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

                                    FORM 10-Q


                                   (Mark One)
     [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934
                 For the quarterly period ended March 31, 2001.
                                       or

     [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934
                         For the transition period from
                          ____________ to____________.

                       Commission File Number (000-30928)

                        PATH 1 NETWORK TECHNOLOGIES INC.
             (Exact name of registrant as specified in its charter)


              DELAWARE                                   13-3989885
 (State or other jurisdiction of           (I.R.S. Employer Identification No.)
  incorporation or organization)



            3636 NOBEL DRIVE, SUITE 275, SAN DIEGO, CALIFORNIA 92122
                                 (858) 450-4220
   (Address, including zip code, and telephone number, including area code, of
                          principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No ___

The number of shares  outstanding of the issuer's Class A Common Stock,  US$.001
par value, as of April 17, 2001 was 8,204,801. No shares of the issuer's Class B
Common Stock are outstanding.

<PAGE>


                        PATH 1 NETWORK TECHNOLOGIES INC.
                          Quarterly Report on Form 10-Q
                  For the Quarterly Period Ended March 31, 2001


                                TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION.................................................3
   ITEM 1. FINANCIAL STATEMENTS................................................3
      CONDENSED CONSOLIDATED BALANCE SHEETS....................................3
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS..........................4
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS..........................5
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.....................6
  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
     CONDITION AND RESULTS OF OPERATIONS......................................10
  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
     MARKET RISK .............................................................20
PART II - OTHER INFORMATION...................................................21
   ITEM 1. LEGAL PROCEEDINGS..................................................21
   ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS..........................21
   ITEM 3. DEFAULTS UPON SENIOR SECURITIES....................................22
   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................22
   ITEM 5. OTHER INFORMATION..................................................22
   ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................22



<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                        PATH 1 NETWORK TECHNOLOGIES INC.
                          (A Development Stage Company)

                     CONDENSED, CONSOLIDATED BALANCE SHEETS
                      (in US$, thousands except share data)
<TABLE>
                                                                                      March 31,      December 31,
                                                                                         2001            2001
                                                                                  ---------------------------------
                                                                                             (unaudited)
<S>                                                                                <C>               <C>
ASSETS
Current assets:
 Cash and cash equivalents                                                           $    4,891       $    7,171
 Restricted cash                                                                            200                -
 Marketable securities, available for sale                                                1,809            4,313
 Other current assets                                                                       279              177
                                                                                  ---------------------------------
      Total current assets                                                                7,179           11,661

Property and equipment, net                                                                 533              459
Acquired technology, net                                                                  1,007                -
Other assets                                                                                 50              184
                                                                                  ---------------------------------
Total assets                                                                         $    8,769       $   12,304
                                                                                  =================================


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued liabilities                                            $    1,466       $    2,175
 Accrued compensation and benefits                                                          211              191
 Deferred revenue                                                                           449              324
                                                                                  ---------------------------------
      Total current liabilities                                                           2,126            2,690

Commitments and contingencies

Stockholders' equity:
 Common stock, $0.001 par value; issuable in series:
      Class A - 20,000,000 shares authorized; 8,204,801                                       8                8
           and 8,183,901 shares issued and outstanding at
           March 31, 2001 and December 31, 2000, respectively
                                                                                              -                -
      Class B - 10,000,000 shares authorized; no shares issued or
           outstanding at March 31, 2001 and December 31, 2000, respectively
 Notes receivable from stockholders                                                        (114)            (114)
 Additional paid-in capital                                                              36,257           32,295
 Deferred compensation                                                                   (5,640)          (3,005)
 Accumulated other comprehensive (loss) gain                                               (515)             228
                                                                                  ---------------------------------
 Deficit accumulated during the development stage                                       (23,353)         (19,798)
                                                                                  ---------------------------------
      Total stockholders' equity                                                          6,643            9,614
                                                                                  ---------------------------------
Total liabilities and stockholders' equity                                           $    8,769       $   12,304
                                                                                  =================================
</TABLE>

See accompanying notes to these condensed, consolidated financial statements.



<PAGE>



                        PATH 1 NETWORK TECHNOLOGIES INC.
                          (A Development Stage Company)

                CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in US$, thousands, except per share amounts)
                                   (unaudited)
<TABLE>
                                                                                         For the period from
                                                           Three Months Ended              January 31, 1998
                                                               March 31,                 (inception) Through
                                                         2001             2000              March 31, 2001
                                                   --------------------------------------------------------------
<S>                                                 <C>              <C>                   <C>
Operating expenses:
 Research and development                             $   1,179       $   1,269                $   6,493
 Sales and marketing                                        214             617                    2,048
 General and administrative                                 898             622                    6,364
 Stock-based compensation
                                                          1,313             427                    8,838
                                                   --------------------------------------------------------------
        Total operating expenses                         (3,604)         (2,935)                 (23,743)


Interest income, net                                         97              18                      573
Loss on sale of securities                                  (48)            (49)                    (183)
                                                   --------------------------------------------------------------
Net loss                                              $  (3,555)      $  (2,966)              $  (23,353)
                                                   ==============================================================

Loss per common share - basic and diluted             $   (0.43)      $   (0.47)              $    (3.16)
                                                   ==============================================================

Weighted average common shares outstanding                8,191           6,325                    7,390
                                                   ==============================================================




 (*) The following table shows how the
     Company's stock-based compensation would
     be allocated to the respective department
     expense line items:
        Research and development                      $     559       $     209               $    2,185
        Sales and marketing                                 212              60                      697
        General and administrative                          542             158                    5,956
                                                   --------------------------------------------------------------
                                                      $   1,313       $     427               $    8,838
                                                   ==============================================================
</TABLE>

See accompanying notes to these condensed, consolidated financial statements.





