FORM 10-KSB
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
                        Commission file number 000-28863

                                 QUEST NET CORP.
             (Exact Name of Registrant as Specified in its Charter)

                    1250 East Hallandale Beach Blvd. Suite 502
                          Pembroke Park, Florida 33009
                    (Address of principal executive offices)

                                 (954) 457-0900
                           (Issuers telephone number)

                            PARPUTT ENTERPRISES, INC.
                             12835 E. ARAPAHOE ROAD
                               TOWER I, PENTHOUSE
                            ENGLEWOOD, COLORADO 80112
                        (Former name and former address)


                            Florida [4813] 84-1331134
        (State of Incorporation) Primary Standard Industrial IRS Employer
                    (Classification Code Number I.D. Number)

                  Securities registered under Section 12(b) of
                               the Exchange Act:
                                      None

                  Securities registered under Section 12(g) of
                               the Exchange Act:
                           Common Stock, no par value
                                (Title of class)

Indicate by check mark whether the Registrant:(1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such  shorter  period  that the  registrant  was  required  to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes __X_ No_____ .

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

State issuer's revenues for its most recent fiscal year. $294,502

Based on the  average  closing bid and asked  prices of the common  stock on the
latest  practicable  date,  November 13, 2000, the aggregate market value of the
voting  stock  held  by  non-affiliates  of the  registrant  was  $564,108  with
49,374,309 shares outstanding. (See note E to the financial statements)


                       Documents Incorporated By Reference
                                     [None]



<PAGE>




                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

Overview

         Quest  Net  Corp.   is  a company  based in Hallandale Beach,  Florida.
We were  incorporated in the State of Colorado in November 1995,  under the name
A.P. Sales Inc., "AP Sales"  proposed  business was to engage in the purchasing,
reconditioning,   selling,   moving,  and  repairing  of  office  equipment  and
furniture,  including, primarily, filing and storage cabinets, and workstations.
Until July of 1998, its operations  were primarily  organizational  in nature or
related to raising capital.

         In  July  1998,  AP  Sales  acquired  certain  of the  assets  of  Pact
Communication  Group,  Inc., a privately  held Florida  corporation.  Pact was a
provider of Internet system and network management  solutions.  Pact's solutions
included server hosting, Internet connectivity,  collaborative  management,  and
Internet

         In December 1999,  Quest began to enter a new phase of reorganizing its
operations and focusing  specifically  on projects such as Wireless  Operations,
Dial-up and  Hosting.  It also started to pursue an  acquisition  of a telephone
company in order to benefit  from its  recently  granted  CLEC  License  and 214
International Telecommunication License.

         Quest also decided to move their  offices to a new location in order to
house  all of its  operations  in one  place,  have room for  expansion,  and to
generate  facilities  that would provide a better back up to its network.  A new
facility was chosen in, Pembroke Park,  Florida.  In September 2000, we combined
our  corporate  offices  with  those of CWTel  and  moved  to their  offices  in
Hallendale  Beach , Florida,  due to our inability to timely pay the rent on the
former corporate offices.

         In February  2000,  due to  management  conflict as to the direction of
Quest,  it was mutually  decided  between  Quest and its  President at the time,
Rebecca Del Medico,  that Quest would be in a better  situation  if someone with
more of an Operational/Technological background filled that position. As part of
the  termination  agreement,  Ms. Del Medico  received  $50,000 and the right to
50,000 shares of Quest's  common  stock,  which Quest had accrued over the three
month, ended December 31, 1999. Mr. Pereira,  the Chief Executive Officer at the
time, replaced Ms. Del Medico as President.  Mr.  Pereira,  initially  felt that
Quest  should  have  started  a  professional   search  for  a  mature  seasoned
Telecommunications  Executive.  Due  to  the  cost  of  such a  search  and  the
compensation package required for such an executive,  the Board of Directors did
not approve the request.  Instead,  it was decided to continue with  negotiation
for an  acquisition  candidate  that  would  bring  in a  management  team  with
qualities that management felt would be the right fit for Quest.

         On February 25, 2000,  Quest entered into a Stock  Purchase  Agreement,
effective March 1, 2000 to purchase CWTel,  Inc. from Charles Wainer for the sum
of $1,200,000. Of the purchase price $200,000, was paid at closing, $700,000 was
paid by the  issuance of 310,000 shares of Quest's  restricted  common stock and
$300,000 was to be paid in three equal  payments at 90 days,  180 days,  and 270
days from closing.  These payments were guaranteed by the issuance,  at closing,
of 30,000  shares of  preferred  stock,  with a face  value of $10.00 per share.
Quest is  presently  in  default  for the first and  second  payments  under the
purchase  agreement.  Mr. Wainer has presented Quest's Board of Directors with a
notice of default. CWTel, Inc. provides communication services to commercial and
residential  customers.  CWTel is a  switch-based  carrier  for  local  and long
distance voice calls utilizing conventional  transmission methods and Voice over
IP protocols.  CWTel, Inc. also provides  high-speed  Internet service,  dial-up
Internet  access,  and web hosting.  CWTel,  Inc.  offers local dial tone,  long
distance  calling,  and  high  speed  Internet  access  to  tenants  located  in
commercial buildings.  Agreements are previously signed with the landlord or the
management of such buildings, and then tenants are offered discounted services.

                                       2
<PAGE>


         As part of the transaction, Mr. Wainer was given a five-year employment
agreement as President of Quest, at an annual base salary of $100,000 during the
Term,  with a 20% cost of living increase per annum and 50,000 shares of Quest's
common stock. Mr. Wainer also received  options to purchase  1,000,000 shares of
Quest's common stock.  These options vest at the rate if 50,000 shares every six
months and options for an additional  50,000 shares can be exercised  every time
Quest has  increased  its revenue by one million  dollars and has retained  that
revenue for a period of not less than two months.  These options are exercisable
at $2.68 per share (110% of the fair market value of Quest's common stock on the
date  of the  Employment  Agreement).  Once  vested,  the  options  will  remain
exercisable  for one year  from the date of  vesting.  After  one year  from the
vesting  date,  the  options  will  become  null and void.  Mr.  Wainer was also
appointed  as  interim  CEO and a  Director.  At the same time,  Victor  Coppola
resigned from the Board of Directors.

      Mr. Camilo  Pereira  had  already  expressed  to the Board his desire, for
health and personal reasons to resign as CEO/Chairman of the Board. The Board of
Directors  requested  that Mr.  Pereira  remain in  management of Quest until at
least August 2000. Originally, Mr. Pereira had agreed in principal to remain,but
in March 2000, he resigned from all managerial and directorship responsibility.

         In  February  2000,  Quest had also  decided to cancel its  purchase of
shares of Africa  Internet Corp.  Quest had paid $200,000 of the purchase price.
Pursuant to the  cancellation  agreement,  Quest received back the shares issued
for the acquisition and paid a cancellation  penalty of $100,000 and the balance
was agreed  would be paid back in one year with an  interest  bearing  note as a
guarantee for that amount.

         In March 2000, Quest entered into a two-year Consulting  Agreement with
Internet  Strategy  Group Ltd. for a consulting  fee of $20,000 per month during
the first year and $24,000  during the second  year plus 60,000  shares of Quest
Net common stock annually, to be issued every quarter in advance. Mr. Pereira is
an employee of Internet  Strategy Group Ltd. Internet Strategy Group Ltd. was to
perform  consulting  and  advisory  services on behalf of Quest on an  as-needed
basis,  not to exceed 60 hours per months.  Its duties  consisted  of  providing
advice and consultation with respect to all matters relating to or affecting the
telecommunications  business.  The agreement was  terminated in July 2000 due to
our inability to pay the consulting  fees. No shares were issued pursuant to the
agreement.

      During the third  quarter,  there was a substantial  scale back in Quest's
Sales  Department as Quest found that there were severe  technological  problems
with the equipment of Wireless,  Inc. Mr. Paul Zeller,  Quest's former Executive
Vice President,  was transferred to  Sales/Marketing  but eventually his service
was terminated.

      Quest also terminated the services of its Vice President Thomas Magill. In
addition,  Quest also  terminated  the services of George Elia,  Director of the
Investor  Relations  Department  when  he  refused  to  cooperate  with  the SEC
inquiry-see item 3-legal  proceedings-securities  and exchange commission.  John
Scafidi,  Quest's Chief  Financial  Officer  resigned in May 2000. In June 2000,
Julian Cantillo resigned from the Board of Directors. In September 2000, Richard
Zaden  resigned  from the Board of  Directors.  In  November  2000,  David Block
resigned  from the Board of  Directors.  Mr.  Wainer is now the sole Officer and
Director of Quest.

      Since Mr. Wainer  became  President  and interim CEO, staff and management
have been scaled down. Quest  also  moved to its new facility.  During the move,
it was discovered that two Mux's were lost or stolen from our   warehouse.  This
equipment is valued at  approximately   $655,000.  After several meetings and an
investigation  by the Board,  it was decided  that Quest  should  proceed with a
claim under its insurance  policy.  No claim was ever filed and subsequently the
insurance was cancelled for  non-payment.  Quest has written off those assets on
their balance sheet.

      We saw the need to start the  deployment of more sites under its GlobalBot
subsidiary and the commission of the development on Carsonline, Boatsonline, and
Motorbikesonline was initiated. Due to technological problems, the WINGS Online,
Inc. revenue was not collected for several months. Some of that revenue has been
collected, some written off and GlobalBot has correct the problem.

                                       3
<PAGE>


      Since Quest does not have the resources  available to operate,  fund,  and
grow  GlobalBot to its full  potential,  Quest's Board of Directors has approved
the "spin off" of GlobalBot,  under certain conditions including but not limited
to a successful  private sale of 20% of GlobalBot's common stock owned by Quest,
and additional funding for GlobalBot.  In addition,  the Board believes that the
"spin off" would allow  management of Quest to concentrate on its core business,
and  enhance  GlobaBot's  access  to  financing.  See  Item 1.  "Description  of
Business-GlobalBot".

      We  spent  approximately  $  200,000  for  advertising  for our new  $9.95
unlimited Internet dial-up but did not manage to attract a substantial number of
clients.  Although we experienced a growth on its customer base, that growth was
far less then originally projected by management.  In November 2000, we sold our
dial-up  internet  access  business to an  unaffiliated  third party for $25,000
because we could no longer afford to maintain our dial up lines.

Merger

      Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated
as of March  13,  2000  between  Parputt  Enterprises,  Inc.  ("PEI"),  a Nevada
corporation,  and Quest Net Corp., all the outstanding shares of common stock of
PEI were  exchanged for 275,000 shares of common stock of Quest in a transaction
in which Quest was the surviving company.

      The Merger Agreement was adopted by the unanimous  consent of the Board of
Directors of PEI and approved by the unanimous  consent of the  shareholders  of
PEI on March 13, 2000. The Merger Agreement was adopted by the unanimous consent
of the Board of Directors of Quest on March 13, 2000.  Pursuant to Florida,  law
the consent of the shareholders of Quest was not required.

         Prior  to  the  merger,   PEI  had  500,000   shares  of  common  stock
outstanding,  which shares were  exchanged for 275,000 shares of common stock of
Quest.  By  virtue  of  the  merger,  Quest  acquired  100%  of the  issued  and
outstanding common stock of PEI.

      Prior to the  effectiveness  of the  merger,  Quest  had an  aggregate  of
22,786,022  shares of common stock issued and outstanding,  and 30,000 shares of
preferred stock outstanding.  The preferred stock has a preference on dividends,
liquidation,  and merger at $10.00 per share.  The preferred stock has no voting
or conversion rights.

      Upon  effectiveness  of the merger,  Quest had an aggregate of  23,061,022
shares of common stock outstanding.

      The officers,  directors, and by-laws of Quest continued without change as
the officers, directors, and by-laws of the successor issuer.

      A copy of the  Merger  Agreement  and the  Articles  of Merger and Plan of
Merger are filed as an exhibit to Quest's Form 8-K filed on March 23, 2000.

      The  consideration   exchanged   pursuant  to  the  Merger  Agreement  was
negotiated between PEI and Quest.

      In  evaluating  Quest as a candidate  for the  proposed  merger,  PEI used
criteria such as the value of the assets of Quest, its business operations, plan
of operation,  the demand for wireless Internet service Quest's current business
operations and anticipated operations, and Quest's business name and reputation.
PEI determined that the consideration for the merger was reasonable.

                                       4
<PAGE>

      Until September  1,2000, we had four working  subsidiaries,  each with its
own market and customer  base.  We sold dial-up and  dedicated  Internet  access
services  through  IPQuest Corp. and wireless  Internet  services  through Quest
Wireless Corp. In addition, we provided Internet content,  e-commerce and search
engine  development  through  GlobalBot Corp., and provided  international  long
distance  phone services  through  CWTel,  Inc. In June 2000, due to our lack of
working capital,  we sold 20% of our interest in GlobalBot Corp. to InfoDotcoza,
Ltd.,  an  unaffiliated  third party.  In addition,  our Board of Directors  has
approved  the  spin-off  of  GlobalBot  to our  shareholders  in  order  to give
GlobalBot  the  financial  and  operational  flexibility  to take  advantage  of
significant  growth  opportunities in the E-commerce  business.  We believe that
separating the two companies will give GlobalBot a better access to capital, and
allow the  investment  community to measure  GlobalBot's  performance as a stand
alone company. We anticipate that the spin-off will be completed before February
2001.

      In  November  2000,  we were forced to sell our  dial-up  internet  access
business to an  unaffiliated  third party  because be could no longer  afford to
maintain our dial up lines. In addition,  we have  consolidated the IP Quest and
Quest  Wireless  operations  with the CWTel  operations in order to conserve our
cash and other resources.

      Of the  four  subsidiaries,  CWTel,  Inc.,  is the only  subsidiary  being
operated by Quest. IPQuest and Quest Wireless are inactive.  GlobalBot, although
still 80% owned by Quest until the completion of the spin-off, is being operated
as a stand-alone company by separate management.

CWTel

         CWTel, Inc. offers the following  services:  Local Dial Tone also known
as Basic Telephone Service,  Long Distance Calling and High Speed Internet,  the
latest both dedicated and shared, marketed as WDSL.

         CWTel,  Inc.  transports  the service to the end user through a digital
wireless  connection;  these  wireless  systems  are placed in the  rooftops  of
commercial buildings utilizing fixed wireless point to point transmitters.  This
technology  allows  CWTel to avoid  using the  services  of the local  incumbent
telephone  company to complete the last mile  connection,  thus  yielding  great
savings to CWTel and in turn passed thru to the customer.

         Current CWTel's  technology uses a two-foot rooftop dish that is easily
concealed within the roof of the building,  a 5.8GHz transceiver that is capable
of transmitting  up to 24Mb of bandwidth and up to 48  conventional  voice calls
simultaneously  for a distance of up to 45 miles.  Other  transceivers allow for
more bandwidth to shorter distances,  the 45Mb unit will transmit up to 15 miles
and the 100Mb unit up to 5 miles.

         Due to  the  nature  of the  Local  Dial  Tone  service  and  the  high
availability   needed  to  provide  such  services,   CWTel  uses   conventional
uncompressed T-1's   on their  transceivers instead of compressed  Voice Over IP
protocol. This technology is also known as wireless fiber.

         All voice  services  are  provided  through a 2000 port  Class 5 Harris
telecom switch, all IP services use Cisco equipment.

         CWTel,  Inc.  markets  these  services to  commercial  buildings in the
tri-county  area of South  Florida;  the  rates  offered  to the end  users  are
approximately  50% lower than  BellSouth,  the local  telephone  provider.  Long
Distance  prices  are  very  competitive  compared  to  other  carriers  and the
available casual dial providers (1010XXX).

                                       5
<PAGE>


         High Speed Internet is marketed under different  plans, the WDSL option
priced at $ 45.00;  a shared T-1 priced at $189.00 and dedicated T-1 priced at $
699.00.

