SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-K



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|(X) | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
	 SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended: December 31, 2000

OR



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| | -----------------------------------------------------------------------------------------
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from
               to

Commission File Number: 0-29625



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HIGH SPEED NET SOLUTIONS, INC.

(Exact name of registrant as specified in its
charter)


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|------------------------ |  | ------------------------------------
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|Florida                  |  | 65-0185306                          
|(State of incorporation) |  | (I.R.S. Employer Identification No.)

434 Fayetteville Street Mall, Suite 600

Raleigh, North Carolina 27601


(919) 807-5600




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(Address, including zip code, and telephone number (including
area code) of



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

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

Common Stock, par value $.001 per share



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(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 Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes    No.

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
 No delinquent filers.

The aggregate market value of the shares of common stock held by
non-affiliates of the registrant was approximately $72,691,651
as of May 31, 2001 based on the average of the bid and
asked price of the stock reported for such date. For the purpose
of the foregoing calculation, the shares of common stock held by
each officer and director and by each person who owns 5% or more
of the outstanding common stock have been excluded in that such
persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination
for other purposes.

The number of shares outstanding of the registrants common
stock as of May 31, 2001 was 34,056,179.

DOCUMENTS INCORPORATED BY REFERENCE

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|     |  |          |  | Part of Form 10-K    
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|     |  | Document |  | is incorporated      
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|N/ A |  |          |  | None                 









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HIGH SPEED NET SOLUTIONS, INC.

FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000


TABLE OF CONTENTS

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|PART I  
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|Item 1.  |  | Business                                                                               |  |      | 2  | 
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|Item 2.  |  | Properties                                                                             |  |      | 24 | 
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|Item 3.  |  | Legal Proceedings                                                                      |  |      | 24 | 
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|Item 4.  |  | Submission of Matters to a Vote of Security
	Holders                                   |  |      | 25 | 
|PART II 
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|Item 5.  |  | Market for Registrants Common Stock and
	Related Shareholder Matters                  |  |      | 26 | 
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|Item 6.  |  | Selected Financial Data                                                                |  |      | 33 | 
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|Item 7.  |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |  |      | 36 | 
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|Item 7A. |  | Quantitative and Qualitative Disclosures about
	Market Risk                            |  |      | 52 | 
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|Item 8.  |  | Financial Statements and Supplementary Data                                            |  |      | 52 | 
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|Item 9.  |  | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure  |  |      | 52 | 
|PART III
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|Item 10. |  | Directors and Executive Officers of the Registrant                                     |  |      | 54 | 
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|Item 11. |  | Executive Compensation                                                                 |  |      | 58 | 
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|Item 12. |  | Security Ownership of Certain Beneficial Owners
	and Management                        |  |      | 64 | 
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|Item 13. |  | Certain Relationships and Related Transactions                                         |  |      | 66 | 
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|Item 14. |  | Exhibits, Financial Statement Schedules, and
	Reports on Form 8-K                      |  |      | 68 | 



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FORWARD-LOOKING STATEMENTS; RISKS AND UNCERTAINTIES

This annual report on Form 10-K for the year ended
December 31, 2000, contains forward-looking statements.
These statements relate to, among other things, future events or
our future financial performance, operating results, planned
product introductions and cash requirements. We have attempted
to identify forward-looking statements by terminology such as
will likely result, expect, will
continue, anticipate, estimate,
intend, plan, project,
outlook or similar expressions. These statements are
only predictions and are not guarantees of future performance.
They are subject to certain risks, uncertainties and other
factors, some of which are beyond our control, are difficult to
predict and could cause actual results, levels of activity,
performance or achievements to differ materially from those
expressed in the forward-looking statements.

This report also includes market data relating to, for example,
the anticipated growth of wireless subscribers and smart
handheld devices. These statements are based on estimates
contained in studies published by market research firms, such as
Dataquest. These firms arrived at their estimates by using
methodologies and assumptions chosen by them. These estimates
include estimates of the number of digital wireless subscribers
worldwide, the number of smart handheld devices shipped annually
worldwide, and the number of worldwide wireless subscribers with
Internet browsing capabilities. The methodologies and
assumptions used to make these estimates could prove to be
incorrect, in which case actual results would likely differ from
the estimates. The estimates and reports from which information
is cited in this annual report on Form 10-K were not
prepared for or on behalf of the Company or Summus, Ltd. and
neither the Company nor Summus, Ltd. compensated the market
research forms that prepared these reports.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
We are not obligated to update these statements or publicly
release the results of any revisions to them to reflect events
or circumstances occurring after the date of this report or to
reflect the occurrence of unanticipated events.