                        PATH 1 NETWORK TECHNOLOGIES INC.
                          (A Development Stage Company)
                CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (in US$, thousands)
                                   (unaudited)
<TABLE>
                                                                                                       January 30, 1998
                                                                           Three Months Ended             (inception)
                                                                               March 31,                    Through
                                                                         2001             2000          March 31, 2001
                                                                    --------------------------------------------------------
<S>                                                                  <C>            <C>                <C>
Cash flows from operating activities:
 Net loss                                                            $   (3,555)      $  (2,966)          $  (23,353)

 Adjustments to reconcile net loss to net cash
      used in operating activities:
    Depreciation and amortization                                           166               7                  340
    Amortization of deferred compensation                                 1,313             427                6,250
 Common stock issued to employees by principal stockholders                                                      331
    Common stock options issued for services                                  7           1,148                2,593
    Loss on investment                                                       48              49                  183
 Changes in assets and liabilities:
    Other current assets                                                    244              17                   67
    Other assets                                                             35            (800)                (137)
     Accounts payable and accrued liabilities                              (643)            311                1,532
    Accrued Compensation and Benefits                                       (47)              -                  144
    Deferred revenue                                                        125               -                  449
                                                                    --------------------------------------------------------
           Cash used in operating activities                             (2,307)         (1,807)             (11,601)
Cash flows from investing activities:
 Purchase of Marketable Securities                                      (82,407)              -             (292,075)
 Sale of Marketable Securities                                           83,777               -              292,456
 Purchase of Metar ADC Assets                                            (1,000)              -               (1,000)
 Purchases of property and equipment                                       (148)            (66)                (781)
                                                                    --------------------------------------------------------
           Cash used in investing activities                                222             (66)             (1, 400)
Cash flows from financing activities:
 Issuance of common stock for options exercised, net                          5               -                   12
 Issuance of common stock for cash, net                                       -           3,597               18,080
                                                                    --------------------------------------------------------
           Cash provided by financing activities                              5           3,597               18,092


Increase (decrease) in cash and cash equivalents                         (2,080)          1,724                5,091

Cash and cash equivalents, beginning of period                            7,171             454                    -
                                                                    ---------------------------------
Cash and cash equivalents, end of period                             $    5,091       $   2,178           $    5,091
                                                                    ========================================================
Supplemental cash flow disclosures:
 Cash paid for interest during the period                            $        -       $     597
                                                                    =================================
Supplemental disclosure of noncash investing activities:
 Issuance of Series A convertible preferred stock in exchange
    for investment in JYRA Research, Inc.                            $        -       $       -           $      147
                                                                    ========================================================
 Issuance of common stock for marketable securities                  $        -       $       -           $    3,096
                                                                    ========================================================
 Unrealized gain/(loss) in marketable securities                     $     (730)      $       -           $     (502)
                                                                    ========================================================
 Exercise of stock options for stockholder notes                     $        -       $       -           $      114
                                                                    ========================================================
</TABLE>

See accompanying notes to these condensed, consolidated financial statements.






<PAGE>


NOTES TO THE CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

The accompanying condensed, consolidated balance sheets as of March 31, 2001 and
December 31, 2000, the condensed, consolidated statements of operations and cash
flows for the three  month  periods  ended  March 31, 2001 and 2000 and from the
period January 30, 1998  (inception)  through March 31, 2001, have been prepared
by Path 1 Network  Technologies  Inc. (the "Company") and have not been audited.
These quarterly financial statements, in the opinion of management,  include all
adjustments,  consisting only of normal and recurring adjustments,  necessary to
state fairly the financial  information  set forth therein,  in accordance  with
generally accepted accounting  principles.  These financial statements should be
read in conjunction with the financial statements and notes thereto for the year
ended  December  31, 2000  included in the  Company's  Form 10-K filed March 29,
2001.  The  interim  financial  information  contained  in  this  filing  is not
necessarily  indicative  of the  results to be  expected  for any other  interim
period or for the full year ending December 31, 2001.

Reclassifications

Certain reclassifications have been made to prior period financial statements to
conform to current year presentation.


NOTE 2 - PRINCIPLES OF CONSOLIDATION

The  accompanying  condensed,  consolidated  financial  statements  include  our
accounts  and  those of our  wholly-owned  subsidiary.  We have  eliminated  all
significant intercompany accounts and transactions.


NOTE 3 - MANAGEMENT ESTIMATES AND ASSUMPTIONS

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


NOTE 4 - NET LOSS PER SHARE

Basic and  diluted  net loss per  share has been  computed  in  accordance  with
Statement  of  Financial  Accounting  Standards  (SFAS) No. 128,  "Earnings  Per
Share," using the weighted-average  number of shares of common stock outstanding
during the period including any dilutive common stock equivalents.  Common stock
equivalents  for the three months  ending March 31, 2001 and 2000 were  excluded
from the calculation of diluted earnings per share because of the  anti-dilutive
effect.

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 98,
common  shares,  if any,  issued in each of the  periods  presented  for nominal
consideration  would be included in the per share  calculations  as if they were
outstanding for all periods presented. No such shares have been issued.


NOTE 5 - ACQUISTION OF METAR ADC

In February, 2001 the Company completed the purchase of the assets of Metar ADC.
As of March 31,  2001,  the  Company  had made  payments  of US$1.0  million and
incurred  acquisition  cost  of  approximately  US$100,000.   The  cost  of  the
acquisition of approximately US$1.1 million is being amortized over a three year
period.


NOTE 6 - PRODUCT DEVELOPMENT AGREEMENT

On  February  5,  2001 the  Company  entered  into a  non-recurring  engineering
"Product   Development   Agreement"  (the  "Agreement")   with  BarcoNet,   N.V.
("BarcoNet"),  a public  limited  liability  company  located  in  Belgium.  The
agreement calls for Path1 to perform certain engineering  services in connection
with the  development  of the PGA-100  system,  in order for  BarcoNet to pursue
commercial  production of the PGA-100 system. In conjunction with the agreement,
Path 1 placed  100,000 shares of its Class A Common Stock into an escrow account
as security for the US$1.0 million advance paid to Path1 to fund the engineering
services outlined in the agreement. Subject to the meeting of certain milestones
and the  successful  completion of an Acceptance  Test, the Company will receive
additional funds (bringing the value of the agreement to US$1.7 million) and the
shares  placed  into  escrow  will be  returned  to the  Path  1. If  successful
completion of the Acceptance test is not achieved,  the Company will be required
to return the US$1.0  million  advance or release  the shares  held in escrow to
Barconet,  at the sole option of the  Company.  As of March 31, 2001 the Company
was in compliance with the terms of the agreement and had received US$200,000 of
the funds pursuant to the agreement.