         CWTel installs the rooftop  equipment and necessary  indoor and battery
backup  equipment  within a week.  The marketing  team, who work on a commission
basis,  utilize  posters and brochures to advertise the "Smart  Building" to the
tenants, thereafter a door-to-door sales is performed.

         Quest,  through  CWTel,  has  installed  and  maintained  seven  "Smart
Buildings"  (two other  buildings were installed but have since  cancelled their
services).  In addition,  CWTel has pending  contracts for eleven new buildings.
Due to the  changes  to a better  technology  and our lack of funds to  purchase
equipment, we have not been able to complete these installations.

         The customer base of CWTel is as follows:

         Seven  commercial  buildings  providing  Local Dial Tone, Long Distance
           Service and High Speed Internet.
         Total number of customers:                      54
         Total number of Local Lines:                   229
         Total number of toll free service customers:    38
         Total number of dedicated Internet Customers:   17
         Total number of Internet Hosting Accounts:     160
         Total number of collocation customers:           6


GlobalBot

         Until June 2000,  GlobalBot was a wholly owned  subsidiary of Quest. In
June 2000,  due to our lack of working  capital,  we sold 20% of our interest in
GlobalBot Corp. to InfoDotcoza,  Ltd., an unaffiliated third party. In addition,
our  Board  of  Directors   has  approved  the  spin-off  of  GlobalBot  to  our
shareholders   in  order  to  give  GlobalBot  the  financial  and   operational
flexibility  to  take  advantage  of  significant  growth  opportunities  in the
E-commerce  business.  We believe that  separating  the two companies  will give
GlobalBot a better  access to capital,  and allow the  investment  community  to
measure GlobalBot's performance as a stand alone company. We anticipate that the
spin-off will be completed before February 2001.  GlobalBot,  although still 80%
owned by Quest until the  completion  of the  spin-off,  is being  operated as a
stand-alone company by separate management at a separate location.

         GlobalBot is currently  operating with three full-time employees and is
in the process of conducting executive searches for two additional positions for
Marketing and Management  Information Systems (MIS).  GlobalBot is an E-commerce
website that sells  advertising space on its websites to individuals and dealers
who are looking to sell their aircrafts,  boats, cars & motorbikes.  At present,
boatsonline.com,  carsonline.com and  motorbikeonline.com are under construction
and will follow the same  format as  Wingsonline.com,  which is now  GlobalBot's
only source of revenue.

         Wingsonline is one of the leading Internet sites in the aircraft market
today.  Wings  is  used  as  a  market  place  to  purchase  airplanes,   parts,
accessories,  locate aviation services,  financing,  or insurance and employment
forum for those seeking employment.

   Wings Online offers five different payment options for advertising space:

         A basic 50-word advertisement w/o photos for $12.00.

         Full specifications of the aircraft without photos for $16.00.

         Full specifications of the aircraft plus one photo for $25.00

         Full specification sheet that includes up to 3 photos for $32.50

         Full specifications and up to five photos for $39.00.

                                       6
<PAGE>

         In  addition,  Wings also offers its  customers an option to have their
own company  banner or link ad created  free of charge that can link to external
sites or internal pages.  Currently,  the monthly cost of a banner ad is $100.00
per month and a link ad is $50.00 per month.

         Wings provides its customers with the ability to search its website for
aircraft's  and other  aviation  services for free,  it also offers the user the
option  to  sign up on its  "Hotlist"  which  will  send  the  user  the  latest
aircrafts  that have been posted at no charge. The Wingsonline customer database
consists of approximately 225 customers.


The GlobalBot Spin-off
----------------------

Company Doing the Spin-off:                          Quest  Net Corp., a Florida
                                                     corporation.

Company Resulting from the Spin-off.                 GlobalBot, Corp, a  Florida
                                                     corporation.

Conditions to the Spin-off:                          None

Spin-off Ratio:                                      One  share  of  our  common
                                                     stock for every four shares
                                                     of  Quest  Net Corp. common
                                                     stock held of record on the
                                                     spin-off record date.

Spin-off Record Date:                                May 1,2000(5:00 p.m.Florida
                                                     time).

Spin-off Effective Date:                             Upon  effectiveness  of the
                                                     GlobalBot     Form       10
                                                     Registration Statement.
 .
Dividend Agent:                                      The dividend agent is
                                                     Florida Atlantic Stock
                                                     Transfer, Inc.  The address
                                                     and telephone number of the
                                                     dividend  agent is 7130 Nob
                                                     Hill Road, Tamarac, Florida
                                                     33321, (954) 726-6305.

Material Federal Income Tax
Consequences to GlobalBot
Shareholders:                                        Alberni & Alberni, P.A. has
                                                     issued   an    opinion   to
                                                     GlobalBot  to  the   effect
                                                     that,  for  federal  income
                                                     tax purposes, the  spin-off
                                                     should    qualify    as   a
                                                     tax-free  distribution   to
                                                     the  shareholders  of Quest
                                                     Net Corp. under Section 355
                                                     of the   Internal   Revenue
                                                     Code.            Therefore,
                                                     shareholders   should   not
                                                     incur  federal  income  tax
                                                     upon  the  receipt  of  our
                                                     common  stock  in the spin-
                                                     off.

Trading Market and Symbol for
our Common Stock:                                    At  present  there  is   no
                                                     public trading  market  for
                                                     GlobalBot   common   stock.
                                                     GlobalBot   will  apply  to
                                                     have   its   common   stock
                                                     approved for  quotation  on
                                                     the Nasdaq OTCBB. We cannot
                                                     be  certain  that a trading
                                                     market will develop.
Transfer Agent and Registrar
for our Common Stock:                                Florida   Atlantic    Stock
                                                     Transfer,  Inc.,  7130  Nob
                                                     Hill Road  Tamarac, Florida
                                                     33321, (954) 726-6305.

                                       7
<PAGE>


Relationship between Quest Net
Corp. and GlobalBot after the
Spin-off:                                            After the spin-off,   Quest
                                                     Net Corp.and GlobalBot will
                                                     operate   independently  of
                                                     each  other   as   separate
                                                     public companies.


ITEM 2.  DESCRIPTION OF PROPERTY

         We have  combined our offices with the offices of CWTel.  These offices
are located at 1250 East Hallandale Beach Blvd.Suite 502, Pembroke Park, Florida
33009.  CWTel  leases  approximately  800  square  feet  of  office  space  from
unaffiliated third parties for $1,838 per month. This lease expires in May 2002.
We believe  that this  facility  is  adequate  for our  current  and  reasonably
foreseeable future needs.

ITEM 3.  LEGAL PROCEEDINGS

Secure Transaction International Corp. et al.
---------------------------------------------

         In April 1999, Quest filed a lawsuit in the Circuit Court of  the  17th
Judicial Circuit in and for Broward County,  Florida against Secure  Transaction
International  Corp., its  subsidiaries  and principals,  the accounting firm of
Margolis,  Fink & Wichrowski,  Barry A Fink,  C.P.A.,  P.A., Mark V. Wichrowski,
C.P.A. and Barry A. Fink and Mark Wichrowski,  individually,  alleging violation
of the Florida securities laws, negligent misrepresentations, breach of contract
payment of accounts, and conversion.

         The  lawsuit  stems from  several  contracts  entered  into with Secure
Transaction  and  its  subsidiaries  for  bandwidth,   consulting  services  and
software.  As payment for the services,  Secure Transaction and its subsidiaries
issued redeemable  preferred stock that was convertible into Secure  Transaction
common stock.

         Quest provided the services as required and the  appropriate  amount of
convertible  stock was not redeemed or converted.  The amount due us under these
various agreements is approximately $867,842.

         Quest  has  also  alleged  that  the  Financial   Statements  provided,
negligently misrepresented the financial condition of Secure Transaction and its
subsidiaries.  Quest has asked the court for rescission,  compensatory  damages,
attorneys' fees, costs, and expenses.

         The  defendants  filed a motion  to  dismiss,  which  was  denied.  The
defendants  have  filed  an  answer  to our  complaint.  The  lawsuit  is in the
discovery stage. At present, we are unable to predict the outcome this lawsuit.

Herman Henin
------------

         In January 1999,  Herman Henin,  a shareholder  of Pact  Communications
Group,  Inc.,  filed a lawsuit  against  Quest in the Circuit  Court of the 17th
Judicial Circuit in and for Broward County,  Florida.  Mr. Henin alleged that he
did not receive a proper  distribution  of Quest shares from Pact after  Quest's
acquisition  of  certain  of the assets of Pact,  and that,  somehow,  Quest was
responsible.

         Due to the cost of litigation,  Quest settled the case for the issuance
of mutual  releases  and the  issuance of 12,500  shares of common  stock to Mr.
Henin's attorney.

                                       8
<PAGE>

Autonomy, Inc.
--------------

         In  September   1999,   Autonomy,   Inc,   filed  suite   against  Pact
Communication  Group,  Inc. and Quest Net Corp. in the Circuit Court of the 17th
Judicial Circuit in and for Broward County, Florida. The lawsuit stemmed from an
alleged  contract  with  Pact for a  non-transferable,  non-sublicenseable,  and
non-exclusive  license  for the use of  Autonomy's  software  and other  related
services.  In June  2000,  the case was  dismissed  by mutual  agreement  of the
parties without any payment.

James LLC
---------

         On May 5, 2000,  a lawsuit  was filed  against  the Quest in the United
States District Court,  Southern District of New York, by James LLC (Case No. 00
Civ.  3467).  The lawsuit stemmed from the sale of common stock to James LLC for
$5,000,000.  The lawsuit  alleged that we breached our contract of sale to James
LLC by, among other things, failing to register the common stock, and failing to
pay liquidated damages for the non-effectiveness of the registration  statement.
James LLC demanded damages in excess of $5,000,000.  This lawsuit was settled in
October 2000.

         The terms of the settlement  were submitted to the Court for a fairness
hearing  pursuant  to 15 U.S.C.  Section 77 (a)(10) and the Court  approved  the
Settlement.  Pursuant to the terms of the  Settlement,  Quest issued  25,900,000
shares of its  unrestricted  Common Stock to James LLC and a Promissory  Note in
the  principal  sum of  $3,500,000,  maturing  December 31,  20001,  and bearing
interest at the rate of eight percent per annum.

Securities and Exchange Commission
----------------------------------

         Quest  has  been  advised  by  the  Securities   and  Commission   (the
"Commission")  that they have issued an order directing a private  investigation
of possible violations of Sections 17(a) of the Securities Act and Section 10(b)
of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated there under by
certain  unnamed  persons.  The  Commission  has  also  advised  Quest  that the
investigation  should not be construed as an indication by the Commission or its
staff that any  violation  of law has  occurred,  nor as a  reflection  upon any
person, entity, or security.

Florida Department of Revenue
-----------------------------

         During  the  month  of  January,  we  were  notified  of  an  impending
investigation  by the Florida  Department of Revenue  concerning  the payment of
Florida Use Taxes in regard to the purchase of our Fixed Assets. We contracted a
Certified Public Accountant to respond to the Florida Department of Revenue.  As
a result of this limited  investigation,  it came to light that we had failed to
pay Use Taxes on certain of our purchases.  The total liability that was paid by
Quest and Quest Wireless was approximately $6,083.

Qwest Communications International, Inc.
----------------------------------------

         On October  24,  2000,  we were  served  with a lawsuit  filed by Qwest
Communications  International,  Inc. in the United States District Court for the
District of Colorado.  The  complaint  alleges  trademark  infringement,  unfair
competition,  false designation of origin and false  description,  and trademark
dilution. Qwest has requested the Court to, among other things, to:

                                       9
<PAGE>

  Preliminarily and permanently enjoin Quest from using the name Quest.

          >> Award damages to Qwest for actual damages sustained  by  Qwest
             resulting from the use of the name Quest by us.

          >> Award  Qwest treble the profits resulting  from  the  dilution  and
             infringement of the rights of Qwest by our use of the name Quest.

          >> Require Quest to cancel all trade names,trademark registrations and
             domain names using the name Quest

          >> Award punitive damages

         Due to its financial condition, Quest is unsure at  present what action
will be taken with regard to this lawsuit.

Threatened Litigation
---------------------

         Due to our lack of working  capital,  we have been late on  payments to
creditors and vendors,  many of which have threatened legal action.  If lawsuits
are instituted, Quest may be forced into Bankruptcy.


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

         NONE



                                     PART II

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

         Our  common  stock is traded on the  NASDAQ  over-the-counter  bulletin
board market  under the symbol QNET.  There has been trading in our common stock
since July 10, 1998.

         The  following  table  sets  forth,  for  each  of the  fiscal  periods
indicated,  the high and low bid prices for the common stock, as reported on the
OTC Bulletin Board.  These per share quotations reflect  inter-dealer  prices in
the over-the-counter  market without real mark-up,  markdown, or commissions and
may not necessarily represent actual transactions.

QUARTER ENDING              High/BID        Low/BID

FISCAL YEAR 1998
September 1998             $  3.0625       $  .8128
December 1998              $  9.75         $  .51
March 1999                 $ 15.00         $ 5.00
June 1999                  $ 10.1255       $ 4.56

FISCAL YEAR 1999
September 1999             $  9.250        $ 2.875
December 1999              $  3.44         $ 1.25
March 2000                 $  3.69         $ 1.62
June 2000                  $  1.750        $ 0.08

FISCAL YEAR 2000
September 2000             $  0.125        $ 0.0625

         On November  13, 2000,  the closing  trade price of the common stock as
reported  on the OTC  Bulletin  Board was  $.025    As of such date,  there were
approximately 300 holders of record of our common stock.

                                       10
<PAGE>

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

GENERAL

      Quest Net Corp., since inception, has been primarily engaged in  providing
Internet connectivity and the development of Internet tools for individuals  and
companies.

      The Company has  incurred  net losses  applicable  to common  shareholders
since  inception  through  June 30, 2000,  of  approximately  $18,160,900  after
discounts
and  dividends  on preferred  stock.  The Company  anticipates  that losses from
operations  will  continue  due to the lack of working  capital  and the capital
necessary to fund its operations.

      The  company's  costs  and  expenses  primarily  fall  into the  following
categories:

            o     Telecommunications and operations;
            o     Employee stock compensation plans;
            o     Employees' salaries
            o     General and administrative;
            o     Amortization and depreciation.

         Telecommunications     and     operating     expenses     consist    of
telecommunications,  including  the cost of local  telephone  lines and costs of
leased lines connecting the Internet and operations centers.

         Operating   expenses  also  include  employee  salaries  and  benefits,
equipment  costs,  office rent and utilities and customer  service and technical
support costs.

         Employee stock compensation plans consist of  restricted  common  stock
awards and options.  The  Company  has  utilized  its  restricted  stock  as  an
incentive to attract and keep qualified experienced key personnel.

         General and administrative expenses consist primarily of administrative
staff and related benefits.

         Amortization  expense primarily relates to the amortization of goodwill
and a non-compete agreement acquired in a purchase of an e-commerce provider and
certain  equipment  and  licenses  related  to  proposed plans to offer Internet
kiosks. Amortization expense is based  on  the  Company's  best  estimate of the
useful lives of the intangible assets.

         Depreciation expense primarily relates to equipment and is based on the
estimated  useful lives of the assets ranging from three to five years using the
straight-line method for the equipment.


RESULTS OF OPERATIONS

YEAR ENDED JUNE 30, 2000 AND JUNE 30, 1999

REVENUE

      Revenue  for the year ended June 30,  2000 was  $294,502  as  compared  to
$1,070,198  for the same period in 1999.  The decrease was primarily a result of
the loss of a major  customer,  severe  competition  from large  companies,  the
saturation  of the Internet  market and a reduction of marketing  and  technical
personnel,  due to a lack of working  capital,  to maintain the previous  year's
level of operations.

COSTS AND EXPENSES

      Cost of revenue, was substantially comprised of leased and telephone lines
for the year ended June 30, 2000 was  $518,324  as compared to $695,088  for the
same period in 1999.  The  decrease  was a result of a reduction in software and
source code purchased for resale due to a reduction in software sales.