Certain risk factors could cause actual results to differ from
expectations are set forth below. We cannot assure you that our
results of operations will not be adversely affected by one or
more of these factors.

1



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PART I

Item 1.  Business.

Overview

High Speed Net Solutions, Inc. d/b/a Summus (we or
the Company), following its acquisition of
substantially all the assets of Summus, Ltd. (Summus,
Ltd.) in February 2001, is engaged in research and
development contract work for government agencies in the areas
of complex imaging and object recognition. Such contract work
represented 60% and 76% of Summus, Ltd.s revenues in the
years ended December 31, 2000 and 1999, respectively. Over
the past ten years, Summus, Ltd.s work in this area has
led to the development of:



| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | mine detection technologies (both land and sea);                                                                       
|
| |  | wireless sensor technologies such as automatic target
	recognition, de-noising and image compression and decompression;
|
| |  | side scan sonar 3D imaging;                                                                                            
|
| |  | missile imaging software (smart bomb technology); and                                                                  
|
| |  | 3D (simulation and mapping).                                                                                           

Our government contract work will continue to focus on solving
specific technical and scientific problems in the government
sector. The government contract work has led to the development
of software development kits that allow developers to create new
software products that are compatible with and complementary to
our software and technology, and revenue generation through
licensing and sales of that technology.

As of February 2001, we have revised our business plan,
consistent with the Summus, Ltd. business plan immediately prior
to the asset acquisition, to focus on applications of our
acquired compression software and technology in the mobile and
wireless Internet market. We are in the process of developing
proprietary compression software and technology to
enable the creation, transmission, playing and management of
multimedia content (e.g., still images, graphics, video) over
wireless networks. This data compression technology, the
foundation for our current and anticipated future products and
services, is designed to address the maximum data rate (referred
to as bandwidth) constraints of the existing
wireless network infrastructure, and is expected to remain of
value even after the anticipated widespread buildout and
deployment of the third generation (3G) wireless
network infrastructure, for which there are widely varying
estimates as to when this will occur, ranging between 2003 to
2007. See The Mobile and Wireless Market below.

We are targeting our software and technology toward certain
segments of the mobile and wireless markets, including:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | manufacturers of mobile and wireless devices such as
	Internet-enabled cell phones (so-called smart phones
	that include a microbrowser to allow the viewing of specifically
	formatted Internet information), wireless personal digital
	assistants (PDAs), two-way pagers and other handheld or portable
	devices (e.g., a laptop with a cable connection to a cell phone
	operating as a modem);
|
| |  | content providers or portals;                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | wireless application service providers; and                                                                                                                                                                                                                                                                                                                                                          
|
| |  | service providers such as mobile network operators and mobile
	virtual network operators.                                                                                                                                                                                                                                                                                                            

Through our wholly-owned subsidiary, Douglas May & Co.,
Inc., a marketing and advertising company, we also provide
design assistance and commercial content development, including
audio, video, images and animation, as well as web site design
and construction. Douglas May & Co. represented the primary
source of the Companys revenues in the year ended
December 31, 2000. We are in the process of seeking to
divest ourselves of this business together with our
MaxxSystem-based rich media direct service offering.
See Our

2



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Historic Operating Results/ Financial Condition

The Company has, since commencing business operations, incurred
(and expects to continue to incur for an extended period of
time) net losses. For the years ended December 31, 2000 and
1999, we had a net loss of $12,441,655 and $9,684,529,
respectively. As of December 31, 2000, we had an
accumulated deficit of $24,264,113 and a working capital deficit
of $3,051,731. With the foregoing in mind, our auditors have
included in their report on our consolidated financial
statements a qualification that our financial condition raises
substantial doubt about our ability to continue as a going
concern.

