above $1.0 million may be deducted if it is
"performance-based compensation" within the meaning of the Code. Stock options
granted under the Incentive Plan with an exercise price at least equal to the
fair market value of the Company's Common Stock on the date of grant are
considered to be "performance-based compensation."


                                       80

<PAGE>   83

Compensation of the Chief Executive Officer

         Robert J. Donahue, the Company's Chief Executive Officer and Chairman,
received $230,000 for the services he performed for the Company in fiscal year
2000.

Conclusion

         A significant portion of the Company's executive officers' compensation
is contingent on Company performance and realization of benefits closely linked
to increases in long-term shareholder value. The Company remains committed to
this philosophy of pay for performance, recognizing that the competitive market
for talented executives and the volatility of the Company's business may result
in significant incentive and long-term variable compensation in specific
periods.

                      MEMBERS OF THE COMPENSATION COMMITTEE

Carmine F. Adimando, Jonathan S. Greenhill and Richard E. Wilson


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      The following documents are filed as a part of this report:

         1.       Financial Statements. The Consolidated Financial Statements of
                  GlobalNet, Inc and Subsidiary in Item 8 hereof are filed as
                  part of this Annual Report on Form 10-K.

         2.       Exhibits. The exhibits listed on the accompanying Index to
                  Exhibits immediately following the signature page are filed as
                  part of, or incorporated by reference into, this Annual Report
                  on Form 10-K.

(b)      Reports on Form 8-K:

<TABLE>
<CAPTION>
           DATE OF REPORT                       ITEMS REPORTED                       DESCRIPTION
           --------------                       --------------                       -----------
<S>                                             <C>                        <C>
            May 30, 2000                            Item 4                    Current Report - Change of
                                                                                     Accountants
            May 30, 2000                            Item 4                 Amended Current Report - Change
                                                                                    of Accountants
           April 4, 2001                            Item 6                 Current Report - Resignation of
                                                                                       Director
           April 9, 2001                            Item 5                    Current Report - Financing
                                                                              Transaction with Crescent
                                                                                 International, Ltd.
</TABLE>


                                       81


<PAGE>   84
                                   SIGNATURES

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

                                                    GlobalNet, Inc.

Dated:  April 16, 2001                              By: /s/ Robert J. Donahue
                                                       -----------------------
                                                       Robert J. Donahue
                                                       Chairman and Chief
                                                            Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on April 16, 2001.

<TABLE>
<CAPTION>
        SIGNATURE                                            TITLE
        ---------                                            -----

<S>                                                 <C>
/s/ Robert J. Donahue                                  Chairman and Chief
---------------------------                            Executive Officer
Robert J. Donahue

/s/ Daniel M. Wickersham                              President (Principal
---------------------------                            Executive Officer)
Daniel M. Wickersham

/s/ Pere Valles                                     Chief Financial Officer
---------------------------                         (Principal Financial and
Pere Valles                                            Accounting Officer)

/s/ Colum P. Donahue                                Chief Operating Officer
---------------------------                               and Secretary
Colum P. Donahue

/s/ Carmine F. Adimando                                     Director
---------------------------
Carmine F. Adimando

                                                            Director
---------------------------
Robert H. Kohn

/s/ Jonathan S. Greenhill                                   Director
---------------------------
Jonathan S. Greenhill

/s/ Paul Fritz                                              Director
---------------------------
Paul Fritz

/s/ Richard E. Wilson                                       Director
---------------------------
Richard E. Wilson

                                                            Director
---------------------------
Philip R. Zimmermann
</TABLE>


                                       82

<PAGE>   85

                                  EXHIBIT INDEX



<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                             DESCRIPTION
    ------                             -----------
<S>               <C>
      3.1         Articles of Incorporation (1)

      3.2         Amended Articles of Incorporation (2)

      3.3         By-laws of Registrant (1)

      4.1         Form of Common Stock Certificate of Registrant (5)

      4.2         See Exhibits 3.1, 3.2 and 3.3 for provisions of the Amended
                  Articles of Incorporation and By-laws of the Registrant
                  defining the rights of holders of Common Stock of the
                  Registrant

      4.3         Registration Rights Agreement, dated February 2001, by and
                  among GlobalNet and Investor (3)

      4.4         Registration Rights Agreement, dated April 9 2001, by and
                  between GlobalNet and Crescent International, Ltd. (4)

      4.5         Form of Warrant dated February 2001 (3)

      4.6         Incentive Warrant, dated April 9, 2001, by and between
                  GlobalNet and Crescent International, Ltd. (4)

      4.7         Protective Warrant, dated April 9, 2001, by and between
                  GlobalNet and Crescent International, Ltd. (4) 4.8 Convertible
                  Note, dated April 9, 2001, issued to Crescent International,
                  Ltd. (4)

     10.1         2000 Stock Plan and Stock Option Agreement (2)

     10.2         Agreement and Plan of Reorganization (2)

     10.3         Securities Purchase Agreement, dated April 9, 2001, by and
                  between GlobalNet and Crescent International, Ltd. (4)

     10.4         Summary of Principal Terms of Employment Agreement between the
                  Registrant and each of its directors and executive officers
                  and Employment Agreement between the Registrant and Robert J.
                  Donahue (5)

     10.5         Lease Agreement between Registrant and PrinVest Financial
                  Corp. (5)

     10.6         Master Lease Agreement between Registrant and General Electric
                  Capital Corporation (5)

     21.1         List of Subsidiaries (5)

     23.1         Consent of KPMG LLP (5)


</TABLE>

(1) Previously filed on October 18, 1999 with GlobalNet's (f/k/a Rich Earth,
    Inc.) Registration Statement on Form 10SB/A, incorporated herein by
    reference.

(2) Previously filed on May 30, 2000 with GlobalNet's Information Statement on
    Form 14C, incorporated herein by reference.

(3) Previously filed on April 2, 2001, with GlobalNet's Registration Statement
    on Form S-3, incorporated herein by reference.

(4) Previously filed on April 13, 2001, with GlobalNet's Current Report on Form
    8-K dated April 9, 2001, incorporated herein by reference.

(5) Filed herewith.


                                       83