   Stock based  compensation  decreased by $5,579,027 during the year ended June
30,  2000 as  compared  to the year ended June 30,  1999 due to a decline in our
stock price. During the year ended June 30, 1999 the Company's stock was trading
at  substantially  higher prices and, as result,  we incurred higher expenses in
order to fulfill our  commitment to issue shares to employees  and  consultants.
Additionally,  certain  employment  contracts  were  canceled  as  result  of  a
reduction in the workforce due to a decrease in revenues, thereby decreasing the
number of shares issued as issuance was predicated on Company performance.

                                       11
<PAGE>

      Bad debt expense decreased by $865,939 during the year ended June 30, 2000
as compared to the year ended June 30, 1999 as result of less  vulnerability due
to the loss of a major client and a decrease in the level of operations.

      Salaries and bonuses  increased by $398,954 during the year ended June 30,
2000,  as  compared  to the year  ended  June 30,  1999,  due to the  hiring  of
additional  staff,  the  increase  in our sales  force and the hiring of a Chief
Financial  Officer and a new  President,  and the eventual  termination of those
contracts.

      General and  administrative  costs  increased to  $2,504,166  for the year
ended June 30, 2000 as compared  to  $599,861  for the same period in 1999.  The
$1,904,305 increase was a largely due to the $9.99 dial up advertising campaign,
rent for  larger  office  space,  additional  consulting  contracts  in order to
generate new business or to retain existing business, legal fees incurred due to
the SEC investigation and other lawsuits.  Additionally included in the increase
is $706,000 representing balance of the rent due on a lease for property vacated
in August 2000 with a remaining term of 54 months.

      Depreciation and amortization  increased by $715,538 during the year ended
June 30, 2000 as compared to the year ended June 30, 1999.  The increase was due
to  purchasing  and placing in service  equipment  acquired  during the year and
intangible  assets  acquired  in  the  purchase  of  Wings  Online,   Inc.,  AVX
Communications and CWTel, Inc.

      The Company  experienced an unauthorized loss on property and equipment of
$655,000  during the three months ended March 31, 2000.  At the time of the move
to its new office,  the  Company  noticed  that  certain  equipment  that was in
storage was missing. The Company began to investigate this loss and has reported
the  matter to the proper  authorities.  Several  individuals  had access to the
storage  facility and  equipment,  which makes it very  difficult to recover the
equipment or to identify the person or persons involved.

      At June 30,  2000,  the Company  reviewed  the net book value of its fixed
assets, covenant not to compete associated with its acquisition of Wings Online,
Inc.  and  goodwill   associated  with  acquisitions  of  CWTel,  Inc.  and  AVX
Communications.  The  review  indicated  that  based on the  Company's  level of
operations, the Company's estimate of the recoverability of such net book values
was  significantly  impaired.  Accordingly,  the  Company  recognized  a loss on
impairment of  $2,467,749  comprised of $714,851  attributable  to fixed assets,
$179,633 attributable to the covenant not to compete and $1,573,265 attributable
to goodwill.

      Interest expense  increased by $27,937 during the year ended June 30, 2000
as compared to the year ended June 30, 2000 as a result of Company not redeeming
its  preferred  stock  outstanding  on a timely basis due to a lack funds at the
time.

      Interest  income  increased by $68,328 during the year ended June 30, 2000
as  compared  to the year ended  June 30,  1999 due to the  investment  interest
earned on the proceeds of a $5,000,00 private placement.

      The  Company  recorded  a   charge  of  $100,000  as  a  penalty  for   an
unconsummated acquisition. The penalty was incurred because the Company canceled
its acquisition of 49% of AfricaInternet, Corp. a related party company.

LIQUIDITY AND CAPITAL RESOURCES

      From inception,  the Company's revenues have been  insufficient to support
its  operations  and as a result its continued  existence is dependent  upon its
ability to resolve its liquidity problems,  principally by obtaining  additional
debt and/or  equity  financing.  The  Company  currently  has a working  capital
deficiency of  $2,429,645  as compared to working  capital of $4,340,804 at June
30, 1999 and a  Shareholders'  deficit of $1,483,  940 including an  accumulated
deficit  of  $18,260,927  at June  30,  2000.  Additionally,  the  cash  used in
operations for the year ended June 30, 2000 totaled $2,196,502.  These and other
factors raise a  substantial  doubt as to the ability of the Company to continue
as a going concern.  In order to continue its current  operations and effectuate
its operational  plan the Company will need to obtain  additional debt or equity
financing.  In the event  that the  Company  is unable to obtain  debt or equity
financing or are unable to obtain such  financing on terms and  conditions  that
are acceptable, the Company may have to cease or severely curtail operations.

      The Company has  financed  its  operations  through  several  Regulation D
private placement transactions.

      The Company  anticipates  that the  balance of its  capital  needs for the
fiscal year ending June 30, 2001 will be approximately $ 250,000.

      In June 1999, we finalized a Private Placement ( REG D 506) with James LLC
in the amount of $5,000,000, of which the company received a net amount of
$4,650.000.  On May 5, 2000, a lawsuit was filed against Quest by James LLC. The
lawsuit was settled On October 5, 2000, the lawsuit was settled.  As part of the
settlement, the Company issued James LLC, 25,900,000 shares of its common stock,
thereby  giving  James LLC a majority  interest  in the shares of the  Company's
common stock then  outstanding  and a note in the  principal  sum of  $3,500,000
maturing on December 31, 2001 with interest at 8% per anum.

                                       12
<PAGE>

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

      Statements  in this  Quarterly  Report on Form  10-QSB  under the  caption
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations,"  as well as in the Company's press releases or oral statements that
may be made by the Company or by officers, directors or employees of the Company
acting  on the  Company's  behalf,  that  are  not  historical  fact  constitute
"forward-looking  statements". Such forward-looking statements involve known and
unknown  risks,  uncertainties,  and other  factors  that could cause the actual
results of the Company to be materially different from the historical results or
from any  results  expressed  or  implied  by such  forward-looking  statements.
Factors  that might cause such a difference  include,  without  limitation,  the
information set forth below. In addition to statements which explicitly describe
such risks and  uncertainties,  statements  labeled  with the terms  "believes",
"belief" "expects",  "plans" or "anticipates" should be considered uncertain and
forward-looking. All cautionary statements made in this Report should be read as
being applicable to all related forward-looking statements wherever they appear.

Limited Operating History; Continuing Operating Losses
------------------------------------------------------

         From inception to June 30, 2000, we generated revenues of approximately
$1,364,700 and incurred operating expenses of approximately $18,000,000. At June
30, 2000, we had a net loss of approximately $9,220,669.

The Company is Unable to Meet Capital Needs
-------------------------------------------

         At  present,  we are not  generating  enough  cash  flow  to  meet  our
operating  needs.  We have  downsized our  employees to three  full-time and one
part-time employee,  including our sole officer, Charles Wainer. The Company has
cut back on all but the  necessary  expenses,  however we still  cannot fund our
operations.

         We have been seeking additional capital to fund our operations,  and we
are seeking to obtain  additional  capital  through debt or equity  financing or
conventional loans. However, we have been unsuccessful to date due to our credit
rating and low stock price. If we cannot obtain  additional funds or a candidate
that wishes to take over the Company and infuse  additional  capital  within the
next  few  months,  the  Company  will be  forced  to cease  operations  or seek
protection by filing for Bankruptcy.

         Our lack of working  capital  has  necessitated  the sale of 20% of our
subsidiary  GlobalBot.  In  addition,  our Board of  Directors  has approved the
spin-off of GlobalBot in order to give  GlobalBot the financial and  operational
flexibility  to  take  advantage  of  significant  growth  opportunities  in the
E-commerce  business.  We believe that  separating  the two companies  will give
GlobalBot a better  access to capital,  and allow the  investment  community  to
measure GlobalBot's performance as a stand alone company.

                                       13
<PAGE>

         In November  2000,  we were forced to sell our dial-up  customers to an
unaffiliated  third party because be could no longer afford to maintain our dial
up lines.

         If we are unable to continue our operations,  your entire investment in
us  will be  lost.  See  "Management's  Discussion  and  Analysis  of  Financial
Condition  and Results of  Operations--Liquidity  and Capital  Resources"  for a
discussion of our working capital and capital expenditures.

We Have Had History Of A Limited  Customer  Base And This May Continue To Be The
Case.
         At  present,  our  customer  base is  limited.  Our  ability to operate
profitably  depends on increasing  our customer  base and  achieving  sufficient
gross profit margins.  We cannot assure you that we will be able to increase our
customer base or to operate profitably.

We Are Subject To All Of The Substantial Risks Inherent In An Internet Business,
Which May Harm Our Ability To Operate Successfully.

         We are subject to all of the substantial  risks inherent in an Internet
related business, any one of which may harm our ability to operate successfully.
These include, but are not limited to:

   Our inability to develop,  maintain  and/or increase levels of traffic on our
     Internet  sites.
   Our  inability  to  attract  or  retain  customers.
   Our inability to generate significant Web-based revenue from our customers.
   Our failure to anticipate and adapt to a developing market and the level of
     use of the Internet and online services for the purchase of consumer
     products and in general.
   Our inability to upgrade and develop competitive systems and infrastructures.
   The failure of our servers and networking  systems to efficiently  handle our
     Web  traffic.
   Technical difficulties  and  system  downtime  or  Internet brownouts.

If We Raise Addition Capital Through The Issuance Of Equity Or Convertible Debt,
Your Proportionate Interest Will Be Diluted.

         We will need more  working  capital to continue our  operations.  If we
raise additional  capital by issuing equity or convertible debt securities,  the
percentage ownership of our then-current  stockholders will be reduced, and such
securities may have senior rights, preferences, or privileges.

Our Data  Centers And The  Networks On Which We Rely Are  Sensitive To Harm From
Human  Factions  And  Natural   Disasters.   Any  Resulting   Disruption   Could
Significantly Damage Our Business And Reputation.

         Our reputation for providing  reliable  service  largely depends on the
performance  and  security  of  our  data  centers  equipment  and  the  network
infrastructure  on which we rely.  Our  customers  often  maintain  confidential
information on our servers.

         Our  data  centers,   equipment  and  networks,   and  our   customers'
information are subject to damage and unauthorized access from:

               Human error and tampering.
               Breaches of security.
               Natural disasters.
               Power loss.
               Capacity limitations.
               Software defects.
               Telecommunications failures.
               Intentional acts of vandalism, including computer viruses.

                                       14
<PAGE>

         All of which,  will cause  interruptions in service or reduced capacity
for our customers. These events could potentially jeopardize the security of our
customers'  confidential  information  such as  credit  card  and  bank  account
numbers.

         Despite  precautions  we have taken and plan to take, the occurrence of
any one of the  events  listed  above  or  other  unanticipated  problems  could
seriously damage our business and reputation and cause us to lose customers.

         The time  and  expense  required  to  eliminate  computer  viruses  and
alleviate  other security  problems  could be  significant  and could impair our
service quality.

We Could Not  Provide  Adequate  Service To Our  Customers  If We Were Unable To
Secure Or  Maintain  Sufficient  Network  Capacity  To Meet Our Future  Needs On
Reasonable Terms Or At All.

         Our  failure to achieve or maintain  high  capacity  data  transmission
could negatively  impact service levels to our existing  customers and limit our
ability to attract new customers, which would harm our business.


We Are Dependent On Internet Network Access Services We Receive From Others, Any
 Disruption Of These Services Could Harm Our Business

         We rely on third-party networks,  local telephone companies,  and other
companies to provide  data  communications  capacity.  Any  disruption  of these
services could cause our customers to find other  providers and prohibit us from
obtaining new customers.

Our Business Depends In Part On Our Network Service Provider's Numerous  Peering
 Relationships.  Their Inability To Maintain Their Peering Relationships   Could
 Be Costly And Harmful To Our Business.

         The  Internet is  composed  of many  Internet  service  providers  that
operate  their  own  networks  and  interconnect  with  other  Internet  Service
Providers at various peering points.

         If our network service  provider's  network or infrastructure  fails to
continue  to meet  industry  requirements  for  peering or it loses its  peering
relationships for any reason, our transmission rates could be reduced, resulting
in a decrease in the quality of service we provide to our customers.

Potential Lack Of Liquidity Of Our Common Stock

         Our common stock trades on the OTC Electronic  Bulletin  Board.  Stocks
trading on the OTC Electronic  Bulletin Board generally attract a smaller number
of market makers and a less active public market.

         Moreover,  since  our  common  stock is  traded  on the OTC  Electronic
Bulletin Board, investors may find it difficult to dispose of or obtain accurate
quotations as to the value of our common stock.

                                       15
<PAGE>

We Are Subject To Penny Stock Regulations And Restrictions

         Our stock is designated as a Penny Stock.  Such a designation  requires
any broker or dealer  selling such  securities to disclose  certain  information
concerning the transaction,  obtain a written agreement from the purchaser,  and
determine that the purchaser is reasonably suitable to purchase such securities.
These  rules will  restrict  the  ability of Broker / Dealers to sell our common
stock and may affect the ability of Investors to sell their shares.

You May Not Be Able To Resell  Shares Of Our Stock At Or For More Than The Price
You Paid.

         The price of our common stock and Internet and telecommunication  stock
in general,  have recently  experienced  extreme  volatility that often has been
unrelated to the operating performance of any specific public companies.  During
the period from July 10, 1998 to November  13, 2000 the bid and ask price of our
common  stock has ranged from a high of $30.71 to a low of $.02.  If  continued,
these broad market and industry  fluctuations  may adversely  affect the trading
price of our common stock, regardless of our actual operating performance.  This
volatility may negatively impact the liquidity and value of your shares.

Our Articles of Incorporation Allow Authorization and Discretionary Issuance  of
 Preferred Stock

         Our Articles of Incorporation  authorize the issuance of "blank check",
preferred  stock.  The Board of  Directors  is  empowered,  without  stockholder
approval,  to designate  and issue  additional  series of  preferred  stock with
dividend, liquidation,  conversion, voting, or other rights, including the right
to issue  convertible  securities  with no limitations  on conversion.  Any such
designations and issuances, could:

       Adversely  affect  the voting power or other rights of the holders of our
         common stock.
       Substantially dilute the common shareholder's interest.
       Depress the price of our common stock.



         Our Certificate Of Incorporation  Gives The Board Of Directors The Sole
Authority To Issue "Blank Check"  Preferred Stock. The Issuance Of "Blank Check"
Preferred  Stock Could Have The Effect Of Delaying,  Deterring,  Or Preventing A
Merger, Take Over Or Change In Control Without Any Action By The Shareholders.

         The Board of Directors,  by the issuance of preferred stock, could make
it more difficult for a third party to acquire us, even if the acquisition would
be beneficial to you. You may not realize the premium  return that  stockholders
may realize in conjunction with corporate takeovers.

        The issuance of "blank check"  Preferred  stock could delay,  deter, or
prevent  a take  over,  merger or change of  control  and May  Prevent  You From
Realizing A Premium Return.

We May Be Unable To Protect  Our  Intellectual  Property  Rights Or To  Continue
Using Intellectual Property That We License From Others.

         We rely and will rely on a combination of copyright, trademark, service
mark,  and trade  secret laws and  contractual  restrictions  to  establish  and
protect certain of our proprietary  rights. We have no patented  technology that
would bar  competitors  from our  market.  Despite  our  efforts to protect  our
proprietary rights, unauthorized parties may attempt to copy or otherwise obtain
and use our data or technology.

The Uncertainty Associated With Unproven Business Models

         Since Quest Net's business model is relatively new and unproven, we may
not be able to anticipate and adapt to a developing  market, or may be unable to
manage its network infrastructure  (including server, hardware, and software, to
handle our Internet  traffic,  or to  effectively  manage our rapidly  expanding
operations.

                                       16
<PAGE>


We  Lack  Unique  Services  Or  Market  Niche  In  An  Industry Characterized By
 Significant Overcapacity For Current Demand

         The market for Internet  access is highly  competitive  and  fragmented
with over 4,800  Internet  service  providers,  primarily  in local  markets and
averaging less than 5,000 customers  each.  Multiple  Internet access  providers
serve every local market we have entered,  or intend to enter. We offer the same
type of services as other Internet service providers. Due to our lack of working
capital in the past, we have not obtained any significant market share.