<PAGE>


NOTE 7 - REPORTABLE OPERATING SEGMENTS

The Company is engaged in the  development of  communication  technologies  that
enable the  transport of real-time  multimedia  over  Internet  Protocol  ("IP")
networks.  For the  purposes  of  applying  Statement  of  Financial  Accounting
Standards  (SFAS)  No.  131  management  determined  that it has  two  operating
segments  based  on the  two  distinct  areas  of  technical  expertise  and the
deployment of our patented core TrueCircuit(R) technology.

o    The Video Solutions Group is engaged in the development of system solutions
     that  enable  broadcast  quality  video over IP.  Utilizing  TrueCircuit(R)
     technology and other  developed  network  traffic  techniques the group has
     been able to  provide  broadcast  quality  video and  reduce  the amount of
     latency and jitter associated with the high speed transmission of data over
     an IP network.  Currently,  the Video  Solutions Group employs 18 engineers
     and works primarily out of our San Diego, California USA facility.

o    The Sistolic Group,  comprised  mainly of the employees hired in connection
     with the asset  purchase of Metar ADC, is engaged in the  development of 10
     Gigabit Emac and Ethernet  switches  and related  technology.  By employing
     network  traffic  management  techniques  and the  patented  TrueCircuit(R)
     technology,  Sistolic  is in the  process of  developing  a one chip (ASIC)
     solution  that fosters the high speed  transmission  of data over  existing
     networks.  Currently  Sistolic  consists  of 4  engineers  in the US and 22
     engineers in our Romanian facility.

Following is a table that  reconciles the Company's  operating  expenses and net
identifiable fixed assets between the two reportable  segments as of and for the
period ended March 31, 2001. The development of two separate  operating segments
did not occur until the Company completed the acquisition of the assets of Metar
ADC in February 2001. Accordingly,  there is no segment disclosure as of and for
the three months ended March 31, 2000.

                                                       March 31,2001
 Operating loss before interest and taxes:        (in`000's, US dollars)
 -----------------------------------------   ---------------------------------
                                                        (unaudited)
      Video Solutions                                      $1,346
      Sistolic                                                983
      Corporate                                             1,275
                                             ---------------------------------
                                                           $3,604
                                             =================================

 Net Property & Equipment:
 ---------------------------------
      Video Solutions                                        $312
      Sistolic                                                174
      Corporate                                                47
                                             ---------------------------------
                                                             $533
                                             =================================


NOTE 8 - STOCK OPTIONS

The Company  accounts for  stock-based  compensation  arrangements in accordance
with  the  provisions  of  Accounting   Principles  Board  Opinion  ("APB")  25,
Accounting  for stock issued to  Employees,  Statement  of Financial  Accounting
Standards  ("SFAS") No. 28, Accounting for Stock  Appreciation  Rights and Other
Variable  Stock  Option  or  Award  Plans,  and  SFAS No.  38,  Determining  the
Measurement  Date for Stock Option,  Purchase,  and Award Plans involving Junior
Stock. The Company also complies with the disclosure provisions of SFAS No. 123,
Accounting for Stock-Based Compensation.

The Company accounts for equity  instruments  issued to non-employees  using the
fair value method in accordance with the provisions of SFAS No. 123 and Emerging
Issues Task Issue No. 96-18,  Accounting for Equity  Instruments that are Issued
to Other than Employees for Acquiring,  or in conjunction with Selling, Goods or
Services.

Equity   instruments   issued  to  non-employees   that  are  fully  vested  and
non-forfeitable  are measured at fair value at the issuance date and expensed in
the period over which the benefit is expected to be received. Equity instruments
issued to  non-employees  which are either  unvested or  forfeitable,  for which
counter-party  performance  is required for the equity  instrument to be earned,
are measured  initially at the fair value and subsequently  adjusted for changes
in fair  value  until  the  earlier  of: 1) the date at which a  commitment  for
performance by the  counter-party to earn the equity instrument is reached or 2)
the date on which the counter-party's performance is complete.

During the three month period ended March 31, 2001, the Company  granted 920,000
stock options to employees and  consultants  with vesting  periods  ranging from
immediate to four years.  The options are for the purchase of 920,000  shares of
Class B common  stock at an exercise  price of US$4.35 per share.  There were no
options to purchase  Class A common stock granted  during the three month period
ended March 31, 2001.  During the three month  period ended March 31, 2001,  the
Company recorded  stock-based  compensation expense of US$1.3 million related to
options outstanding to employees and consultants.


NOTE 9 - LEGAL PROCEEDINGS

Under a Settlement  Agreement  and Mutual  Release  dated  January 4, 2001,  the
Company  settled  its  lawsuits  and signed a mutual  general  release  with Dr.
Franklin  Felber.  Each party agreed that the settlement was not to be construed
as an  admission  of any  liability  or wrong  doing by  anyone.  To settle  the
lawsuits, the Company paid Dr. Felber US$300,000 and placed in escrow US$200,000
and 400,000 shares of Class A common stock. On January 10, 2002, Dr. Felber will
receive  from escrow some or all of the cash and stock,  based on the  following
table (US dollars):


<TABLE>
 If for the 30 trading days immediately      Then Felber shall receive from       Plus the following amount of cash:
 preceding January 10, 2002, the average     the escrow the following number
       closing price (ACP) of the           of shares of the Class A common
        Class A common stock is:                        stock :
------------------------------------------ ----------------------------------- -----------------------------------
<S>                                        <C>                                  <C>
A. $11.00 or more                           The quotient of $1,000,000           $0
                                            divided by the ACP
B. Between $6.00 and $10.99                 100,000                              $0
C. Between $4.00 and $5.99                  100,000                              The  difference  between  $600,000
                                                                                 and the  product of 100,000  times
                                                                                 the ACP
D. Between $1.00 and $3.99                  The  quotient of $400,000  divided   $200,000
                                            by the ACP
E. Less than $1.00                          400,000                              $200,000
</TABLE>

Any of the cash and stock not  delivered  to Dr.  Felber  under this  settlement
agreement  will be returned to the Company.  The Company  recorded a reserve for
settlement  costs of US$1.4 million at December 31, 2000,  its maximum  exposure
under the terms of the settlement agreement.

NOTE 10 - SUBSEQUENT EVENTS

On April 4, 2001, Dr. Michael T. Elliott resigned as President,  Chief Executive
Officer  (CEO) and a Director of the  Corporation.  The Company  entered into an
Employment  Separation/Consulting Agreement and General Release with Dr. Elliott
providing  for  salary  continuation  at the rate of  US$200,000  per  annum for
fifteen months or until Dr. Elliott  accepts a full time position,  whichever is
earlier.  Under  the  agreement,  Dr.  Elliott  will  report to the CEO and will
provide  consulting  services as may be requested  by the CEO. Dr.  Elliott will
also receive a one percent (1%) commission on certain  funding  activities if he
is directly involved with the activities.