Summus, Ltd. has also incurred net losses. For the years ended
December 31, 2000 and 1999, Summus, Ltd. had a net loss of
$11,451,281 and $8,846,980, respectively. As of
December 31, 2000, Summus, Ltd. had an accumulated deficit
of $23,414,113 and a working capital deficit of $3,727,660. With
the foregoing in mind, Summus, Ltd.s auditors have
included in their report on the Summus, Ltd. financial
statements a qualification that its financial condition raises
substantial doubt about its ability to continue as a going
concern.

To date, we have generated limited revenue from our operations
and have been dependent upon issuances of our equity to raise
the necessary operating capital to sustain our operations.
Subject to our liquidity constraints, we intend to continue to
expend significant financial and management resources on the
development of our proposed products and services, and other
aspects of our business.

Our History

We were incorporated in 1984 under the name of EMN Enterprises,
Inc. and remained a non-operating shell company until
August 1998. In August 1998, EMN Enterprises acquired
all the assets and assumed the liabilities of Marketers World,
Inc., a private company that intended to engage in leasing
computer systems. Ormond Trust, an entity established by
Bradford Richdale, received shares of stock representing a
controlling interest in EMN Enterprises following Marketers
Worlds distribution of the shares received in the
transaction. We subsequently changed our name to Zzap.net.inc.

In September 1998, we acquired all the issued and
outstanding shares of capital stock of Brad Richdale Direct,
Inc. At the time of the acquisition, Brad Richdale Direct was
not an operating entity and its only significant asset was its
marketing and licensing rights to technology proprietary to
Summus, Ltd. By year-end 1998, we discontinued the business
operations of Marketers World and Brad Richdale Direct and
changed our name to our current name  High Speed Net
Solutions, Inc.

Business Relationship with
Summus, Ltd.

In February 1999, we entered into a Marketing License
Agreement (MLA) with Summus, Ltd. under which we
obtained:



| |   |                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the exclusive right (other than with respect to government
	agencies and government contractors, and the OEM market, for
	which Summus, Ltd. retained all rights) to resell and sublicense
	a streaming product to be used for incremental delivery and
	playing of video clips over the Internet; and     
|
| |  | the non-exclusive right to resell and sublicense various
	software products, including software to compress still images
	into wavelet form and a video e-mail-like product to be used for
	recording, compressing and e-mailing personal video clips
	recorded from a personal computer (PC) video camera.

Due to our very limited financial resources and marketing
personnel at the time, our initial sales and marketing efforts
were made principally from our web site and we did not realize
any revenues from these products.

In August 1999, Summus, Ltd. acquired a majority of the
then outstanding shares of common stock of the Company. Summus,
Ltd. subsequently sold a portion of its shares of the
Companys common stock to

3



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The change in the Companys focus resulted in our
commencement of negotiations with Summus, Ltd. to modify our
business relationship. These negotiations led to our entering
into a series of agreements with Summus, Ltd. in
mid-February 2000. Under these agreements, Summus, Ltd.
granted to us a non-exclusive license to use a suite of software
products referred to as MaxxSystem. The MaxxSystem
product suite, version 1.0, to be delivered by Summus, Ltd. over
a period of six months, was to, among other things:



| |   |                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | enable end-users to import, create and compress multimedia
	content, bundle it with a video codec
	(compression-decompression) player, and then send an e-mail
	message including that content to distribution lists;                                                             
|
| |  | provide a completely integrated media presentation, designed to
	be launched from a web site, encapsulating rich media (images,
	video, slide shows and text) with electronic commerce
	capabilities, web site referrals and e-commerce sales
	effectiveness measurement collection;
|
| |  | collect and process measurement information, handle opt-in and
	opt-outs, integrate with existing online advertising tools and
	process e-commerce transactions and links to web sites; and                                                                                         
|
| |  | allow content creators to combine images, video, slide shows and
	text into a compelling advertisement utilizing the benefits of
	the Summus, Ltd. wavelet-based technology.                                                                                                        

Toward the end of the first quarter of 2000, a combination of
market conditions and potential government regulatory actions
caused us to modify our short- and longer-term plans for revenue
generation as an application service provider of multimedia
content over the Internet. Market resistance developed to the
delivery of Internet services via .exe file types
following certain software vendors delivery of such files
with viruses. This prompted many companies to configure
firewalls to block all files with an .exe extension. This
limited the market for e-mail distribution using the MaxxNote
(i.e., the video e-mail) module of MaxxSystem. At about the same
time, the Federal Trade Commission initiated an investigation
into the use of information gathered by permission-based
marketing through e-mails and banner ads. In addition, feedback
from our early distribution and campaign management service
offerings made evident that we needed to add to our service
offerings video streaming (together with the computer hardware,
network and support facilities to enable use of video streaming)
to be a viable player in the marketplace.