We Cannot Be Certain  That We Will Be Able To Compete With  Significant  Pricing
Pressure By Our Competitors.

         As a result of  increased  competition  in our  industry,  we expect to
encounter  significant  pricing  pressure.  We cannot be certain that we will be
able to offset the effects of any required price reductions  through an increase
in the number of our  subscribers,  higher revenues from our business  services,
cost reductions or otherwise,  or that we will have the resources to continue to
compete successfully.

We May Not Be Able To Compete In The Internet Service Market

         We  operate  in  the  Internet  services  market,  which  is  extremely
competitive.   Our  current  and  prospective  competitors  include  many  large
companies that have substantially greater market presence, financial, technical,
marketing,  and other resources than we have. We compete  directly or indirectly
with the following categories of companies:

        >> Established  online services,  such as America Online, the  Microsoft
           Network, CompuServe, and Prodigy.
        >> Local, regional, and national Internet  service  providers,  such  as
           MindSpring, Earthlink, Network, Inc., Internet America, and PSINet.
        >> National  telecommunications  companies,  such  as  AT&T  Corp.,  MCI
           WorldCom, Inc., Sprint, and GTE.
        >> Regional Bell operating companies,  such   as   BellSouth   and   SBC
           Communications.

         Our  competition  is likely to increase.  We believe this will probably
happen  as large  diversified  telecommunications  and media  companies  acquire
Internet service  providers and as Internet service  providers  consolidate into
larger, more competitive companies.

         Diversified  competitors  may bundle other  services and products  with
Internet  connectivity  services,   potentially  placing  us  at  a  significant
competitive disadvantage. As a result, our business may suffer.

We May Not Be Able To Compete In The Long-Distance Telephone Market

         Quest, through its wholly owned subsidiary CWTel, is a reseller of long
distance  telephone  service.  We compete with long distance  carriers and other
long distance  resellers and providers,  including  large carriers such as AT&T,
MCI WorldCom and Sprint and new entrants to the long  distance  market.  Many of
our competitors are significantly  larger and have substantially  greater market
presence and financial, technical,  operational,  marketing and other resources.
We will face stiff price competition and may not be able to compete.

                                       17
<PAGE>

Quest Has Limited Marketing And Sales Capability.

         Because of our lack of working capital we have not had the resources to
develop a marketing and sales force.

Dependence On Qualified Personnel.

         Due to the specialized nature of our business,  we are highly dependent
upon our  ability  to attract  and retain  qualified  technical  and  managerial
personnel.  Our failure to recruit key technical and  managerial  personnel in a
timely  manner has been  detrimental  to our plan of  operations  and has had an
adverse  impact  upon our  business  affairs  and  finances.  Due to our lack of
operating capital, we have had to downsize our technical personnel to two, which
includes Charles Wainer, our sole officer.


The "Going Concern"  emphasis On The Report Of Our  Independent  Accountants May
Reduce Our Ability To Raise Additional Financing.

         The  report  of our  independent  accountants  on  our  June  30,  2000
Consolidated  Financial  Statements contains an explanatory  paragraph regarding
our ability to continue as a going concern.  Our independent  accountants  cited
our history of operating losses,  limited operating  history,  and negative cash
flow from  operations,  which  raised  substantial  doubt as to our  ability  to
continue as a going  concern.  This "going  concern",  emphasis  will reduce our
ability to raise additional financing.

Control By James LLC/Possible Change Of Control

         James LLC  beneficially  owns 54.3% of the outstanding  Common Stock of
the Company. Due to it stock ownership,  James LLC is in a position to elect all
of the Company's  directors and control  policies and operations of the Company.
This  could  effectuate  a change in  control of the  Company.  See,  "Principal
Shareholders".

No Payment Of Dividends

         Although we declared a  three-for-one  stock dividend in December 1998,
it is not anticipated that we will pay any cash dividends on our common stock in
the  future.  The Board of  Directors  intends  to follow a policy of  retaining
earnings, if any, for use in our business operations. As a result, the return on
your  investment in us will depend upon any  appreciation in the market price of
the common stock.


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Index to Consolidated Financial Statements

                                                                            Page

         Independent Auditor's Report                                    F-2-F-3

         Financial Statements

                  Balance Sheet                                            F-4

                  Statements of Operations                                 F-5

                  Statements of Shareholders' Equity (Deficit)           F-6-F-7

                  Statements of Cash Flows                                 F-8

                  Notes to Financial Statement                          F-9-F-22

                                       18
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


To the Stockholders and Board of Directors
Quest Net Corp. and Subsidiaries
Pembroke Park, Florida

We have audited the accompanying  consolidated  balance sheet of Quest Net Corp.
and subsidiaries as of June 30, 2000 and the related consolidated  statements of
operations,  changes in  shareholder's  equity  (deficit) and cash flows for the
year then  ended.  These  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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 consolidated  financial statement
presentation.  We believe  that our audit  provides 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 Quest Net Corp. and
subsidiaries  as of June 30, 2000, and the results of its operations  changes in
shareholders'  equity  (deficit)and  cash  flows  for the  year  then  ended  in
conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that  the  Company  will  continue  as a  going  concern.  The  Company  has  no
significant  revenue  from  operations.  It is  utilizing  technology  which may
require  substantial  expenditures  to  successfully  market.  The Company  must
successfully  complete its marketing  efforts.  As a result the Company may need
additional funds. These factors raise substantial doubt about the ability of the
Company to continue as a going  concern.  Management's  plans in regard to these
matters are  described in Note A. The  financial  statements  do not include any
adjustments that might result from the outcome of the foregoing uncertainties.


                                      /s/ Feldman Sherb & Co., P.C.
                                      Certified Public Accountants

New York, New York
November 10, 2000


                                       F-2

<PAGE>

To the Board of Directors and Shareholders
Quest Net Corp. and Subsidiaries

                          INDEPENDENT AUDITORS' REPORT

We have audited the accompanying  consolidated balance sheets of Quest Net Corp.
and subsidiaries (a Florida corporation in the development stage) as of June 30,
1999 and the related consolidated statements of operations, shareholders' equity
and cash  flows for the years  ended  June 30,  1999 and 1998 and for the period
November  28,  1995  (inception)  through  June  30,  1999.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
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 Quest Net Corp. and
subsidiaries,  as of June 30, 1999 and 1998 and the results of their  operations
and cash  flows for the years  ended  June 30,  1999 and 1998 and for the period
November  28,  1995  (inception)  through  June 30,  1999,  in  conformity  with
generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
the Company  will  continue  as a going  concern.  As shown in the  accompanying
consolidated financial statements, the Company incurred a net loss of $9,032,794
for the year ended June 30, 1999,  negative cash flows from operations and has a
limited  operating  history.  These and other factors discussed in Note A to the
consolidated financial statements raise a substantial doubt about the ability of
the  Company to  continue as a going  concern.  Management's  plans in regard to
those  matters  are  also  described  in  Note  A.  The  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

s/Cordovano and Harvey, P.C.

Cordovano and Harvey, P.C.
Denver, Colorado

July 10, 1999

                                       F-3


<PAGE>



                                QUEST NET CORP.

                           CONSOLIDATED BALANCE SHEET

                                  JUNE 30, 2000


                                     ASSETS

CURRENT ASSETS
 Cash........................................................ $    28,691
 Accounts receivable, net of $10,185 allowance. .............      35,712
 Prepaid expenses............................................      21,433
                                                               ----------
       TOTAL CURRENT ASSETS..................................      85,836

PROPERTY AND EQUIPMENT, net of
 accumulated depreciation of $112,600........................     292,982

PROPERTY NOT IN SERVICE .....................................     689,615

OTHER ASSETS.................................................      33,380
                                                               ----------
                                                              $ 1,101,813
                                                               ==========
                      LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
 Accounts payable and accrued expenses....................... $ 1,733,788
 Notes payable...............................................      81,985
 Due to shareholder..........................................     637,332
 Obligations under capital lease - current...................      12,252
                                                               -----------
       TOTAL CURRENT LIABILITIES.............................   2,465,357

MINORITY INTEREST............................................      80,000

OBLIGATIONS UNDER CAPITAL LEASE..............................      40,386

SHAREHOLDERS' DEFICIT
 Preferred stock, no par value; 5,000,000 shares authorized;
  30,000 shares issued and outstanding
 Common stock, no par value; 50,000,000 shares authorized;
  23,474,309, shares issued and outstanding..................  16,390,721
   stock warrants, 47,000 issued and outstanding.............       7,191
   stock options, 10,000 issued and outstanding..............      25,800
 Additional paid in capital..................................     353,285
 Accumulated deficit......................................... (18,260,927)
                                                               ----------
       TOTAL SHAREHOLDERS' DEFICIT...........................  (1,483,930)
                                                               ----------
                                                              $ 1,101,813
                                                               ==========

        See accompanying notes to the consolidated financial statements


                                       F-4


<PAGE>

<TABLE>

                                QUEST NET CORP.
                                ---------------

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>


                                            For the Years Ended
                                                   June 30,
                                            ----------------------
                                               2000        1999
                                            -----------  ---------

REVENUES
 Internet related and other services......$   294,502   $  136,361

   OTHER:
 Bandwidth sales ..........................      -         396,000
 Software sales and development ...........      -         537,837
                                            -----------  ----------
TOTAL REVENUES                                294,502    1,070,198
                                            -----------  ---------
COSTS AND EXPENSES
 Cost of internet related services.........   518,324       95,088
 Cost of revenues - software sales
  and development..........................      -         600,000
 Stock based compensation.................. 1,450,458    7,029,485
 Bad debt expense..........................    27,156      893,095
 Salaries and bonuses......................   782,114      383,160
 Consulting fees, related party............      -         135,000
 General and administrative................ 2,504,166      599,861
 Depreciation and amortization............. 1,028,905      313,367
 Unauthorized loss on property
  and equipment............................   655,000         -
 Loss on impairment of long lived assets... 2,467,749         -
 Loss on disposal of assets................     7,810       56,559
 Penalty for unconsummated acquisition.....   100,000        -
                                            ----------- ----------
TOTAL OPERATING EXPENSES                    9,541,682   10,105,615
                                            -----------  ---------
OPERATING LOSS                             (9,247,180)  (9,035,417)

NON-OPERATING INCOME (EXPENSE)
 Interest expense..........................   (33,880)      (5,943)
 Interest income...........................    76,894        8,566
 Realized loss on marketable securities....   (16,503)        -
                                            -----------   ---------
NET LOSS                                  $(9,220,669) $(9,032,794)
                                            ===========  ==========
NET LOSS PER SHARE:
 Basic and diluted........................$     (0.41) $     (0.68)
                                            ===========  ==========
SHARES USED FOR COMPUTING NET LOSS PER SHARE:

 Basic and diluted.......................  22,639,802   13,322,111
                                           ============ ===========















        See accompanying notes to the consolidated financial statements


                                       F-5


<PAGE>

                                QUEST NET CORP.
                                ---------------

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                       For the years ended June 30, 2000 and 1999
<CAPTION>


                                                                                                  Additional             Total
                                                 Preferred Stock        Common Stock               Paid In  AccumulatedShareholders'
                                                Shares     Amount     Shares     Amount   Warrants Capital     Deficit      Deficit
                                              --------- ----------- ---------- ---------- -------- --------   -------   -----------
<S>                                           <C>       <C>         <C>        <C>        <C>      <C>        <C>       <C>
BALANCE, July 1, 1998 .......................         -    $      -    440,007  $ 129,544   $    -  $     -   $(7,464)  $   122,080

July 27, 1998 shares issued for software
   purchase .................................    60,000     600,000          -          -        -        -         -       600,000

September 21, 1998, conversion of
   preferred shares..........................   (60,000)   (600,000)   300,000    258,300        -  341,700         -             -

November 2, 1998, shares issued for services,
   valued at market value of stock...........         -           -    200,000    600,000        -        -         -       600,000

November 2, 1998, shares issued for services
   at market value of stock .................         -           -    101,333    303,999        -        -         -       303,999

November 23, 1998, shares issued for cash,
   net of $2,950 offering costs..............         -           -     50,000     97,050        -        -         -        97,050

December 1, 1998, shares issued for
   officers' compensation ...................         -           -  1,310,693  4,013,997        -        -         -     4,013,997

December 11, 1998, shares issued pursuant
   to employment agreements..................         -           -    175,000    514,063        -        -         -       514,063

December 22, 1998, shares issued in
   exchange for equipment ...................   100,000   1,000,000  2,607,660    724,520        -        -         -     1,724,520

December, 1998, shares issued for cash.......         -           -     50,000     50,000        -        -         -        50,000



        See accompanying notes to the consolidated financial statements

                                       F-6
<PAGE>


                                QUEST NET CORP.
                                ---------------

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                       For the years ended June 30, 2000 and 1999

<CAPTION>
                                                                                                              Deficit
                                                                                                           Accumulated
                                                                                       Warrants Additional   During        Total
                                             Preferred Stock         Common Stock         and    Paid In  Development  Shareholders'
                                            Shares     Amount     Shares      Amount   Options   Capital     Stage       Deficit
                                          --------- ----------- ---------- ----------- --------  -------- -----------   -----------
<S>                                       <C>       <C>         <C>        <C>         <C>      <C>       <C>           <C>
January 5, 1999, shares issued for
   compensation at market value of stock.         -           -     17,667     178,878        -         -           -       178,878

January 5, 1999, shares issued for payment
   of offering costs of $15,000..........         -           -     24,000           -        -         -           -             -

Shares issued in three for one common stock
   dividend .............................         -           - 15,525,081           -        -         -           -             -

January 7, 1999, shares issued for cash..         -           -     25,000      75,000        -         -           -        75,000

January 8, 1999, shares issued for services
   at market value of stock..............         -           -        677       8,801        -         -           -         8,801
January 1999, shares issued for purchase of
   domain names..........................         -           -      1,500       7,000        -         -           -         7,000

January 25, 1999, shares issued for cash.         -           -    132,915     692,809        -         -           -       692,809

January 25, 1999, 47,000 warrants
   issued for cash.......................         -           -          -           -    7,191         -          -         7,191

February 15, 1999, shares issued in
   acquistion of Wings Online, Inc.               -           -     29,326     200,000        -         -           -       200,000

February 12, 1999, shares issued
   pursuant to employment agreement......         -           -    100,000     154,675        -         -           -       154,675

March 2, 1999, shares issued for services,
   valued at market value of stock.......         -           -      4,000      29,375        -         -           -        29,375

May 3, 1999, shares issued in exchange for
   property..............................         -           -     39,894     300,000        -         -           -       300,000

May 17, 1999, 10,000 options granted at
   fair value ...........................         -           -          -           -   25,800         -           -        25,800

May 27, 1999, shares issued for cash, net
   of $350,000 offering costs............         -           -    910,747   4,650,000        -         -           -     4,650,000

Net loss for the year ended
   June 30, 1999.........................         -           -          -           -        -         -  (9,032,794)   (9,032,794)
                                          --------- ----------- ---------- ----------- --------  -------- -----------   -----------
              BALANCE,  JUNE 30, 1999       100,000   1,000,000 22,045,500  12,988,011   32,991   341,700  (9,040,258)    5,322,444

Redemption of preferred stock............  (100,000) (1,000,000)         -           -        -         -           -    (1,000,000)

Issuance of common stock for compensation         -           -    543,372   2,063,869        -         -           -     2,063,869

Issuance of options for employee
   compensation..........................         -           -          -           -        -    11,585           -        11,585

Issuance of common stock for services....         -           -    267,650     518,088        -         -           -       518,088

Issuance of common stock for leasehold
   improvements..........................         -           -     32,787     120,753        -         -           -       120,753

Issuance of common stock for Parputt
   acquisition...........................         -           -    275,000           -        -         -           -             -

Issuance of common and preferred stock
   for acquisition of CWTel, Inc.........    30,000           -    310,000     700,000        -         -           -       700,000