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD LOOKING STATEMENTS

This document may contain forward-looking statements. These statements relate to
future  events or our  future  financial  performance.  In some  cases,  you can
identify  forward-looking  statements  by  terminology  such as  "may,"  "will,"
"should,"  "except," "plan,"  "anticipate,"  "believe,"  "estimate,"  "predict,"
"potential"  or  "continue,"  the  negative  of such  terms or other  comparable
terminology. These statements are only predictions. Actual events or results may
differ materially.

Although  we believe  that the  expectations  reflected  in the  forward-looking
statements  are  reasonable,  we  cannot  guarantee  future  results,  levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes  responsibility for the accuracy and completeness of the forward-looking
statements.  Except to the extent  required by federal law, we disclaim any duty
to update any of the forward-looking statements after the date of this report to
conform such statements to actual results or to changes in our expectations.

You are also urged to carefully review and consider the various disclosures made
by us which attempt to advise interested parties of the factors which affect our
business, including without limitation the disclosures made in this Item 2 or in
the Company's annual report on Form 10-K and other reports and filings made with
the Securities and Exchange Commission.


OVERVIEW

Path 1 has developed  communications  technologies  that enable the transport of
real-time  multimedia  over  Internet  Protocol  ("IP")  networks  and employs a
patented approach to Quality of Service ("QoS"). Path 1's technology enables the
transport of broadcast quality video,  audio,  telephony and other time-critical
data, such as sensor and control data, over an IP Ethernet  network with minimal
latency and jitter.  Path 1 believes  that the greatest  demands on the Internet
and  IP-based   wide-area  networks  will  take  the  form  of  broadcast  video
distribution,  video-on-demand,  video  networking,  interactive video and other
forms of high quality video media consumption.  The Internet and most enterprise
networks today are using Ethernet/IP or SONET/ATM transport  protocols.  Current
network  capacity  is  inadequate  to handle the video  delivery  demands of the
future.  Path 1 has begun a planned phased approach of deploying its technology,
beginning  with  validation  and trials of  current  development  platforms  and
potentially  building  to full  end-to-end  solutions  to address  the  emerging
demands for the delivery of high quality video, voice and data over IP networks.

Path 1 has developed and patented  several  techniques  that address the network
requirements  to  distribute  video over legacy IP  environments.  This combined
technology  and  know-how  provide  the  critical  components  of  the  required
end-to-end  solution.  In support of this  objective,  Path 1 is developing  and
utilizing  in-house  technical  expertise  in  the  areas  of:  storage  devices
(servers),  network bandwidth  management,  synchronization,  MPEG transmission,
subscriber software services, security and IP home networking devices.

IP networks offer significant  advantages in data handling,  deployment cost and
worldwide acceptance and availability. However, one limiting factor has been the
inability  to offer  video  across  commercial  wide-area  IP  networks  with an
acceptable  level of quality and  reliability.  Path 1 is addressing many of the
issues   associated   with   this   challenge.   With   Path   1's   technology,
broadcast-quality video is being demonstrated,  end-to-end with a high degree of
reliability.  In  fact  in  the  first  quarter  of  2001  Path  1  successfully
demonstrated  coast-to-coast (US) transmission of broadcast  television material
in an all-IP offering.

Path 1's  business  approach is to: 1) develop an  end-to-end  technology  video
network solution using in-house  technologies or by links and partnerships  with
outside enterprises;  2) develop channel partners to develop and penetrate video
distribution  markets;  and 3)  reduce  cost  and  enhance  the  performance  of
solutions   through    Application    Specific   Integrated   Circuit   ("ASIC")
implementations.  Path 1 intends to leverage its TrueCircuit(R) technology as an
enabling technology integral to the development of end-to-end solutions.

Path 1 is working to transition from a development stage company to an operating
company.  During  2000,  Path 1 raised  US$4.4  million of capital  from private
investors  and  entered  into a series  of  agreements  with  Leitch  Technology
Corporation  ("Leitch")  wherein  Path 1 received  US$10.0  million in cash plus
approximately  US$3.1 million in Leitch common stock. These funds are being used
to develop Path 1's technology,  acquire a group of ASIC design engineers, begin
a marketing program,  develop  prototypes  utilizing Path 1's technology and for
general  working  capital   purposes.   Path  1  currently   believes  it  needs
approximately  US$15-30 million in additional capital from private investors and
strategic  partners to implement its business  strategies  and fund its plan for
future growth.

LIQUIDITY AND CAPITAL RESOURCES

Since  our  inception  on  January  31,  1998 we have  financed  our  operations
primarily  through  the  sale of  common  equity  securities  to  investors  and
strategic  partners.  The funds are  currently  invested  in U.S.  Treasury  and
government agency obligations and  investment-grade  corporate  obligations.  We
also hold common stock in Leitch Technology Corporation and Jyra Research, Inc.,
which they issued directly to us.

At March 31,  2001,  we had net working  capital of US$5.0  million  compared to
US$9.0  million at December 31, 2000.  Cash,  cash  equivalents  and  marketable
securities  totaled US$6.9 million at March 31, 2001 compared to US$11.5 million
at December 31, 2000. For the next several years, we expect to incur substantial
additional  expenditures associated with research and development in addition to
increased costs associated with staffing for management, sales and marketing and
administration  functions. We anticipate that our existing resources will enable
us to fund operations until December 31, 2001.

Cash used for operating  activities during the three months ended March 31, 2001
and 2000 was US$2.3 million and US$1.8 million, respectively.. This increase was
primarily the result of an increase in personnel expenses including research and
development activities,  promotional and marketing expenses, recruiting fees and
other operating costs.

Cash provided by investing  activities during the three-month period ended March
31, 2001 was approximately US$222,000 compared to a use of cash of approximately
US$66,000  for the  three-month  period ended March 31, 2000.  Cash  provided by
investing  activities was primarily the result of the sale of securities,  which
more than offset expenditures  related to the purchase of computers for research
and development use.

Cash  provided by financing  activities  during the three months ended March 31,
2001 and 2000 was US$5,000 and US$3.6 million, respectively. The Company did not
raise any additional  capital in the three-month period ended March 31, 2001 and
thus this  decrease  was a result of no new  issuances  of Class A common  stock
other than the exercise of stock options by employees.