Because we viewed Summus, Ltd.s compression technology as
key to differentiating our rich media direct service delivery
from the service offerings of other companies in this market, we
entered into discussions with Summus, Ltd. that led to the two
companies entering into an asset purchase agreement at the end
of October 2000. The terms of the agreement were
subsequently amended in late December 2000 and again in
late January 2001. On February 16, 2001, we acquired
substantially all of Summus, Ltd.s assets, including its
intellectual property in encoding, manipulating, compressing,
managing and distributing digital multimedia content, and
assumed approximately $2.8 million of Summus, Ltd.s
liabilities. The terms of the asset purchase agreement
contemplate that Summus, Ltd. will liquidate following the
winding up of its business activities.

In accordance with generally accepted accounting principles, the
acquisition of the assets of Summus, Ltd. is accounted for as a
reverse purchase in which Summus, Ltd. is treated as
the accounting acquirer; the Company, the acquired corporation.
As such, we have included financial statements of Summus, Ltd,
as well as selected financial data and managements
discussion and analysis of and pertaining to Summus. Ltd., in
this annual report on Form 10-K.

4



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Acquisition of Douglas May
& Co., Inc.

On July 10, 2000, the Company, as part of its strategy to
focus on its rich media direct service offering, acquired all of
the issued and outstanding capital stock of Douglas May &
Co., Inc., a marketing and advertising company that provides
design assistance and commercial content development, including
audio, video, images and animation, as well as web site design
and construction. By virtue of the acquisition of Douglas May
& Co., the Company generated its first significant revenues
and, from an accounting standpoint, thereby exited the
development stage.

The Mobile and Wireless Market

The Internet has grown rapidly in recent years, becoming a
global medium for communication, commerce and entertainment.
Initially, the Internet was used primarily to deliver text-based
content through applications such as e-mail and file sharing.
Continued improvements in the processing power of PCs, the
increasing availability of broadband access technologies such as
cable modems and digital subscriber lines (DSL), and advances in
streaming media and compression technologies have facilitated
the delivery of content enhanced with video, audio, animation
and other multimedia. As a result, the Internet has become a
media-rich environment, capable of delivering audiovisual and
interactive programming and services to users.

Many users have become accustomed to the Internet providing them
with access to a wide variety of multimedia content. However, to
access this multimedia content, most users today are limited to
using PCs that connect to the Internet through wired
connections. As personal and business lives become increasingly
mobile and complex, we believe many people are finding that
wired local area network (LAN) and wide area network
(WAN) connections are no longer able to meet all of their
Internet access needs. Time-sensitive or location-specific
information may require real-time communications, available when
and where needed. We believe that more and more Internet users
want to be able to send and receive messages, buy goods and
services, or negotiate a transaction from any point at any time.
The implementation and build-out of wireless LAN, with the
wiring of hotels, airports, corporate campuses and retail
establishments such as coffee houses, is suggestive of this
perceived desire for mobility.

The increased need for mobility has coincided with and is
reinforced by the rapid growth in worldwide use of wireless and
mobile technologies. Given the projections of key industry
analysts, the convergence of wireless communications and mobile
Internet access appears inevitable. The Yankee Group estimates
that there are 40 million mobile professionals in the U.S.
alone requiring constant access to e-mail, corporate Intranets
and various online services. The Gartner Groups Dataquest
unit predicts a $9 billion market for mobile Internet
devices by 2004, up from $200 million in 1999. Dataquest also
predicts that the number of wireless data users in North America
will increase from 5.7 million in 2000 to over 70 million
in 2004. Of the more than 1 to 1.2 billion cell phones that
vendors estimate will be in use by 2005, between 30-40% are
expected to be streaming media-enabled. The Strategis Group has
estimated that mobile data services will be used by 60% of the
U.S. population in 2007. Subscribers will rise from
5 million in 2000 to 172 million in 2007.