Net loss for year ended June 30, 2000....         -           -          -           -        -         -  (9,220,669)   (9,220,669)
                                          --------- ----------- ---------- ----------- --------  -------- -----------   -----------
              BALANCE,  JUNE 30, 2000        30,000  $        - 23,474,309 $16,390,721 $ 32,991  $353,285$(18,260,927)  $(1,483,930)
                                          ========= =========== ========== =========== ========  ======== ===========   ============


        See accompanying notes to the consolidated financial statements

</TABLE>


                                      F-7

<PAGE>


                                QUEST NET CORP.
                                ---------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS





                                                  For the Years Ended June 30,
                                                  -----------------------------
                                                        2000             1999
                                                     -----------     -----------

CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss........................................ $   (9,220,669) $  (9,032,794)
                                                      ----------     ----------
 Adjustments to reconcile net loss to net cash
  used in operating activities:
  Depreciation and amortization..................      1,028,905        313,367
  Loss on impairment of long-lived assets........      2,467,749              -
  Unauthorized loss on equipment.................        655,000              -
  Loss on disposal of assets.....................              -         56,559
  Common stock issued for services...............        518,088        600,000
  Common stock issued for leasehold..............        120,753              -
  Common stock issued for compensation...........      2,075,454      7,029,485

Changes in assets and liabilities:

 Accounts receivable.............................         18,252        (42,515)
 Other receivable................................          2,276              -
 Prepaid expenses................................          9,501              -
 Other assets....................................         36,420        (69,250)
 Accounts payable and accrued expenses...........      1,510,034        123,000
 Accrued compensation............................     (1,418,265)             -
                                                      -----------   -----------
                                                       7,024,167      8,010,646
                                                      -----------   -----------
NET CASH USED IN OPERATING ACTIVITIES ...........     (2,196,502)    (1,022,148)
                                                      -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES
 Capital expenditures............................     (1,249,826)      (118,756)
 Proceeds from sale of equipment.................              -          2,100
 Investment in subsidiary........................              -       (135,000)
                                                      -----------   -----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES .....     (1,249,826)      (251,656)
                                                      -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES
 Proceeds from note payable......................         81,985              -
 Repayments of capital lease.....................         (5,255)             -
 Sale of common stock and warrants...............              -      5,925,000
 Debt issue costs................................              -       (352,950)
 Proceeds from related party debt................         20,000              -
 Proceeds from sale of 20% interest in subsidiary         80,000              -
 Redemption of preferred stock...................     (1,000,000)             -
                                                      -----------   -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES     (823,270)     5,572,050
                                                      -----------   -----------
NET INCREASE (DECREASE) IN CASH  ................     (4,269,598)     4,298,246
 Cash, beginning of period.......................      4,298,289             43
                                                      -----------   -----------
 Cash, end of period............................. $       28,691  $   4,298,289
                                                      ===========   ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest........................... $            -  $       5,943
                                                      ===========   ===========
Cash paid for income taxes....................... $            -  $           -
                                                      ===========   ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
 Common stock issued for property................ $      120,753  $   1,031,520
                                                      ===========   ===========
 Preferred stock issued for property............. $            -  $   1,600,000
                                                      ===========   ===========
 Common stock issued for acquisitions............ $      700,000  $     200,000
                                                      ===========   ===========
 Common stock issued for offering costs.......... $            -  $      15,000
                                                      ===========   ===========

        See accompanying notes to the consolidated financial statements


                                       F-8


<PAGE>
                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note A: Organization,  business, liquidity and summary of significant accounting
--------------------------------------------------------------------------------
policies
--------

Organization and business
-------------------------

Quest Net Corp.  (the  "Company" or "Quest")  was  incorporated  in the state of
Colorado on November  28, 1995 under the name of A. P. Sales,  Inc.  The Company
was  formed  for the  purpose  of  entering  the  office  furniture  repair  and
reconditioning  market.  In June of 1998,  the Company  acquired  certain assets
related to the  internet  services  industry  and became a provider  of Internet
system and network  management  solutions for enterprises with  mission-critical
Internet  operations,  including  server  hosting,  Internet  connectivity,  and
Internet  technology  services.  At that time,  the Company  changed its name to
Quest Net Corp. The Company redomiciled in Florida in December 1998.

Merger
------

Pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated as of
March 13, 2000 between Parputt Enterprises,  Inc. ("PEI"), a Nevada corporation,
and Quest Net  Corp.,  all the  outstanding  shares of common  stock of PEI were
exchanged for 275,000  shares of common stock of Quest in a transaction in which
Quest  was  the   surviving   company.   The  merger  was  accounted  for  as  a
recapitalization of Quest.

Basis of presentation
-----------------------

As shown in the accompanying  financial  statements,  the Company incurred a net
loss of $9,220,669 for the year ended June 30, 2000, and has a limited operating
history.  Those  factors,  as well as the uncertain  condition  that the Company
faces as a new business  with an unproven  business  model  entering the new and
rapidly  evolving  market  of  online  commerce  and  the  Internet,  create  an
uncertainty about the Company's ability to continue as a going concern.

Management is actively pursuing new debt and/or equity financing and continually
evaluating the Company's  profitability,  however any results of their plans and
actions cannot be assured. The consolidated  financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Summary of significant accounting policies:

Principles of consolidation
-----------------------------

The  Company's  consolidated  financial  statements  include the accounts of the
Company's and its 80% owned  subsidiary  Wings Online,  Inc. The Company  formed
five other wholly owned  subsidiaries,  IPQuest  Corp.,  Quest  Wireless  Corp.,
Globalbot Corp., QuesTel Corp. and Quest Fiber Corp, and CWTel, Inc. as of March
1,  2000.  All  material   intercompany  accounts  and  transactions  have  been
eliminated in consolidation.

Use of estimates
-----------------

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

Cash and cash equivalents
-------------------------

The Company considers all short-term, highly liquid investments with an original
maturity  date of three  months  or less to be cash  equivalents.  Cash and cash
equivalents are stated at cost, which  approximates  fair value.




                                      F-9
<PAGE>

                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of significant accounting policies continued:

Property and equipment
-----------------------

Property  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation  is provided  using the  straight-line  method  over the  estimated
useful  lives of the  assets,  which  is  estimated  to be three to five  years.
Expenditures  for repairs and  maintenance are charged to expense when incurred.
Expenditures for major renewals and  betterments,  which extend the useful lives
of existing  equipment,  are  capitalized  and  depreciated.  Upon retirement or
disposition  of  property  and  equipment,  the  cost  and  related  accumulated
depreciation  are removed from the accounts  and any  resulting  gain or loss is
recognized in the consolidated statements of operations.

Leasehold  improvements  are  amortized  over the life of the existing  lease of
twenty two months.

Intangible assets
-----------------

Intangible  assets are stated net of accumulated  amortization.  Amortization is
provided using the straight-line  method over three years. The Company evaluates
on a regular basis whether events and circumstances  have occurred that indicate
that the carrying amount of intangible assets may warrant revision.

Long-lived assets
-----------------

The Company  periodically reviews the values assigned to long-lived assets, such
as property and equipment and intangibles,  to determine whether any impairments
are other than temporary. During the year ended June 30, 2000, the Company wrote
off  $2,467,749  due to  impairment.  Management  believes  that the  balance of
long-lived assets in the accompanying balance sheets are appropriately valued.

Sources of supplies
-------------------

The Company relies on third-party networks,  local telephone companies and other
companies to provide data  communications  capacity.  Although  management feels
alternative telecommunications facilities could be found in a timely manner, any
disruption of these services could have an adverse effect on operating results.

Income taxes
------------

Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to differences  between the recorded book basis and tax basis
of assets and liabilities  for financial and income tax reporting.  The deferred
tax assets and liabilities represent the future tax return consequences of those
differences,  which will  either be taxable  or  deductible  when the assets and
liabilities  are recovered or settled.  Deferred  taxes are also  recognized for
operating  losses that are  available to offset  future  taxable  income and tax
credits that are available to offset future federal income taxes.

Revenue recognition
-------------------

The Company recognizes revenue when internet-related  services and bandwidth are
provided.  Revenue from the sale of software is recognized  when the software is
delivered  to the  customer.  Revenue  related to the  maintenance  and  further
modification of software previously sold is recognized as the work is performed.


                                      F-10
<PAGE>


                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of significant accounting policies continued:

Stock-based compensation
------------------------

SFAS No.  123,  "Accounting  for  Stock-Based  Compensation"  permits the use of
either a fair value based method or the method defined in Accounting  Principles
Board  Opinion 25,  "Accounting  for Stock  Issued to  Employees"  ("APB 25") to
account for stock-based compensation  arrangements.  Companies that elect to use
the method  provided in APB 25 are required to disclose pro forma net income and
earnings per share that would have resulted from the use of the fair value based
method.  The  Company  has  elected  to  continue  to  determine  the  value  of
stock-based  compensation  arrangements  under  the  provisions  of APB 25  and,
accordingly, has included pro forma disclosures under SFAS No. 123.

Fair value of financial instruments
-----------------------------------

SFAS 107,  "Disclosure  About Fair  Value of  Financial  Instruments,"  requires
certain  disclosures  regarding  the fair value of  financial  instruments.  The
Company has determined,  based on available  market  information and appropriate
valuation   methodologies,   the  fair  value  of  its   financial   instruments
approximates  carrying value. The carrying amounts of cash, accounts receivable,
prepaid expenses,  accounts  payable,  accrued  expenses,   and    other accrued
liabilities  approximate  fair  value  due to  the  short-term  maturity  of the
instruments.

Loss per share
--------------

The Company has adopted SFAS, No. 128,  Earnings per Share.  Under SFAS 128, net
loss per  share-basic  excludes  dilution  and is  determined  by dividing  loss
available to common shareholders by the weighted average number of common shares
outstanding during the period. Net loss per share-diluted reflects the potential
dilution  that could occur if  securities  and other  contracts  to issue common
stock were  exercised or converted  into common  stock.  As of June 30, 2000 and
1999, there were 74,549 and 87,999 stock options respectively, and 47,000 common
stock purchase  warrants  outstanding which were not included in the calculation
of net loss per share-diluted because they were antidilutive.

Recently issued accounting pronouncements
-----------------------------------------

The Company has adopted  Statement  of  Financial  Accounting  Standard  No. 133
("SFAS No.  133"),"Accounting for Derivative Instruments and Hedging Activities"
for the year  ended  June  2000.  SFAS  No.  133  establishes  a new  model  for
accounting for  derivatives  and hedging  activities and supersedes and amends a
number of existing  standards.  The application of the new pronouncement did not
have a material impact on the Company's financial statements.

Note B:  Related party transactions
-----------------------------------

During the year ended June 30,  1999 the former  President  of the  Company  and
another entity owned by the former  President of the Company,  paid on behalf of
the Company  certain  expenses  totaling  $103,976.  The former  President  also
advanced $35,648 to the Company for working capital purposes. The Company repaid
$29,725 to the former President and issued a seven and half percent note payable
to the former  President for the remaining  $109,899.  As of June 30, 1999,  the
Company repaid the note and accrued interest of $3,241 for a total of $113,140.

The former President advanced the Company an additional $105,000 in exchange for
a note payable to the former  President.  The Company repaid the $105,000 within
sixty days of issuance of the note, and did not accrue any interest.


                                      F-11
<PAGE>

                                 QUEST NET CORP.
                                 ---------------


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note B:  Related party transactions continued
---------------------------------------------

The Company  entered  into an  agreement  to pay  $135,000 to an  affiliate  for
consulting fees related to the Company's acquisition of equipment. The equipment
purchase is discussed in Note D. The Company paid the affiliate  $35,000 and has
recorded a due to  related  party in the  amount of  $100,000,  which was repaid
during the year ended June 30, 2000.  The affiliate  also  performed  consulting
services  during the year ended June 30, 1999 for the Company  valued at $7,600.
For payment of those services the Company issued 101,333 shares of the Company's
common  stock to the  affiliate  and recorded the charge for the services at the
market value of the stock issued, $303,999.

From time to time during the year ended June 30, 1999,  the Company paid certain
expenses  related to ventures the former  President is associated with, but have
no relative  business  purpose to the Company.  The amounts  totaled $97,360 and
have been deducted from amounts accrued and payable to the President pursuant to
his employment agreement.

In  connection  with the  acquisition  of  CWTel,  Inc.,  the  Company  owes its
President  $637,332  consisting  of  $337,332  of  liabilities  assumed  in  the
transaction and $300,000 as part of the consideration of the purchase price. The
amount due of $337,332 is non-interest bearing and due on demand.

In February  2000, due to management  conflict as to the direction of Quest,  it
was mutually  decided  between Quest and its President at the time,  Rebecca Del
Medico,  that Quest would be in a better  situation  if someone  with more of an
Operational/Technological  background  filled  that  position.  As  part  of the
termination  agreement,  Ms. Del Medico received $50,000 and the right to 50,000
shares of Quest's  common  stock,  which Quest had accrued over the three month,
ended December 31, 1999.

Note C:  Property and equipment
- -------------------------------

Furniture and equipment consisted of the following at June 30:

                                            2000
                                         ----------
          Office equipment ............  $   3,500
          Computer equipment ..........    285,507
          Software ....................    116,575
                                         ----------
                                           405,582
          Less accumulated depreciation   (112,600)
                                         ----------
                                         $ 292,982
                                         ==========

Property not in service includes $392,000,  which represents items returned to a
vendor  subsequent  to June 30, 2000 as payment for amounts  due. The Company is
currently  negotiating to return an additional  $160,000 of equipment to another
vendor.

Note D:  Shareholders' equity
-----------------------------

Preferred stock
---------------

The Company is authorized to issue five million shares of no par value preferred
stock which may be issued in series with such designations,  preferences, stated
values,  rights,  qualifications  or  limitations  as determined by the Board of
Directors.

During the year ended June 30, 1999,  the Company  issued  60,000  shares of its
redeemable  convertible  preferred stock with a stated value of $10 per share in
exchange for certain software used in transacting  credit card business over the
internet.  The preferred stock was convertible  into the Company's  common stock
based on the average five day bid price for the Company's common stock as of the
date of conversion.  The Company  received notice of conversion on September 21,
1998.  The five day average bid price prior to conversion  was $.8610 per share.
The preferred  stock was converted into 300,000  common  shares.  The conversion
rate in accordance with the preferred stock agreement was 696,864 common shares.
The Company has recorded additional paid in capital in the amount of $341,700 to
reflect  the value of the  excess of the  conversion  over the fair value of the
common stock.

                                      F-12
<PAGE>

                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note D:  Shareholders' equity continued
---------------------------------------

Preferred stock continued
-------------------------

During the year ended June 30, 1999,  the Company  issued  100,000 shares of its
convertible  redeemable  preferred  stock with a stated  value of $10 per share,
along  with  2,607,660  shares of its  common  stock in  exchange  for  computer
equipment at a cost of $1,724,520. The preferred stock was redeemable six months
from date of issuance. In the event of non-redemption,  the holder had the right
to convert the preferred shares into common stock of the Company at a conversion
price equal to the average bid and asked price of the common stock for the three
trading days prior to conversion.  The preferred  stock was valued at $1,000,000
based on the stated and  redemption  value of the preferred  stock of $10.00 per
share.  The  remaining  purchase  price of $724,520 was  allocated to the common
stock.  Based on a third  party  independent  appraisal  of the  equipment,  the
Company  recorded  the  transaction  at  the  fair  value  of the  equipment  of
$1,724,520.  The  preferred  stock was redeemed for  $1,000,000  during the year
ended June 30, 2000.

Common Stock
------------

On October 16, 1998 the Company reversed its 4,400,000 outstanding common shares
to  440,000  to give  effect  to a one for ten  reverse  split  approved  by the
shareholders.

On December  31, 1998,  the Board of  Directors  approved a three for one common
stock  dividend to  shareholders  of record as of January 6, 1999. The number of
shares issued in the dividend of 15,525,081 was greater than twenty five percent
of the  outstanding  shares  prior to the  dividend,  therefore  the Company has
accounted for the transaction as if it were a forward three-for-one stock split.
Earnings per share calculations have been retroactively restated for all periods
presented to give effect to the dividend.