At March 31,  2001,  we have no material  commitments  other than our  operating
leases. Our future capital requirements will depend upon many factors, including
the timing of research and product  development  efforts,  the  expansion of our
general and  administrative  functions and sales and  marketing  efforts and the
need to finance the manufacturing of commercial products that we may develop and
launch.  We expect to continue  to expend  significant  amounts on research  and
development staffing,  infrastructure and computer equipment to support on-going
research and development activities.

We may pursue a number of  alternatives  to raise  additional  funds,  including
borrowings;   lease   arrangements;   collaborative   research  and  development
arrangements with technology companies; the licensing of product rights to third
parties;  or additional public and private financing.  There can be no assurance
that funds from these sources will be available on favorable  terms,  if at all.
If we raise  additional  funds  through the issuance of equity  securities,  the
percentage  ownership  of our  stockholders  will be reduced,  stockholders  may
experience additional dilution or such equity securities may provide for rights,
preferences or privileges senior to those of the holders of our common stock.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2001 VS. THREE MONTHS ENDED MARCH 31, 2000

Research and development expenses, including stock based compensation, increased
from  approximately  US$1.5  million  for the  quarter  ended  March 31, 2000 to
approximately  US$1.7 million for the quarter ended March 31, 2001. The increase
can be attributed  to the  replacement  of outside  consultants  with  full-time
Company  employed  staff  engineers  and the focus of the Company on  developing
certain products for target markets and our strategic partners.

Sales and marketing expenses, including stock based compensation, decreased from
US$677,000  for the quarter ended March 31, 2000 to  US$426,000  for the quarter
ended March 31, 2001. The decrease of approximately  US$251,000 is primarily due
to the hiring of in-house sales personnel, the reduction of expenses for outside
marketing  consulting  agencies,   and  the  timing  of  sales  and  promotional
activities related to tradeshows and other industry exhibits or forums. Until we
obtain  additional  dedicated  sales and  marketing  people,  we may continue to
utilize research and development personnel as well as general and administrative
personnel in our sales and marketing efforts.

General  and  administrative  expenses,   including  stock  based  compensation,
increased from US$780,000 for the quarter ended March 31, 2000 to US$1.4 million
for the quarter ended March 31, 2001. The increase of  approximately  US$660,000
is primarily due to an increase in facilities costs, higher head count primarily
related to the addition of professional  management,  finance and administrative
staff and executives and consulting  expenses primarily related to enhancing our
advisory board. In addition non-cash stock based compensation  charges increased
by approximately US$380,000 in the quarter ended March 31, 2001 when compared to
the same period in 2000.

Stock-based  compensation  expense  is a  non-cash  item that is  recognized  in
association  with stock options  having  exercise  prices below  estimated  fair
value.  Stock-based compensation expense is calculated as the difference between
exercise price and estimated fair market value on the date of grant,  and if the
options  are  subject  to  variable  accounting  treatment,  then  each  quarter
additional  compensation  expense,  positive or negative, is recognized based on
the fair market value of our common stock in accordance  with the  provisions of
variable stock option accounting.  During the three months ended March 31, 2001,
the fair market value of our common stock  increased  resulting in a stock-based
compensation  charge of US$1.3  million.  Stock-based  compensation  expense may
continue to fluctuate from quarter to quarter,  in material amounts, as the fair
market value of our common stock increases and decreases.

Our interest  income  increased  from  US$18,000 for the quarter ended March 31,
2000 to  US$97,000  for the  quarter  ended  March 31,  2001.  This  increase of
US$79,000  was due to  significantly  higher  average cash  balances  during the
quarter ended March 31, 2001, which included  proceeds from a private  placement
with Leitch completed in April of 2000. Cash from this private placement enabled
us to increase our spending in various expense categories.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

YOU  SHOULD  CAREFULLY  CONSIDER  THE  FOLLOWING  RISK  FACTORS  AND  THE  OTHER
INFORMATION INCLUDED HEREIN AS WELL AS THE INFORMATION INCLUDED IN OUR FORM 10-K
FILED ON MARCH 29, 2001,  AND OTHER REPORTS AND FILINGS MADE WITH THE SECURITIES
AND  EXCHANGE  COMMISSION.  OUR  BUSINESS  AND  RESULTS OF  OPERATIONS  COULD BE
SERIOUSLY  HARMED BY ANY OF THE FOLLOWING RISKS. THE TRADING PRICE OF OUR COMMON
STOCK COULD DECLINE DUE TO ANY OF THESE RISKS AND  STOCKHOLDERS MAY LOSE PART OR
ALL OF THEIR INVESTMENT.

IT IS DIFFICULT  TO EVALUATE  OUR BUSINESS  BECAUSE WE HAVE NOT YET LAUNCHED ANY
PRODUCTS COMMERCIALLY.

We have a relatively brief operating  history.  We were  incorporated in January
1998 and commenced  operations in May 1998. As of March 31, 2001, we did not yet
have any products in commercial production.  Accordingly,  we are subject to all
of  the  risks  associated  with  new  business  ventures   including,   without
limitation,  those  associated  with raising  capital,  acquiring or  developing
products  which  function as  intended,  arranging  for  suitable  manufacturing
facilities,   entering  into  strategic   relationships  with  other  companies,
identifying,   hiring  and  retaining  necessary  personnel,   establishing  and
penetrating   markets  for  our  proposed  products  and  achieving   profitable
operations.

WE WILL NEED MORE WORKING  CAPITAL TO EXPAND OUR BUSINESS AND OUR  PROSPECTS FOR
OBTAINING ADDITIONAL FINANCING ARE UNCERTAIN.

Path 1 currently believes it needs approximately  US$15-30 million in additional
capital  from  investors  and  strategic  partners  to  implement  its  business
strategies and fund its plan for future growth. The additional financing will be
used to fund expansion, to develop new or enhance existing services or products,
to respond  to  competitive  pressures  or to  acquire  complementary  products,
businesses or technologies and to finance the  commercialization of any products
we develop.  If we raise  additional  funds  through  the  issuance of equity or
equity-linked securities,  the percentage ownership of our stockholders would be
reduced.  In  addition,  these  securities  may  have  rights,   preferences  or
privileges  senior  to  the  rights  of  the  securities  held  by  our  current
stockholders. We cannot guarantee that additional financing will be available in
the  future on terms  favorable  to us,  if at all.  If  adequate  funds are not
available or are not available on acceptable  terms, our ability to continue our
operations,  fund our  expansion,  take  advantage of  potential  opportunities,
develop or enhance products or otherwise respond to competitive  pressures would
be significantly limited.