From the perspective of the wireless service providers,
competition is increasing as a result of deregulation,
privatization, industry consolidation and the continued
deployment of multiple competing wireless networks within the
same geography. Although many wireless service providers have
experienced strong subscriber growth, efforts to attract and
retain these subscribers have resulted in significant
price-based competition. Furthermore, increased competition has
resulted in higher customer acquisition costs, lower average
revenue per subscriber and a greater likelihood that subscribers
will switch from one wireless service provider to another, a
phenomenon known as customer churn. In response to
these trends, wireless service providers are seeking ways to
differentiate their services to generate additional revenue,
attract new subscribers and promote subscriber loyalty. Many
wireless service providers have already made significant
investments to migrate from analog networks to more robust
digital networks in an effort to improve the efficiency,
capacity and bandwidth of their wireless networks and are now
developing and testing next generation, higher bandwidth
networks to support the delivery of more bandwidth-intensive
applications and services. Mobile data services are expected to
be the cornerstone of wireless carriers efforts to reduce
customer churn, increase

5



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The emergence of the Internet as a distribution channel for
multimedia content has increased competition among programming
providers, as well. Programming providers include traditional
media companies, such as newspapers and television networks, as
well as new digital content providers. Traditional media
companies are seeking to adapt their existing content, as well
as develop new content, for deployment over the Internet, while
new digital content providers are designing content specifically
for delivery over the Internet. Consequently, programming
providers are designing and deploying streaming interactive
audio, video and other multimedia content in an effort to enrich
their web sites and attract users. These trends have led to a
significant increase in content available on the Internet,
creating an intensely competitive environment among programming
providers to maintain and broaden their potential audience. As a
result, programming providers are seeking new platforms other
than PCs for their multimedia content, including PDAs, smart
phones and other mobile information devices.

For wireless to deliver on its anticipated potential, wireless
devices must be supported by an overall value
proposition  a combination of device, wireless
network, content and services, together with product and service
pricing models  satisfactory to the end user. The
differing characteristics of wireless device use in different
geographic markets suggest that what will prove satisfactory to
end users in those markets may differ. U.S. users and service
providers have built up expectations that wireless Internet will
provide a user experience similar to wireline Internet. This
Internet orientation is attributable to the well-developed fixed
infrastructure with ample broadband access potential (via cable
or DSL) that exists in the U.S., together with the flat-rate
pricing structure for local calls and cable access which lends
itself to high-volume usage. Given the high expectations for a
mobile Internet that will emulate the fixed Internet experience,
the constraints of todays wireless technology may lead to
much disappointment among users as they pay for apparently
inferior access to content (as a function of lower speeds with
higher latency, and the risk of a lost connection at any
moment). In contrast, in Europe (where industry analysts
estimate that 70% of adults have mobile phones) and in Japan,
the mobile phone has become an inherent part of life. To date,
the data needs of Europeans have been largely limited to more
simple wireless Internet services, such as short message service
(SMS) (similar to e-mail).

Regardless of how participants in the industry seek to deliver
the Internet to subscribers, a number of major issues and
challenges exist, including:

Required Investment in
Network Infrastructure

It has been reported that cellular carriers, such as AT&T
Wireless, Sprint PCS and Nextel, have collectively made
investments of more than $60 billion in the past three
years to upgrade their networks from analog to digital. The
transition from analog to digital networks represents the
progression from first to second generation technology. In
digital transmissions, conversations are converted into ones and
zeros. Unlike analog transmissions, which are sent as a
continuous electrical signal, digital transmissions are a
combination of on and off pulses of electricity. The move from
analog to digital has meant that networks can accommodate more
calls, and calls are clearer because there is less interference
noise. But todays digital networks are designed primarily
for voice traffic, not data. Voice traffic has far different
requirements than data traffic. The data transmission rates for
wireless Internet are presently quite slow, approximately
one-fifth the speed of an average desktop dial-up Internet
service. Upgrading these networks will require huge investments
by wireless carriers in spectrum, as well as base station and
other infrastructure equipment, even before existing investments
have proven profitable.