During the year ended June 30, 1999 the  Company  sold  1,039,248  of its no par
value common stock in exchange for $925,000 in cash,  $42,400 of equipment  (see
discussion of equipment  acquired for $1,724,520  above) and $32,600 in services
valued at the market value of the stock issued,  $903,999.  The  offerings  were
conducted on behalf of the Company through its executive officers and directors.
The shares offered were not registered and were offered pursuant to an exemption
from  registration  claimed under Section 3(b) of the Securities Act of 1933, as
amended,  and Rule 504 of  Regulation  D  promulgated  thereunder.  The  Company
incurred  $17,950 in legal costs related to the  offerings.  The offering  costs
were paid with $2,950 cash and  the issuance of 24,000  shares of the  Company's
restricted  stock valued at the cost of the services of $15,000.  The costs have
been  deducted  from  the  offering  proceeds  and are  recorded  as such in the
accompanying consolidated financial statements.

Shares sold to one shareholder in conjunction with the above-mentioned  offering
also included 47,000 warrants to purchase  additional shares of the Company's no
par value  common  stock for $9.40 per  share.  The  warrants  may be  exercised
anytime  beginning  January 25, 2000 and prior to January 25, 2001.  The Company
valued the warrants at $7,191  using  pricing  methods  similar to those used in
valuing options under SFAS 123.  No warrants have been exercised to date.

In January 1999 the Company  acquired from two different  individuals the rights
to the domain  names  Boats  Online  and Cars  Online for  $10,000  and  $4,000,
respectively.  The  purchase  price  was paid in  1,000  and 500  shares  of the
Company's restricted stock,  respectively valued at $5,000 and $2,000 along with
$5,000 and $2,000 in cash, respectively.

On February 12, 1999 the Company issued 29,326 shares of its  restricted  common
stock valued at the market price of the Company's free-trading common shares, or
$200,000, and $135,000 in cash, in exchange for all of the outstanding shares of
Wings Online, Inc.

On May 3, 1999 the Company  entered  into an agreement  with AVX  Communications
whereby the Company would receive  certain assets valued at $300,000 in exchange
for the issuance of 39,894 shares of the Company's  restricted  common stock.

                                      F-13
<PAGE>
                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note D:  Shareholders' equity continued
--------------------------------------

Common Stock continued
----------------------

On May 27,  1999,  pursuant to an  exemption  from  registration  claimed  under
Section  3(b) of the  Securities  Act of  1933,  as  amended,  and  Rule  506 of
Regulation D  promulgated  thereunder,  the Company  sold 910,747  shares of its
common stock for $5,000,000 to one  shareholder.  The costs of the offering were
legal and finders' fees of $350,000,  which have been deducted from the proceeds
of the offering in the accompanying consolidated financial statements.

In March 2000,  the Company issued 275,000 shares of its common stock for all of
the shares  of  common stock issued and outstanding of Parputt Enterprises, Inc.
The exchange has been accounted for as a recapitalization of the Company.

In March 2000, the Company  acquired all of the shares of common stock of CWTel,
Inc. in consideration of $200,000,  310,000 shares of its common stock valued at
$700,000 and $300,000 in notes  guaranteed  by the issuance of 30,000  shares of
preferred stock. Additionally, the sole shareholder of CWTel became President of
the Company and was issued  50,000  restricted  shares of common stock valued at
$100,000 under terms of his employment agreement as president.

In April 2000, the Company issued 32,787 shares of its common stock valued at
$121,000 for leasehold improvements.

During the year ended June 30, 2000 the Company's former transfer agent reissued
530,000  shares  to  an  existing   shareholder  without  cancelling  or  taking
possession of the original  certificate.  The Company is currently attempting to
have the shares  returned  and  cancelled.  If the shares are not  returned  the
Company  will record the issuance of such shares in the  subsequent  period with
the related compensation expense.

 Note E: Stock based compensation
---------------------------------

On December 11, 1998,  pursuant to employment  contracts with key management and
officers,  the Company issued  175,000  shares of the Company's  common stock as
compensation  to three  employees.  The Company has recorded stock  compensation
expense of  $514,063  based on the market  price of the  Company's  free-trading
common stock as of the date of the grant, which was December 1, 1998.

On January 5, 1999 the Company  issued  10,000 shares of its  restricted  common
stock to a former officer of the Company as payment for services.  The stock was
valued at the market  price of the  Company's  free-trading  common  stock as of
January 5, 1999 and  accordingly  the  Company  has  recorded  $101,250 in stock
compensation expense.

On January 5, 1999 the Company  issued  7,667  shares of its  restricted  common
stock, valued at the market price of the Company's  free-trading common stock as
of January 5, 1999, to its board of directors and accordingly recorded a $77,628
charge to operations as directors' fees.

On February 12, 1999,  the Company  issued to an officer of the Company  100,000
shares of the  Company's  restricted  common  stock as payment  pursuant  to the
officer's  employment  agreement.  The employment  agreement  dated July 1, 1998
states that the officer is to receive  50,000  shares per year,  25,000 of which
are to be issued  each six months  beginning  January 1. The  Company  failed to
issue  the  officer  the  25,000  shares  prior to the  three  for one  dividend
effective  January 6, 1999.  Therefore  to make the officer  whole,  the Company
issued 100,000  shares,  valuing them at the total value of 25,000 shares at the
market price of the Company's  free-trading stock which was $6.187 on January 1,
1999, resulting in stock compensation expense of $154,675.

                                     F-13A
<PAGE>

                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note E:  Stock based compensation continued
-------------------------------------------

On March 2, 1999 as  payment  for $5,000 in  consulting  services,  the  Company
issued 4,000 shares of its restricted  common stock,  valued at the market value
of the stock issued, $29,375.

On March 10,  1999 as payment for $10,000 in  consulting  services,  the Company
issued 677 shares of its restricted common stock,  valued at the market value of
the stock issued, $8,801.

During the year ended June 30,  2000,  the  Company  issued  423,522  restricted
shares of its common stock to the former  President of the Company in accordance
with the terms of his  employment  contract.  The shares  were  valued  based on
market at the  respective  dates of grant at $1,734,000 of which  $1,037,000 had
been  accrued as of June 30,  1999.  The Company  issued an  additional  237,500
shares of its common stock to employees,  directors and professionals  valued at
$534,000, the  market  value on the  respective  date of  grants,  for  services
rendered of which $81,000 had been accrued as of June 30, 1999.

In March 2000,  the Company  entered  into an agreement  with a  consultant  for
services.  In  consideration  of such  services the Company paid the  consultant
$150,000  and issued  100,000  shares of its common  stock valued at $214,000 in
accordance with the agreement.
                                      F-14
<PAGE>


                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note E:  Stock based compensation continued
- -------------------------------------------

Common Stock options
--------------------

On September 9, 1998 the Board of Directors approved a performance bonus plan in
the  form of  common  stock  options  with an  exercise  price  of  $.012 to the
President  and CEO of the  Company.  The  President  would  receive one share of
restricted  common stock for every $100.00 of earning assets  (increase in total
assets)  generated prior to and after September 9, 1998. The number of shares to
be  received  as options  are to be  calculated  at the end of each  quarter and
expire five years from the date of grant which is considered to be the date both
the strike price and number of shares are determined. On December 1, 1998, based
on unaudited quarterly financial information,  the Board of Directors granted to
the President options to purchase  1,310,693 shares of the Company's  restricted
common  stock for $.012 per  share.  The  Company  recorded  stock  compensation
expense in accordance with APB 25 of $3,998,269 which was the difference between
the exercise  price of $.012 and the market value of the Company's  common stock
on December 1, 1998 of $3.05. The President exercised the options in December of
1998. No other options have been granted pursuant to the performance bonus plan.

On March 26, 1999, the Company granted options to its three outside directors to
purchase 5,000 shares of the Company's  common stock for $6.00 per share,  which
was the market value of the  Company's  common  stock on that date.  The options
vest in two equal  increments  of 2,500 shares six months and twelve months from
the date of grant,  as long as the option  holders  are  members of the board at
time of vesting.  The options expire two years from date of vesting.

On March 30, 1999 the  Company  granted  options for 9,999  shares of its common
stock,  to an  employee,  exercisable  for $6.00 per share.  The options vest on
March 30, 2000 and expire on March 30,  2002.  The options  were  granted at the
market value of the  Company's  common stock as of March 30, 1999. In accordance
with APB 25, no compensation expense was recorded.

On April 5, 1999 the Company  granted  options  for 25,000  shares of its common
stock, exercisable for $4.00 per share to an officer, who resigned subsequent to
the  granting of the  options.  The options were vested on the date of grant and
expire  April 5, 2000.  The  options  were  granted  at the market  value of the
Company's  common  stock as of April 5,  1999.  In  accordance  with APB 25,  no
compensation expense was recorded.

On May 17, 1999 the  Company  granted  options  for 10,000  shares of its common
stock, exercisable for $7.25 per share to certain consultants.  The options were
granted at the market  value of the  Company's  common stock as of May 17, 1999.
They are fully vested and expire on May 17, 2001.  The fair value of the options
as determined in accordance with SFAS No. 123 is $25,800 and has been charged to
operations.

On May 17, 1999 the  Company  granted  options  for 28,000  shares of its common
stock,  exercisable for $7.25 per share to certain  employees.  The options were
granted at the market  value of the  Company's  common stock as of May 17, 1999.
The options vest in six months from the date of grant.  In  accordance  with APB
25, no compensation expense was recorded.

On November 1, 1999, the Company granted options for 11,550 shares of its common
stock  exercisable  for $1.06 per share,  to one employee.  The options vest one
year from the date of grant and expire on November 1, 2004.  The exercise  price
was below  market  value and  accordingly  compensation  expense of $11,585  was
recorded.

                                      F-15
<PAGE>


                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note E:  Stock based compensation continued
-------------------------------------------

Summary
-------

A summary of the status of the Company's stock option awards as of June 30, 2000
and 1999, and the changes during the periods then ended are presented below:

                                          Stock Options
                       ---------------------------------------------------------
                                             Weighted
                                             average
                         Shares           exercise price          Exercisable
                       -----------       ----------------    -------------------
Outstanding at

June 30, 1998:               -                   -                         -
  Granted               1,398,692              $0.45                  1,388,692
  Exercised            (1,310,693)             $0.12                 (1,310,693)
  Canceled                   -                   -                         -
                      ------------       ----------------    -------------------
Outstanding at

June 30, 1999:             87 999              $5.97                     87,999
  Granted                  11,550              $1.06                     11,550
  Exercised                  -                   -                         -
  Canceled/Expired        (25,000)             $4.00                    (25,000)
                      ------------       ----------------    -------------------
Outstanding at June
30, 2000                   74,549               5.87                     74,549

The following table summarizes  information  about exercisable stock options
at June 30, 2000:
<TABLE>
<CAPTION>

                                                Outstanding                                                 Exercisable
                ----------------------------------------------------------------------------    -----------------------------------
<S>               <C>                 <C>                  <C>                  <C>               <C>                  <C>

                    Range of                                 Remaining            Average                                Average
                    Exercise             Number             Contractual          Exercise            Number             Exercise
                     Price             Outstanding              Life               Price           Exercisable            Price
                ----------------    -----------------    ------------------    -------------    -----------------     -------------
Options:            $1.06 to             74,549               1 year to            $5.87              74,549               $5.87
                    $7.25                                     4.4 years
</TABLE>


SFAS 123
--------

In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial Accounting  Standards No. 123 (SFAS 123),  "Accounting for Stock-Based
Compensation".  SFAS 123  encourages  the use of a fair  value  based  method of
accounting  for  compensation  expense  associated  with stock option awards and
similar plans.  SFAS 123 permits the continued use of the intrinsic  value based
method prescribed by APB 25, but requires additional disclosures,  including pro
forma  calculations of net earnings and earnings per share, as if the fair value
method of accounting  prescribed by SFAS 123 had been applied for the applicable
periods.

                                      F-16
<PAGE>


                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note E:  Stock based compensation continued
-------------------------------------------

SFAS 123 continued
------------------

The fair value of each option  granted has been  estimated  as of the grant date
using the Black-Scholes option-pricing model with the following weighted-average
assumptions:  risk-free interest rate of 5.63 percent, expected volatility of 80
percent,  expected life of two to five years, and no expected dividends.

Had  compensation  expense been determined  based on the fair value at the grant
date,  and  charged  to  expense  over  vesting  periods,  consistent  with  the
provisions of SFAS 123, the Company's net loss and net loss per share would have
decreased to the pro forma amounts indicated below:

                                                           June 30,
                                                ------------------------------
                                                   2000              1999
                                                ------------     -------------
As reported:
 Net loss .................................     $ (9,220,669)    $ (9,032,794)
 Net loss per share - basic and diluted ...     $      (0.41)   $      (0.68)
Pro Forma:
 Net loss .................................     $ (9,234,183)    $ (9,121,219)
 Net loss per share - basic and diluted ...     $      (0.41)    $      (0.68)

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options,  which have no vesting  restrictions and are fully
transferable.   Option  valuation  models  also  require  the  input  of  highly
subjective  assumptions  such as expected  option life and expected  stock price
volatility.  Because  the  Company's  stock-based  awards  have  characteristics
significantly  different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate,  the
Company  believes that the existing option  valuation  models do not necessarily
provide a reliable single measure of the fair value of its stock-based awards.

Note F: Income taxes
--------------------

A reconciliation of the U.S.  statutory federal income tax rate to the effective
tax rate follows for the years ended June 30, 2000 and 1999:




                                                       June 30,
                                           ---------------------------------
                                               2000               1999
                                           --------------     --------------
    U.S. statutory federal rate..........          34.00%             34.00%
    State income tax rate,
       net of federal benefit............               -                 -
    Permanent differences:
    Deferred offering costs..............               -              1.42%
    Stock based compensation.............          (5.00%)           (15.20%)
    Other................................               -              (.02%)
    Temporary differences:
    Depreciation expense.................               -               .20%
    Allowance for bad debt...............               -             (3.35%)
    Net operating loss for which no tax
      benefit is currently available.....         (29.00%)           (17.05%)
                                           --------------     --------------
                                                       -%                 -%
                                           ==============     ==============

                                      F-17
<PAGE>


                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note F: Income taxes continued
------------------------------

At June 30, 2000, deferred taxes consisted of the following:


    Deferred tax assets,
    Net operating loss..................  $  4,000,000
    Valuation allowance.................    (4,000,000)
                                          -------------
          Net deferred taxes............  $          -
                                          =============

The valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery.  The net operating loss carryforward  expires through the
year 2020.

The valuation  allowance will be evaluated at the end of each year,  considering
positive  and  negative  evidence  about  whether the deferred tax asset will be
realized.  At that time,  the  allowance  will either be  increased  or reduced;
reduction could result in the complete  elimination of the allowance if positive
evidence  indicates  that the  value of the  deferred  tax  assets  is no longer
impaired and the allowance is no longer required.

Should the Company undergo an ownership  change as defined in Section 382 of the
Internal  Revenue  Code,  the Company's  tax net  operating  loss  carryforwards
generated prior to the ownership change will be subject to an annual  limitation
which could reduce or defer the utilization of these losses.

Note G:  Acquisitions
---------------------

On June 24, 1998, the Company entered into an agreement with PACT  Communication
Group,  Inc.  ("Pactcom")  to acquire  certain assets of Pactcom in exchange for
2,000,000  shares of the Company's  restricted  common stock.  Subsequent to the
transaction with Pactcom, a former shareholder and officer of Pactcom became and
officer and director of the Company, therefore the transaction was recorded as a
transfer of assets  between  entities under common control and has been recorded
at the historical cost basis of Pactcom as determined  under generally  accepted
accounting principles.