WE ARE RELYING ON LEITCH  TECHNOLOGY  CORPORATION  FOR MARKETING  INTO OUR FIRST
TARGET MARKET.

Pursuant to the Technology  License  Agreement between us and Leitch dated April
10, 2000, we have granted Leitch an exclusive  license,  even as to us, for sale
of  TrueCircuit(R)  technology-based  products into the  professional  broadcast
video market.  We are precluded from selling our intended products directly into
the professional broadcast video market until the exclusive license expires. The
exclusive  license will last for one year and,  thereafter,  will  automatically
renew for  consecutive  additional  one-year  periods  provided  we receive  the
minimum  aggregate monies and other  consideration for that year as set forth in
the  Technology  License  Agreement.  Therefore,  it is possible  that  Leitch's
exclusive  license  will  continue  well past its initial  one-year  term,  thus
lengthening  the period of time during which we will be prohibited  from selling
and marketing  directly into this first target  market.  Although it is possible
that  we  may  sell  our  planned  PG-1  gateway  and  its  related   family  of
TrueCircuit(R)  technology-based  products  that  we  have  are  developing  for
distribution into the professional  broadcast video market to Leitch for re-sale
into this target market, discussions regarding such a distribution agreement are
still in the early stages.

Our ability to profit from the professional  broadcast video market,  whether it
be through  sale of the PG-1 to Leitch or future  direct  sales into this target
market,  will  depend  heavily  upon the  motivation  and  success  of Leitch in
developing,    manufacturing,    launching    and    marketing    TrueCircuit(R)
technology-based  products in this field. The more successful their efforts, the
more royalties we shall  ultimately  receive (such  royalties shall not commence
until termination of the five-year  royalty-free period in favor of Leitch), and
the more  receptive  that  market  would  be to our own  products.  If  Leitch's
TrueCircuit(R)   technology-based   products   experience   difficulties   (e.g.
operational  malfunctions or poor sales  experience) upon their  introduction to
the  professional  broadcast  video  market,  we may encounter  difficulties  in
marketing  TrueCircuit(R)  technology-based  products in that market or in other
fields.

OUR PROPOSED PRODUCTS ARE ONLY AT A DEVELOPMENTAL STAGE

As of March 31, 2001, our proposed  products are either at the conceptual stage,
i.e., ideas for products,  or have been reduced to beta units or prototypes that
must be tested and  modified.  Our  product  development  and  commercialization
process is designed to incorporate the necessary steps to assure  conformance to
industry  standards and protocols.  This  conformance  must include  Underwriter
Laboratories  and other  organization  certifications  for the PG-1. Our current
marketing plans and product designs do not require any other certifications.  We
must  continue  our efforts to design  these  proposed  products and arrange for
prototypes of each product to be  manufactured,  tested and de-bugged  before we
can  implement  our  marketing  plan.  There is no assurance  that each of these
milestones  can be achieved or that,  if they are  achieved,  we will be able to
effectively market our products and achieve profitable operations.

WE MAY BE UNABLE TO OBTAIN FULL PATENT  PROTECTION  FOR OUR CORE  TECHNOLOGY AND
PRODUCTS AND THERE IS A RISK OF INFRINGEMENT

We intend to patent our core  technology and our products.  On October 31, 2000,
we were  issued a U.S.  patent  for our  TrueCircuit(R)  technology  multi-layer
network  switch.  However,  there can be no assurance that other patents will be
issued to us,  or, if  patents  are  issued,  that they will be broad  enough to
prevent significant  competition or that third parties will not infringe upon or
design around such patents to develop a competing product.  Furthermore,  others
may design and manufacture superior products.

In addition to seeking  patent  protection  for our products,  we intend to rely
upon a combination of trade secret, copyright and trademark laws and contractual
provisions to protect our  proprietary  rights in our products.  There can be no
assurance that these  protections  will be adequate or that competitors will not
independently develop technologies that are substantially equivalent or superior
to our products.

There has been a trend toward litigation regarding patent and other intellectual
property rights in the telecommunications industry. Although there are currently
no lawsuits pending against us regarding possible infringement claims, there can
be no  assurance  such  claims  will not be  asserted in the future or that such
assertions  will  not  materially  adversely  affect  our  business,   financial
conditions  and  results of  operations.  Any such  suit,  whether or not it has
merit,  would be costly to us in terms of employee  time and  defense  costs and
could materially adversely affect us.

If an infringement or  misappropriation  claim is successfully  asserted against
us, we may need to obtain a license  from the  claimant to use the  intellectual
property rights. There can be no assurance that such a license will be available
on reasonable terms if at all.

WE  FACE   COMPETITION   IN  OUR  INDUSTRY  FROM  MUCH  LARGER   COMPANIES  WITH
SIGNIFICANTLY  GREATER RESOURCES THAN OUR OWN, AND SUCH COMPETITION IS LIKELY TO
INCREASE IN THE FUTURE.

Although  our  strategy  is to seek to  enter  markets  where  our  intellectual
property  gives us a strong  competitive  advantage,  we  still  presently  face
indirect  and  direct  competition  in these  markets.  We  anticipate  that the
competitive  pressures  we currently  face will  increase  significantly  in the
future.  A number of major network  equipment  providers  such as Cisco Systems,
3Com and Lucent have announced network convergence strategies. Other competitors
are developing  alternative  network  approaches,  which,  if successful,  could
materially  and  adversely   affect  us.  Many  of  our  current  and  potential
competitors have longer operating  histories,  significantly  greater financial,
technical and marketing  resources,  greater name recognition and  substantially
larger  customer bases then we have or expect to have. In addition,  many of our
competitors  may be able to respond  more quickly than we can to new or emerging
technologies,   as  well  as  devote  greater  resources  than  we  can  to  the
development,  promotion and sale of their products.  Increased competition could
force us to reduce  prices,  could lower our projected  margins and could hinder
our ability to gain or hold market share. There can be no assurance that we will
be able to compete successfully against current and future competitors.