Availability of
Bandwidth

Government studies released in late March 2001 have cast
significant doubt that there will be frequency bandwidth or
spectrum available for the auctioning of licenses (such
auctioning anticipated to occur between 2002 and 2004), licenses
viewed as crucial to the roll-out of the so-called third
generation wireless high speed Internet-enabled handheld
technology. The studies of military, other governmental and
commercial users of

6



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Achieving Acceptable Rates
of Return

If developments in the wireless world follow those of the wired
world, prospects for the wireless carriers are far from clear.
Wireless network operators current business model is
vertically integrated, one-stop shopping. They distribute
handsets, own the networks, sell the services and provide
content. In contrast, in the wired world one might purchase a
handset from one company, rely on two different companies for
local and long-distance phone service, and have a fourth company
as ones Internet Service Provider. European
telecommunications regulators have dictated that wireless
carriers in Britain and France provide their customers with
codes to program their mobile phones to go directly to a content
provider of their choice, bypassing the carriers Internet
portal. Once the operators lose their grip on their customers,
the returns anticipated from Internet-access driven revenues
will be less certain.

Will Demand Meet
Expectations?

Notwithstanding the projections of industry analysts, there
remains some uncertainty as to whether cellular users really
want their phones for other than voice calls. Even with the
less-developed Internet infrastructure in Europe and Asia, which
has contributed to the popularity of wireless, most users still
use their devices for messaging and communications, not Internet
surfing. A June 2000 survey by the Yomiuri Shimbun, a
leading Japanese newspaper, found that 40% of Internet-enabled
mobile phone users are not accessing the Internet. A Nippon
Research Institute study in September 2000 came to a
similar conclusion. A January 2001 survey conducted by Ion
Global found that 26% of the respondents who subscribe to NTT
DoCoMos i-mode service dont use their handsets for
e-mail or online content. The same is true in the U.S., where
only about 5-6 million mobile phones are Internet-enabled.
This may be, in part, because networks require cumbersome data
compression using the so-called Wireless Application Protocol
(WAP) to enable Web site slivers to be viewed on tiny
cellphone screens. WAP is based on Wireless Markup Language
(WML). Currently, web sites have to be specifically designed for
WAP. Only about 1% of the web is available in WML.

Sufficiently Valuable
Applications/ Services

The promise of mobile data will be realized only if compelling,
revenue-generating applications and information services are
developed, on platforms enabling Internet access on any wireless
network. Service providers will also have to address the
different configuration of content for Internet-enabled mobile
handsets so as to work on an array of such devices and be able
to scale to suit the bandwidth of a variety of mediums.

Our Market Niche

In addition to the issues and challenges identified above, the
delivery of multimedia content over wireless networks requires
overcoming certain technical challenges, including:



| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | the transmission difficulties caused by high error rates and low
	and varying transmission speeds inherent in wireless networks;
|
| |  | delivery of such content without adversely affecting the
	delivery of voice and data services; and                              
|
| |  | the limited processing power and battery life and varying
	display sizes of mobile information devices.                         

We are developing multimedia technology designed to address the
bandwidth, error constraints, contention with voice and data
traffic, and power challenges associated with multimedia content
transmission over existing and future wireless networks. In an
increasingly multimedia-oriented environment, multimedia content
consumes bandwidth when transmitted, as well as storage space at
origin and destination. Multimedia content within text-based
communications translates into increased transmission time,
greater storage requirements and higher communications costs.
Even with the increased bandwidth of third generation

7



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Our technology is based on certain key mathematical theories and
tools, using advances and results from the fields of wavelets,
non-linear partial differential equations and dynamical systems,
and graph theory and topology. We use these tools to create
highly efficient algorithms for different types of information
processing with low computational complexity and low memory
usage.

Our approach recognizes that the multimedia and information
access experience requires coordination of low and high level
processing. In low level processing, each element of information
is considered independent of other informational elements,
somewhat like looking at the letters in a sentence to determine
its meaning. Low level processing tends to overwhelm the
resources of most devices as soon as any attempt to capture
higher level relationships is made. In high level processing,
the whole sentence is attached to a meaning at once.
High level processing requires processes to transform the basic
informational elements into meaningful terms. Our wavelet-based
processing provides a rich alphabet for the exchanges between
low and high level processing of multimedia information.
Although wavelets are basically low level processing elements,
they are an effective starting point for more sophisticated
processing in many practical applications, such as compression
and information identification.