The assets acquired include equipment,  software,  furniture and an office lease
deposit,  which have been  recorded  on the  Company's  books at  $125,274.  The
Company also acquired  Pactcom's  contracts with  BellSouth  Telecommunications,
Inc.  ("BellSouth")  and  WorldPass  Communications  Corporation  ("WorldPass"),
office leases and certain employment agreements.  There was no value assigned to
any of the above  contracts in conjunction  with the  acquisition.  Based on the
total value assigned to the assets received,  the Company has valued the 200,000
(restated from 2,000,000)  shares issued,  as consideration  for the assets,  at
$125,274.

During the year ended June 30, 1999, the Company  discovered  that Pactcom could
not assign the  BellSouth  contract to the Company and Pactcom has  subsequently
terminated  the  contract.  Amounts due under the contract  for any  termination
costs have not been accrued on the Company's records as management believes that
the costs should accrue to Pactcom.

The WorldPass contract was terminated during the year ended June 30, 1999.

On February 15, 1999 the Company  purchased all of the outstanding  common stock
of Wings Online,  Inc. ("Wings") in exchange for $135,000 cash and 29,326 of the
Company's  common stock  valued at $200,000.  The common stock was valued at the
average bid and asked price for the three  trading  days prior to closing  which
was $6.82.  Wings was acquired from an independent and unaffiliated third party.
Net  assets of Wings as of the date of the  acquisition  totaled  $3,372,  which
approximated fair value. As part of the acquisition,  the previous  shareholders
of  Wings  entered  into an  agreement  to not  compete  with  the  Company  for
thirty-six  months.  The Company has recorded the  transaction  as a purchase in
accordance  with Accounting  Principles  Board Opinion No. 16. The excess of the
purchase price over the fair value of the net assets,  in the amount of $331,628
has been allocated to the non-compete  agreement and is being amortized over the
life of the agreement. The balance of the non-compete was written off during the
year ended June 30, 2000. The  accompanying  consolidated  financial  statements
include the  results of  operations  of Wings from the date of the  acquisition,
February 15, 1999.



                                      F-18
<PAGE>

                               QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following pro forma  condensed  consolidated  statement of operations  gives
effect to the acquisition of Wings as if it had occurred at the beginning of the
period  presented.  The  pro  forma  financial  information  should  be  read in
conjunction with the separate audited financial  statements and notes thereto of
each of the  companies  included  in the pro  forma.  The  pro  forma  financial
statements do not include the results of  operations  of CWTel,  as such amounts
were immaterial.

The pro forma condensed consolidated statement of operations are not necessarily
indicative  of  results  of  operations  had  the  acquisition  occurred  at the
beginning of the periods presented nor of results to be expected in the future.


            PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                   For the years ended June 30, 1999


                                                     1999
                                                  ----------

Revenues .......................................$  1,271,312
Operating expenses ............................. (10,695,916)
(Loss) income from operations ..................  (9,424,604)
Interest expense ...............................      (5,493)
Interest income ................................       8,566
Net (loss) income ..............................  (9,421,981)
Net (loss) income per share-basic and diluted ..$      (0.69)
Basic and diluted shares outstanding ...........  13,683,111

On May 3, 1999,  the Company  purchased  certain  assets,  including  computers,
software  licenses,  video  editing  and  studio  equipment,  office  equipment,
inventory,  contracts for software development and interactive kiosk systems and
related  software for $300,000 from AVX  Communications.  The purchase price was
paid in 39,894 shares of the Company's  restricted  common stock,  valued at the
average bid and asked  price for the three  trading  days prior to closing.  The
fair value of the assets  received is $89,144.  The excess of the purchase price
over the fair value of the assets  received is $210,856 and has been recorded as
goodwill in the accompanying consolidated financial statements.  During the year
ended June 30, 2000, the balance of goodwill was written off.

In February  2000,  Quest had decided to cancel its purchase of shares of Africa
Internet Corp. Quest had paid $200,000 and issued  $2,433,778  restricted shares
of its  common  stock  as  the  purchase  price.  Pursuant  to the  cancellation
agreement,  the Company  received back the shares issued for the acquisition and
paid a cancellation penalty of $100,000 and the balance was agreed would be paid
back in one year with an interest bearing note, at 7% per  annum, as a guarantee
for that amount.

On February 25, 2000, Quest entered into a Stock Purchase  Agreement,  effective
March 1, 2000 to purchase CWTel, Inc.  ("CWTel") from Charles Wainer for the sum
of $1,200,000;  $200,000 was paid at closing,  $700,000 was paid by the issuance
of 360,000 share of the Company's restricted common stock and $300,000 was to be
paid in three equal  payments at 90 days,  180 days,  and 270 days from closing.
These  payments  were  represented  by  promissory  notes and  guaranteed by the
issuance,  at closing, of 30,000 shares of preferred stock, with a face value of
$10.00 per share.  The Company is  presently in default on the first and  second
payments under the purchase agreement.  CWTel provides communication services to
commercial and residential customers.  The company is a switch-based carrier for
local and long distance voice calls utilizing conventional  transmission methods
and voice over IP protocols.  CWTel also provides  high-speed  Internet service,
dial-up  Internet  access,  and web hosting.  CWTel offers local dial tone, long
distance  calling,  and  high  speed  Internet  access  to  tenants  located  in
commercial  buildings.The  Company has recorded the transaction as a purchase in
accordance  with Accounting  Principles  Board Opinion No. 16. The excess of the
purchase  price over the fair value of the net  liabilities,  in the amount of $
1,433,693 has been recorded as goodwill. The balance of the goodwill was written
off during the year ended June 30, 2000. The accompanying consolidated financial
statements  include  the  results  of  operations  of  CWTel  from  the  date of
acquisition, March 1, 2000 through June 30, 2000.


                                      F-19
<PAGE>


                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note G:  Acquisitions continued
-------------------------------



Note H:  Commitments and contingencies
--------------------------------------

Litigation
----------

The  Company is involved in various  legal  proceedings  that have arisen in the
ordinary course of business.  While it is not possible to predict the outcome of
such proceedings with certainty, in the opinion of the Company's management, all
such proceedings should not materially result in any liability, which would have
a material  adverse  effect on the financial  position,  liquidity or results of
operations of the Company.

The  Company  has written off  accounts  receivable  totaling  $867,842 of which
substantially  all is due from one customer.  The receivables  resulted from the
Company's sale of bandwidth and certain software and revenue  generated from the
installation and  modifications  to the software.  The Company has filed lawsuit
against the customer.  The lawsuit is in the discovery  stage and  management is
unable to determine at June 30, 2000 the outcome of the lawsuit.

On October 16, 2000,  Quest Net Corp.  issued to James LLC 25,900,000  shares of
its common stock. The shares were issued as partial settlement of a lawsuit that
was filed  against  Quest on May 5, 2000 in the United  States  District  Court,
Southern District of New York, by James LLC (Case No. 00 Civ. 3467). The lawsuit
stemmed from the sale of common stock to James LLC for  $5,000,000.  The lawsuit
alleged  that the Company  breached  its contract of sale to James LLC by, among
other  things,  failing  to  register  the  common  stock,  and  failing  to pay
liquidated  damages for the  non-effectiveness  of the  registration  statement.
James LLC  demanded  damages  in  excess  of  $5,000,000.  Quest  also  issued a
Promissory Note in the principal sum of $3,500,000,  maturing December 31, 2001,
and bearing interest at the rate eight percent per annum.

                                      F-20
<PAGE>


                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note H:  Commitments and contingencies continued
------------------------------------------------

Employment contracts
--------------------

The  Company had  employment  agreements  and  arrangements  with its  executive
officers.  The  agreements  are  dated  March  20,  1998 and July 1,  1998.  The
contracts  provide for an annual  issuance  of 300,000 and 50,000  shares of the
Company's  common stock,  respectively,  with fifty percent of the annual awards
payable  every six  months.  During the year  ended  June 30,  2000 and 1999 the
Company incurred  compensation  expense related to the contracts of $697,000 and
$1,729,675, respectively resulting  from the issuance of common shares valued at
the  market  price  of the Company's common stock on the anniversary date of the
awards.

The Company had employment  agreements  with certain key  management  during the
year June 30, 1999. The agreements were terminated during the year. Amounts paid
as stock  compensation  pursuant to the agreements  were 25,000 shares valued at
$73,438, which is recorded in the accompanying consolidated financial statements
as stock compensation expense for the year ended June 30, 1999.

In February  2000 as part of the CWTel  acquisition, Charles  Wainer was given a
five-year  employment  agreement as President of Quest, at an annual base salary
of $100,000  during the term,  with a 20% cost of living  increase per annum and
50,000 shares of the Company's common stock. Mr. Wainer also received options to
purchase  1,000,000 shares of the Company's common stock.  These options vest at
the rate if 50,000 shares every six months and Options for an additional  50,000
shares can be exercised  every time the Company has increased its revenue by one
million  dollars and has retained that revenue for a period of not less than two
months.  These  options  are  exercisable  at $2.68 per share  (110% of the fair
market  value  of the  Company's  common  stock  on the  date of the  Employment
Agreement).  Once vested,  the options will remain exercisable for one year from
the date of vesting.  After one year from the  vesting  date,  the options  will
become  null and void.  Mr.  Wainer  was also  appointed  as  interim  CEO and a
Director. At the same time, Victor Coppola resigned from the Board of Directors.

Consulting agreements
---------------------

In March 2000,  the Company  entered into a two-year  Consulting  Agreement with
Internet  Strategy  Group  Ltd.("Internet")  for a consulting fee of $20,000 per
month  during the first year and  $24,000  during  the second  year plus  60,000
shares of the Company's common stock to be issued every quarter in advance.  The
Company  and  Internet  mutually  agreed to rescind  the  consulting  agreement.
Internet  will continue to render  consulting  services to Quest until August 1,
2000 on an "as needed basis" for no additional  compensation.  As  consideration
for the rescission of the  agreement,  Quest paid to Internet the sum of $10,000
as reimbursement of non-accountable  expenses as payment to Internet for accrued
consulting  fees,  Quest  assigned to Internet the African  Internet  promissory
note, in the amount of $100,000. Accordingly, the note from African Internet and
the amount due Internet have been offset in the financial statements.

                                      F-21
<PAGE>


                                 QUEST NET CORP.
                                 ---------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note H:  Commitments and contingencies continued
------------------------------------------------

Non-cancelable leases
---------------------

The Company leases office space and communications equipment under five separate
non-cancelable  operating  leases  that expire in June 2002.  Total  office rent
expense  incurred  under these leases for the years ended June 30, 2000 and 1999
was $191,849 and $25,565,  respectively.  Future  minimum lease payments for the
leases  with  initial  terms in  excess  of one year as of June 30,  2000 are as
follows:

                     June 30, 2001 .........  $ 206,000
                     June 30, 2002 .........  $ 139,000

The lease  commitments  do not include  office space  vacated and  sub-leased of
which the Company  remains  contingently  liable in the event of  nonpayment  by
sublesee. Such amount totaled $321,000.

Securities and Exchange Commission
----------------------------------

Quest has been advised by the Securities and Commission (the  "Commission") that
they  have  issued  an order  directing  a  private  investigation  of  possible
violations  of Sections  17(a) of the  Securities  Act and Section  10(b) of the
Securities  Exchange  Act of 1934  and Rule  10b-5  promulgated  there  under by
certain  unnamed  persons.  The  Commission  has  also  advised  Quest  that the
investigation  should not be construed as an indication by the Commission or its
staff that any  violation  of law has  occurred,  nor as a  reflection  upon any
person, entity, or security.


Note J:  Unauthorized Loss on Property and Equipment
----------------------------------------------------

During the three months  ended March 31, 2000 the Company  scaled down its staff
and  management  team.  The Company also moved to its new  facility.  During the
move, it was discovered that two Mux's were lost or stolen from each warehouse.
This equipment is valued at approximately $ $655,000. After several meetings and
an  investigation  by the Board,  it was decided that the Company should proceed
with a claim  under its  insurance  policy.  The  Company  has written off those
assets on their balance sheet.

Note K:  Accounts Payable and Accrued Expenses
----------------------------------------------

Accounts  payable  and  accrued  expenses  at  June  30, 2000  consisted  of the
following:

                Accounts payable - trade          $   499,707
                Accrued consulting fees                10,000

             Amount due to:
                Equipment vendor (a)                  391,818
                Accrued rent     (b)                  706,309
                Other accruals                        125,954
                                                   ----------
                                                  $ 1,733,788
                                                   ==========

(a) The amount due to the  equipment  vendor was settled  subsequent to June 30,
2000 by returning equipment to the vendor.

(b) Accrued rent represents the remaining lease payments on premises  vacated by
the Company subsequent to June 30, 2000.

Note L:  Fourth Quarter Adjustments (Unaudited)
-----------------------------------------------

During the  fourth  quarter  of Fiscal  2000,  the  Company  made the  following
adjustments:

                Write-off of Long Lived Assets    $ 2,467,749




                                      F-22
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

         On November 2,  2000,  the  Board  of  Directors  of  Quest  Net  Corp.
terminated the accounting  firm of Cordovano & Harvey P.C., as Quest Net Corp.'s
Independent  Certified Public  Accountants.  Quest's lack of working capital has
prevented it from retaining  Cordovano & Harvey to complete the June 2000 audit.
Quest Net Corp. now has a new majority shareholder, James LLC, who has agreed to
provide the auditing firm of Feldman Sherb & Co., P.C. to complete the audit.

         During the Quest's two most recent fiscal years, and the interim period
preceding the date of termination,  there were no disagreements with Cordovano &
Harvey P.C.  on any matter of  accounting  principles  or  practices,  financial
statement  disclosure or auditing scope or procedure which  disagreement(s),  if
not resolved to the  satisfaction of Cordovano & Harvey P.C.,  would have caused
it to make reference to the subject matter of the  disagreement(s) in connection
with its report.

         During  Quest's two most  recent  fiscal  years and the interim  period
preceding Cordovano & Harvey P.C's termination, Cordovano & Harvey P.C. did not:

        >>  Advise Quest that the internal controls necessary for the registrant
        to develop reliable financial statements did not exist;

        >>  Advise Quest that information has come to the accountant's attention
         that  has  led  it to  no  longer  be  able  to  rely  on  management's
         representations,  or that has made it unwilling to be  associated  with
         the financial statements prepared by management;

        >>  Advise  Quest  of the  need to expand significantly the scope of its
         audit, or that information has come to the accountant's attention, that
         if further investigated may:

        >>  Materially impact the fairness or reliability of either:a previously
         issued  audit report or the  underlying  financial  statements;  or the
         financial  statements  issued  or  to be  issued  covering  the  fiscal
         period(s)   subsequent  to  the  date  of  the  most  recent  financial
         statements  covered by an audit report (including  information that may
         prevent  it  from  rendering  an  unqualified  audit  report  on  those
         financial statements), or

        >>  Cause it to be unwilling to rely on management's representations  or
         be associated with the registrant's financial statements, and

        >>  Require Cordovano & Harvey P.C. to expand  the scope of its audit or
         conduct such further investigation;

         During  Quest's two most recent  fiscal years,  and the interim  period
preceding Cordovano & Harvey P.C.'s termination, Cordovano & Harvey P.C. did not
advise   Quest that  information  has come its  attention  that it has concluded
materially impacts the fairness or reliability of either (i) a previously issued
audit  report or the  underlying  financial  statements,  or (ii) the  financial
statements  issued or to be issued covering the fiscal  period(s)  subsequent to
the date of the most  recent  financial  statements  covered by an audit  report
(including  information  that,  unless  resolved to  Cordovano  & Harvey  P.C.'s
satisfaction,  would prevent it from  rendering an  unqualified  audit report on
those financial statements).

                                       19
<PAGE>


         During Quest's two most recent fiscal years,  Cordovano & Harvey P.C.'s
report on the  financial  statements  did not  contain an  adverse  opinion or a
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principle other than a going concern qualification.

         On November 2, 2000, Quest engaged the accounting firm of Feldman Sherb
& Co., P.C. as its Independent Certified Public Accountants.  During Quest's two
most recent  fiscal years and the interim  period  preceding  the  engagement of
Feldman  Sherb & Co.,  P.C. , the Company did not consult with  Feldman  Sherb &
Co., P.C. on any matters.