WE MAY NOT BE ABLE TO PROFIT  FROM  GROWTH IN OUR  BUSINESS  IF WE ARE UNABLE TO
EFFECTIVELY MANAGE THE GROWTH

We anticipate (but by no means do we guarantee) that we will grow rapidly in the
future and that this growth  will place  significant  strain on our  managerial,
financial  and  personnel  resources.  The  pace of our  anticipated  expansion,
together  with  the  complexity  of the  technology  involved  in  our  proposed
products,  demands an unusual  amount of focus on the  operational  needs of our
future  customers for quality and  reliability,  as well as timely  delivery and
post-installation  field support. In addition,  relationships with new customers
generally require significant  engineering support.  Therefore,  adoption of our
products by customers would increase the strain on our resources, especially our
engineers.  To reach our goals, we will need to hire rapidly, while, at the same
time,  investing  in our  infrastructure.  We  expect  that we will also have to
expand our facilities. In addition, we will need to:

     -  successfully train, motivate and manage new employees;

     -  expand our sales and support organization;

     -  integrate new management and employees into our overall operations; and

     -  establish improved financial and accounting systems.

We may not succeed in anticipating all of the changing demands that growth would
impose on our  systems,  procedures  and  structure.  If we fail to  effectively
manage our expansion, our business may suffer.

COMPETITION FOR EMPLOYEES IN OUR INDUSTRY IS INTENSE,  AND WE MAY NOT BE ABLE TO
HIRE KEY EMPLOYEES.

Our future  success will depend,  in part,  on our ability to attract and retain
highly skilled employees, particularly management (including senior management),
technical  and  sales  personnel.  We  believe  our  current  roster  of  senior
management is incomplete and that if we are to succeed we must identify and hire
several additional professional senior managers, including a full-time President
and Chief Executive Officer and a Vice President of Engineering. Competition for
employees  in our industry  and in our  geographic  region is intense due to the
scarcity of available people with the necessary  professional  technical skills.
We may be unable to  identify  and attract  highly  qualified  employees  in the
future.  In  addition,  we may  not be  able to  successfully  assimilate  these
employees or hire qualified key management personnel to replace them.

WE NEED TO IDENTIFY AND HIRE A PERMANENT CHIEF EXECUTIVE OFFICER.

When Michael T. Elliott resigned as our Chief Executive Officer and President on
April 4, 2001,  we replaced him with Peter P. Savage.  Mr. Savage is working for
us part-time.

WE ARE DEPENDENT ON OUR KEY EMPLOYEES FOR OUR FUTURE SUCCESS,  AND NONE OF THESE
KEY EMPLOYEES IS OBLIGATED TO STAY WITH US.

Our  success  depends on the  efforts and  abilities  of our senior  management,
specifically Peter P. Savage, Ronald D. Fellman,  Douglas A. Palmer,  Richard B.
Slansky,  William  McKnight,  Michael Florea and other senior managers yet to be
identified and hired,  and certain other key personnel  including Alan Remen and
Yendo Hu. We currently  have key man life insurance on only Michael  Florea.  If
any of these key employees leaves or is seriously injured and unable to work and
we are  unable  to find a  qualified  replacement,  then our  business  could be
harmed.

OUR  EXECUTIVE  OFFICERS,  DIRECTORS  AND  5%  STOCKHOLDERS  CURRENTLY  MAINTAIN
SUBSTANTIAL  VOTING  CONTROL  OVER US,  WHICH WILL  ALLOW  THEM TO CONTROL  MOST
MATTERS SUBMITTED TO STOCKHOLDERS FOR APPROVAL.

At April 17, 2001, our executive officers, directors and 5% stockholders own, in
the aggregate,  approximately  57% of our outstanding Class A Common Stock. As a
result,  these  stockholders (or subgroups of them) retain  substantial  control
over matters  requiring  approval by our  stockholders,  such as the election of
directors and approval of significant corporate transactions. This concentration
of  ownership  may also have the effect of  delaying or  preventing  a change in
control.

UNANTICIPATED  DELAYS OR  PROBLEMS  IN  INTRODUCING  OUR  PROPOSED  PRODUCTS  OR
IMPROVEMENTS  TO OUR PROPOSED  PRODUCTS MAY CAUSE  CUSTOMER  DISSATISFACTION  OR
DEPRIVE US OF THE "FIRST-TO-MARKET" ADVANTAGE.

Management has limited  experience in manufacturing  and shipping  products.  In
addition,  delays in the  development of prototype  products are not uncommon in
high-tech  industries  such as ours.  If we experience  problems  related to the
introduction  or  modification  of our proposed  products or the reliability and
quality of such products,  which problems delay the introduction of our proposed
products or product  improvements by more than a few months, we could experience
reduced   product   sales  and  adverse   publicity.   We  believe  the  company
first-to-market  with viable  products  will gain a significant  advantage  with
customers;  delays  could  prevent  us from  being the  company  that gains this
advantage.

Our  proposed  products  are  complex  and are  likely  to  contain  a number of
undetected errors and defects, especially when these proposed products are first
released. These errors or defects, if significant, could harm the performance of
these proposed products,  result in ongoing  redevelopment and maintenance costs
and/or cause  dissatisfaction on the part of customers.  These costs,  delays or
dissatisfaction could harm our business.

TO DATE THERE HAS BEEN ONLY A LIMITED  PUBLIC  MARKET  FOR OUR COMMON  STOCK AND
THERE IS NO ASSURANCE  THAT AN ACTIVE  TRADING  MARKET FOR OUR COMMON STOCK WILL
EVER EXIST.

As of April 17, 2001,  there were  8,204,801  shares of our Class A Common Stock
outstanding.  To date,  there has been only a limited  public  market for Path 1
securities  and there can be no  assurance  that a broad  public  market for our
securities  will arise.  We may be unable to attract and  maintain  good-quality
market  makers.  In the event a liquid  market for our Class A Common Stock does
develop,  there can be no  assurance  that the market  will be strong  enough to
absorb all of the Class A Common Stock currently owned by our stockholders.  Now
that our Class A Common Stock has been registered under the Securities  Exchange
Act  of  1934,  substantial  quantities  of  shares  classified  as  "restricted
securities"  or "control  securities"  are now eligible for resale on the public
market  under  Rule  144.  This has the  potential  to  create  a  supply/demand
imbalance that could adversely  affect our stock price. In addition,  subsequent
issuances of equity or equity-linked  securities may further saturate the market
for our Class A Common Stock.  The resale of substantial  amounts of our Class A
Common Stock will have an adverse affect on the market price of our stock.