                                    PART III

ITEM 9.  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS; AND
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
         -----------------------------------------------------------------------

         The following table sets forth certain information  concerning our sole
director and executive officer:

Name                    Age              Term              Position
----                    ---              ----              --------
Charles Wainer           38               2000           President, Interim
                                                         Chief Executive Officer
                                                         Chief Financial Officer
                                                          Director

         Our Directors hold office until the next annual meeting of shareholders
and the election and  qualification of their  successors.  Officers serve at the
discretion  of the  Board.  Until we encountered  cash  flow  problems,  Outside
Directors  were  compensated  $150 for  every  Board of  Director  Meeting  they
attended.

      In June 2000,  Julian Cantillo resigned from the Board of Directors.  In
September  2000,  Richard  Zaden  resigned  from the Board of  Directors  due to
personal and Quest related  circumstances;  none of which were  addressed in his
resignation. In November 2000, David Block resigned from the Board of Directors.
In  his  resignation, he  stated  that  such  resignation  was  due to  lack  of
communication  between Mr. Block and the President,  cancellation of the Officer
and Director Liability Insurance,  and the Company's non-action to resolve these
matters. Mr. Wainer is now the sole officer and Director of Quest.

Charles Wainer, Sole Officer and Director
-----------------------------------------
            Mr. Wainer  was  appointed President/Interim Chief Executive Officer
and a Director of Quest in February  2000.  From February  1998 to present,  Mr.
Wainer was Chief Executive Officer of CWTel, Inc., a telecommunications  company
located in Hallandale, Florida.  Quest purchased  CWTel,  Inc. in February 2000.
From December 1992 to February 1998, Mr. Wainer was Chief  Executive  Officer of
World Pass Communication Corp., a telecommunication company located in Aventura,
Florida.

            Mr.  Wainer  received  a  Bachelor  of Science Degree in Electronics
Engineering from Tel-Aviv University in 1982.

Limited Liability of Directors
------------------------------
         Provisions  included in our certificate of  incorporation,  as amended,
protect our  directors  against  personal  liability  for monetary  damages from
breaches of their duty of care. As a result,  our  directors  will not be liable
for monetary  damages from negligence and gross negligence in the performance of
their duties.  They remain  liable for monetary  damages for any breach of their
duty of loyalty to us, and our  stockholders,  as well as acts or omissions  not
made  in good  faith  or  which  involve  intentional  misconduct  or a  knowing
violation of law and for  transactions  from which a director  derives  improper
personal  benefit.  The liability of our  directors  under federal or applicable
state securities laws is also unaffected.

                                       20
<PAGE>

         While our directors have protection from awards of monetary damages for
breaches  of the  duty of care,  that  does not  eliminate  their  duty of care.
Equitable remedies,  such as an injunction or rescission based upon a director's
breach of the duty of care, are still available.


Compliance With Section 16(a) of the Securities Act of 1934

         Section 16(a) Beneficial  Ownership Reporting Compliance Based upon the
Company's  review of forms filed by directors,  officers and certain  beneficial
owners of the  Company's  common  stock (the  "Section  16  Reporting  Persons")
pursuant to Section 16 of the  Securities  Exchange Act of 1934, as amended (the
"Exchange  Act"),  the Company has  identified the following Form 3 filings that
were filed late by the Section 16 Reporting Persons during fiscal 2000:

        >>       Charles Wainer
        >>       Richard Zadin
        >>       David Block
        >>       Julian Cantillo
        >>       Thomas Magill
        >>       Paul Zeller

To the best of the  Company's  knowledge,  no Form 5 exit filing have been filed
by:

        >>       Richard Zadin
        >>       Julian Cantillo
        >>       Thomas Magill
        >>       Paul Zeller


ITEM 10.  EXECUTIVE COMPENSATION

         No  officer  received  compensation  in excess of  $100,000  during the
fiscal year. Quest has a five-year employment agreement with Charles Wainer, our
president,  which expired in March 2005. The agreement provides for at an annual
base salary of $100,000  during the Term, with a 20% cost of living increase per
annum and 50,000  shares of Quest's  common  stock.  Mr.  Wainer  also  received
options to purchase 1,000,000 shares of Quest's common stock. These options vest
at the rate of 50,000  shares  every six months and  options  for an  additional
50,000 shares can be exercised every time Quest has increased its revenue by one
million  dollars and has retained that revenue for a period of not less than two
months.  These  options  are  exercisable  at $2.68 per share  (110% of the fair
market value of Quest's common stock on the date of the  Employment  Agreement).
Once vested,  the options will remain  exercisable for one year from the date of
vesting.  After one year from the vesting date, the options will become null and
void.  Mr.  Wainer also received a stock grant of 50,000 shares of the Company's
common stock and a car allowance of $500 per month.

         The following table shows the compensation  received by our current and
past chief executive officers for during the past fiscal year.

                                       21


<PAGE>
<TABLE>
<CAPTION>


                             Annual Compensation                        Long-Term Compensation
                             -------------------                        ----------------------
Name & Principal             Year       Salary      Other Annual     Restricted   Securities/Underlying
Position                     Ended                  Compensation(3) Stock Awards    Option/SARs (1)
------------------------- --------- -------------- -------------- --------------- ------------------
<S>                       <C>        <C>              <C>            <C>             <C>

Charles Wainer,           6/30/00    $33,333.33       $1,500         $100,000         $100,000
President,
Acting CEO and Director

Camilo Pereira, former    6/30/00    $57,728.95       $8,000        $1,411,000           NA
CEO and Director

</TABLE>

1. Does not include options to purchase 50,000 shares, which vest in March 2001.
The  value of these  options  on the date for grant  was  $100,000.

Equity Incentive Plan
---------------------

        On October 29, 1999, the Board of Directors approved an Equity Incentive
Plan.  The Plan was to be approved by the  Shareholders  within  one  year.   No
Shareholder meeting was held to approve the Plan and the Plan is now void.

        At June 30, 2000, we had options to purchase  74,000  shares  of  common
stock outstanding.  These options were granted to employees and consultants. The
exercise price of these options range from $1.06 to $7.25 per share.


ITEM 11.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


         The following table sets forth the beneficial ownership of Quest common
stock as of November 13, 2000 as to (a) each person known to us who beneficially
owns  more  than 5% of the  outstanding  shares of our  common  stock;  (b) each
current director and executive  officer;  and (c) all of our executive  officers
and directors as a group.


Name and Address                 Number of Shares Owned       % of Outstanding
of Beneficial Owner                    Beneficially       Shares of Common Stock
-------------------              ----------------------   ----------------------
James LLC.                              26,810,000                         54.3%
C/o Citco Trustees (Cayman) LTD.
Corporate Centre, West
Bay Road, Po Box 31106 SMB
Grand Cayman, Cayman Islands, BWI.

Charles Wainer, Officer & Director         410,000                           *
2999 NE 191st Street, PH-8
Aventura, Florida 33180

All officers and directors                 410,000                           *
as a group (1) person

*Represents less than 1% of the outstanding shares of common stock.

Mr. Wainer's holdings include options to purchase 50,000 shares of common  stock
at $2.68 per share.

                                       22
<PAGE>

Except as indicated  above,  based on  information  provided by such persons,the
persons  named in the table above have sole voting  power and  investment  power
with respect to all shares of common stock shown beneficially owned by them.

Percentage  of  ownership  is  based  on  49,374,309   shares  of  common  stock
outstanding  as of  November  13,  2000,  plus each  person's  options  that are
exercisable within 60 days. Shares of common stock subject to stock options that
are exercisable  within 60 days of November 13, 2000 are deemed  outstanding for
computing the  percentage of that person and the group.  Mr.  Wainer's  holdings
include options to purchase 50,000 shares of common stock at $2.68 per share.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            In January 1999,  we issued a total of 101,333  shares of our common
stock to David Plant,  the father of Maxine Pereira and  father-in-law of Camilo
Pereira,  for consulting services rendered.  The consulting services were valued
at $7,600.  At the time of issuance  these  shares were valued at  $303,999.  In
addition,  in Mr. Plant was paid a  consulting  fee of $135,000.

         In  December  1998,  we  acquired  certain  assets  of  Grupo  Internet
Latinoamericano  valued at  $1,724,520  in exchange  for an aggregate of 100,000
shares of our  redeemable  preferred  stock and  2,607,660  shares of our common
stock. At the time of the  transaction,  Grupo Internet  Latinoamericano  was an
unaffiliated  third party. Quest redeemed the redeemable  convertible  preferred
shares in July 1999, at a redemption  price of $10.00 per share.  At the time of
the redemption,  Grupo Internet  Latinoamericano  owned 49.2% of our outstanding
common stock.

         From time to time  during  the year  ended  June 30,  2000,  Quest paid
certain expenses related to ventures Mr. Pereira is associated with, but have no
relative  business  purpose to Quest.  The amounts totaled $97,360 and have been
deducted  from  amounts  accrued  and  payable to Mr.  Pereira  pursuant  to his
employment  agreement by  decreasing  the shares to be issued to Mr.  Pereira in
connection with his employment  agreement by 14,978 shares valued at $97,360. In
November  1999,  Quest  instituted  a policy that  prohibits  payment of any new
expenses unrelated to its business. In addition,  the Policy provides that Quest
will not enter  into any  transaction  or loan with a related  party  unless the
transaction  or loan is on terms that are no less  favorable to us than we could
obtain  from  unrelated  third  parties.   A  majority  of  the   disinterested,
"independent"  members of our board of  directors  must  review  and  approve or
ratify any transaction involving related parties or conflicts of interest.

         In February  2000,  due to  management  conflict as to the direction of
Quest,  it was mutually  decided  between  Quest and its  President at the time,
Rebecca Del Medico,  that Quest would be in a better  situation  if someone with
more of an Operational/Technological background filled that position. As part of
the  termination  agreement,  Ms. Del Medico  received  $50,000 and the right to
50,000 shares of Quest's  common  stock,  which Quest had accrued over the three
month, ended December 31, 1999.

         In  February  2000,  Quest had also  decided to cancel its  purchase of
shares of Africa  Internet Corp.  Quest had paid $200,000 of the purchase price.
Pursuant to the  cancellation  agreement,  Quest received back the shares issued
for the acquisition, paid  a  cancellation  penalty  of $100,000 and the balance
was to be paid back in one year with an interest-bearing note as a guarantee for
that amount.  The note was subsequently  transferred to Internet  Strategy Group
Ltd. as payment for past due consulting fees.

         On February 25, 2000,  Quest entered into a Stock  Purchase  Agreement,
effective March 1, 2000 to purchase CWTel,  Inc. from Charles Wainer for the sum
of $1,200,000.  Of the purchase price $200,000 was paid at closing, $700,000 was
paid by the  issuance of 310,000  share of Quest's  restricted  common stock and
$300,000 was to be paid in three equal  payments at 90 days,  180 days,  and 270
days from closing.  These  payments  were  represented  by  promissory  note and
guaranteed by the issuance,  at closing,  of 30,000  shares of preferred  stock,
with a face value of $10.00 per share.  Quest is  presently  in default  for the
second payment under the purchase  agreement.  Mr. Wainer has presented  Quest's
Board of Directors with a notice of default.

         In March 2000, Quest entered into a two-year Consulting  Agreement with
Internet  Strategy  Group Ltd. for a consulting  fee of $20,000 per month during
the first and  $24,000 per month  during the second  year plus 60,000  shares of
Quest Net common  stock  annually,  to be issued every  quarter in advance.  Mr.
Pereira is an employee of Internet  Strategy Group Ltd.  Internet Strategy Group
Ltd. was to perform  consulting  and advisory  services on behalf of Quest on an
as-needed  basis,  not to exceed 60 hours per months.  Its duties  consisted  of
providing  advice and  consultation  with respect to all matters  relating to or
affecting the telecommunications  business. The agreement was terminated in July
2000 due to our  inability  to pay the  consulting  fees.  No shares were issued
pursuant to the agreement.

                                       23
<PAGE>

        From time to time Charles Wainer, our President, has accrued salary  and
loaned money to Quest.  All accrued salary has been paid, however Quest owes Mr.
Wainer $62,000 for loans advanced to it. The loans are evidenced by non-interest
bearing promissory notes and are due upon demand.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

A)       Exhibits included herein:
         ------------------------

B) Reports on Form 8-K
         NONE

(a)  Exhibits
Exhibit                    Description

1.1               Agreement and Plan of Merger between Parputt Enterprises, Inc.
                   and Quest Net Corp.
1.2               Articles of Merger
1.3               Certificate of Incorporation of Quest Net Corp.
1.4               Bylaws of Quest Net Corp.
2.                Asset Purchase Agreement (Pact)**
3.1(a)            Articles of Incorporation (Colorado)**
3.1(b)            Amended Articles of Incorporation(Colorado)**
3.1(c)            Articles of Incorporation (Florida)**
3.2               Bylaws**
3.2(a)            Amended and Restated Bylaws**
4.                Warrant (Zubeir Kazi)**
4.1               Warrant (Scott Goldstein)**
4.2               Warrant (DSF Capital)**
4.4               Warrant (Jeffery Stein)**
4.3               Warrant (Sheldon Goldstein)**
4.5               Equity Incentive Plan
10.               Lease (709)**
10.1              Lease (1008)**
10.2              Lease (901)**
10.3              Employment Agreement (Camilo Pereira)**
104               Employment Agreement (Maxine Pereira)**
10.5              Qwest Agreement*
10.6              Bell South Agreement*
10.7              E.spire Agreement*
10.8              Subscription Agreement (James LLC.)**
10.9              Registration Rights Agreement (James LLC.)**
10.10             Wireless Agreement*
10.11             Software Purchase Agreement (Secure Transaction  International
                   Corp.)**
10.12             Asset Purchase Agreement (Grupo Internet Latinoamericano)**
10.13             Software Purchase Agreement (Simplex)**
10.14             Asset Purchase Agreement (AVX, Inc.)**
10.15             Stock Purchase Agreement (Wings Online)**
10.16             Network Sales and Service Agreement (Real Time Cash, Inc.)**
10.17             Network  Sales  and  Service  Agreement (Real Time Encryption,
                   Inc.)**
10.18             Network  Sales  and  Service  Agreement  (Real  Time Wireless,
                   Inc.)**
10.19             Professional Consulting Agreement (Real Time Wireless, Inc.)**
10.20             Professional Consulting Agreement (Real Time Encryption,
                   Inc.)**
10.21             Professional Consulting Agreement (Real Time Phone Services,
                   Inc.)**
10.22             Employment Agreement (Rebecca J. Del Medico) ***
10.23             Form of Africainternet, Corp Stock Purchase Agreement***
10.24             Wainer Employment Agreement
10.25             CWTel Purchase Agreement
10.26             Internet Strategy Group Ltd. Consulting Agreement
20                Long Distance Public Notice**
20.1              License (Cuba Travel)**
21                Subsidiaries of Quest*
----------------------
*        Filed on August 11, 1999, as an Exhibit to the  Registration  Statement
          on Form SB-2.
**       Filed  on  August  11,  1999,  as  an Exhibit to Amendment No. 1 to the
          Registration Statement on Form SB-2.
***      Filed on December, as an  Exhibit  to  the  Amendment  No.  4,  to  the
          Registration Statement on Form SB-2
****     Filed  on  June  16,  2000  as an Exhibit to the Company's Form 10-QSB.
*****    Filed on March 30, 2000 as an Exhibit to the Company's Form 8-K

                                       24
<PAGE>


                                   SIGNATURES

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


                                            Quest Net Corp.


November 10, 2000               By:/s/ Charles Wainer, President

                                       25
<PAGE>


Pursuant to the  requirements  of the Securities  Act of 1933, as amended,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated.

Signatures                      Title                                 Date

/s/Charles Wainer            President                         November 10, 2000
---------------------    (Principal Accounting
                         and Financial Officer)
                          and sole Director

                                       26