THE MARKET PRICE OF OUR CLASS A COMMON  STOCK MAY  FLUCTUATE  SIGNIFICANTLY,  IN
WHICH CASE STOCKHOLDERS MAY LOSE ALL OR PART OF THEIR INVESTMENT.

Our Class A Common  Stock is  presently  quoted for trading on the OTC  Bulletin
Board, a quotation service that displays  real-time quotes and other information
about over-the-counter (OTC) equity securities,  and on the Third Segment of the
Frankfurt  Stock  Exchange.  The  market  price for our Class A Common  Stock is
susceptible to a number of internal and external factors including:

     -  quarterly variations in operating results;

     -  stock price changes in the previous quarter resulting in large
        increases or decreases in reported stock-based compensation expenses,
        causing our overall net income/loss to be highly volatile and
        unpredictable;

     -  announcments of technological innovations;

     -  the introduction of new products or changes in product pricing policies
        by us or our competitors;

     -  proprietary rights disputes or litigation; and

     -  changes in earnings estimates by analysts or other factors.

In addition,  stock prices for many technology  companies  fluctuate  widely for
reasons that may be unrelated to operating results. These fluctuations,  as well
as general  economic,  market and  political  conditions  such as interest  rate
increases, recessions or military conflicts, may materially and adversely affect
the market price of our Class A Common Stock.

WE OFFER  STOCK  OPTIONS TO OUR  EMPLOYEES,  WHICH COULD  RESULT IN  SUBSTANTIAL
DILUTION TO ALL STOCKHOLDERS.

In order to provide  incentives  to  current  employees  and induce  prospective
employees and  consultants to work for us, we have offered and issued options to
purchase  our Class A Common  Stock and  Class B Common  Stock.  As of April 17,
2001,  there were options  outstanding to purchase 703,936 shares of our Class A
Common Stock, and there were options outstanding to purchase 3,104,829 shares of
our Class B Common Stock. We will continue to issue options to purchase  sizable
numbers of shares of stock to new and existing employees,  directors,  advisors,
consultants  or  other  individuals  as we  deem  appropriate  and in  our  best
interests.  The grant and  subsequent  exercise of such options  could result in
substantial dilution to all stockholders. As of April 17, 2000, 10,000 shares of
Class A Common Stock under our 2000 Stock Option/Stock Issuance Plan and 395,171
shares of Class B Common Stock under our 1999 Stock  Option/Stock  Issuance Plan
remain authorized but not yet subject to options.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are  exposed to changes  in  interest  rates  primarily  from our  marketable
securities and investments in certain available-for-sale securities. We are also
exposed to  fluctuations in the stock market as the Leitch and Jyra common stock
we hold are in volatile markets. In addition, we hold stock in a company that is
based in Canada and is traded on Toronto Stock Exchange,  which may expose us to
foreign  currency  fluctuations.  Under  our  current  policies,  we do not  use
interest  rate  derivative  instruments  to manage  exposure  to  interest  rate
changes, nor do we hedge against foreign currency  fluctuations.  A hypothetical
100 basis point  adverse move in interest  rates along the entire  interest rate
yield curve would not materially affect the fair value of our interest sensitive
financial  instruments at March 31, 2001,  because the  instruments we hold have
relatively short-term maturity dates.



                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

Under a Settlement  Agreement  and Mutual  Release  dated  January 4, 2001,  the
Company  settled  its  lawsuits  and signed a mutual  general  release  with Dr.
Franklin  Felber.  Each party agreed that the settlement was not to be construed
as an  admission  of any  liability  or wrong  doing by  anyone.  To settle  the
lawsuits, the Company paid Dr. Felber US$300,000 and placed in escrow US$200,000
and 400,000 shares of Class A common stock. On January 10, 2002, Dr. Felber will
receive  from escrow some or all of the cash and stock,  based on the  following
table (in US dollars):

<TABLE>
 If for the 30 trading days immediately      Then Felber shall receive from       Plus the following amount of cash:
 preceding January 10, 2002, the average     the escrow the following number
       closing price (ACP) of the           of shares of the Class A common
        Class A common stock is:                        stock :
------------------------------------------ ----------------------------------- -----------------------------------
<S>                                        <C>                                  <C>
A. $11.00 or more                           The quotient of $1,000,000           $0
                                            divided by the ACP
B. Between $6.00 and $10.99                 100,000                              $0
C. Between $4.00 and $5.99                  100,000                              The  difference  between  $600,000
                                                                                 and the  product of 100,000  times
                                                                                 the ACP
D. Between $1.00 and $3.99                  The  quotient of $400,000  divided   $200,000
                                            by the ACP
E. Less than $1.00                          400,000                              $200,000
</TABLE>
Any of the cash and stock not  delivered  to Dr.  Felber  under this  settlement
agreement  will be returned to the Company.  The Company  recorded a reserve for
settlement  costs of US$1.4 million at December 31, 2000,  its maximum  exposure
under the terms of the settlement agreement.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

(a) Under a Settlement  Agreement and Mutual  Release dated January 4, 2001, the
Company  settled  its  lawsuits  and signed a mutual  general  release  with Dr.
Franklin Felber (the "agreement").  Pursuant to the agreement the Company placed
into an escrow account  400,000  shares of its Class A common stock.  The shares
are unregistered and were placed into escrow by the Company.  No underwriter was
used and the  Company  incurred  no fees for  placing the shares into the escrow
account.  The shares  will  either be issued to Dr.  Felber or  returned  to the
Company  based on a formula  (see Form 8-K filed  January 4, 2001 and ITEM 1 for
complete disclosure).


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.


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

Not applicable.


ITEM 5.  OTHER INFORMATION

Not applicable.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibit  10.1* -  Settlement  Agreement  and  Mutual  Release  between  Dr.
     Franklin Felber and us.
(b)  Exhibit 10.2* - Product Development Agreement between BarcoNet N.V. and us.

* Previously Filed

<PAGE>




SIGNATURES

Pursuant  to the  requirements  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 authorized.


Path 1 Network Technologies Inc.


/s/ Peter P. Savage
-------------------------
Peter P. Savage
President and Chief Executive Officer


/s/ Richard B. Slansky
------------------------
Richard B. Slansky
Chief Financial Officer
(Principal Financial and Accounting Officer)

Date: May 14, 2001