Wavelets are useful because they lead to accurate and efficient
prediction (thus enabling fewer bits to describe the
information), but are unable to address fully the requirements
of the high level processes. To solve the more challenging
problems presented by our business focus  limited
bandwidth, processing power, memory, I/ O, etc.  we
have developed representation tools and techniques
that extend beyond the limitations of wavelets. These tools
build on the same fundamental approach: an integrated and
coordinated interaction between low and high level processing.

Our Strategy

Subject to our liquidity constraints, we intend to invest
significantly in research and development and personnel to
ensure the continued development of our technology and its
compatibility with new generations of hardware and software.
Specifically, we intend to improve our multimedia technology,
including image, graphics and video technology, and build on our
experience gained in developing our information recognition
technology. We have a strong reputation within the government
market as a result of our providing research and development
work for numerous Department of Defense organizations such as
the Office of Naval Research, the Army Research Lab, the Night
Vision Lab, Air Force Office of Scientific Research, Sandia Labs
and Los Alamos Labs. The focus of these development efforts has
been to utilize government funding to exploit the development of
new dual use technologies.

Critical to our success will be successful commercial deployment
of our technology and software, and our ability to develop and
commercialize new enhancements to our technology in a timely
manner. In that regard, we hired Barry J. Johnson as Vice
President-Products in mid-June of 2001. Mr. Johnson has
served in various product marketing capacities at Motorola,
Inc., Gateway, Zenith Data Systems, NCR and, most recently,
Dial2Go, Inc. Mr. Johnsons first projects at the
Company will be to prioritize our product development efforts
and position our new product line to maximize revenue generation.

Our strategy is to continue to work toward commercial release of
our BlueFuel product line currently under development and
to enter into business relationships and alliances with device
manufacturers, content providers and cellular carriers to extend
the reach of multimedia applications to wireless and mobile
devices. It is our intent to license our technology and provide
a framework to those with whom we enter into such relationships
and alliances that will increase usage, sell devices and
increase their customer base.

Although we are in the process of building relationships with
wireless and mobile device manufacturers, content providers and
cellular carriers, we have not, as yet, entered into any formal
contractual agreements with these parties, and have not, to
date, executed any product orders for the BlueFuel product
line currently under development. See Our
Products  Future Products below.

8



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We recognize that a concern for our corporate viability and the
related concerns regarding our lack of financial resources and
ability to meet specific applications demands and provide
product support may hamper our efforts to forge such business
relationships and alliances. Nevertheless, management believes
that the attributes of our technology will provide opportunities
to enhance our product awareness and profile through such
relationships and alliances.

Semiconductor and Device
Designers and Manufacturers

Our relationship with semiconductor and device designers and
manufacturers will revolve around embedding our products for
decoding content in the microprocessors or digital signal
processors (DSPs) in digital cell phones and PDAs.

We have become a core developer for Qualcomm, Inc.s Binary
Runtime Environment for Wireless (BREW) platform. BREW is
an applications platform for wireless devices using a variety of
air interfaces including, among others, Code Division Multiple
Access (CDMA), which is expected to be the leading standard for
third generation, high speed wireless voice and data
communications. The BREW platform provides a standard
programming environment that gives software developers the tools
to create compelling wireless Internet applications and services
that can be offered by wireless carriers to their customers. As
a core developer for BREW, we will be working with Qualcomm to
BREW-enable a multimedia platform for applications such as video
and image delivery and playback, as well as 3D graphics delivery
and rendering.

Content Providers

In seeking to build relationships with content providers, our
approach will be to provide products for encoding and efficient
storage of multimedia content for viewing by digital cell phones
or PDAs. Content providers are accustomed to traditional means
of message delivery (i.e., print media and the Internet). The
mobile and wireless media extend the reach of content providers,
thereby offering the potential for increased revenue generation.
We are currently engaged in discussions with various content
providers with whom we may enter into commercial alliances to
deliver, for example, sports and entertainment content using our
BlueFuel suite of products. See Our Products
immediately below.

Cellular Carriers

In seeking to build relationships with cellular carriers, we
will focus on providing technology to facilitate multimedia
content transmission via specific carrier air interface networks
(e.g., GSM, TDMA, CDMA) in conjunction with carrier device
manufacturers.

Our Products

Existing Products

We develop proprietary commercial software for complex imaging,
information management, object recognition and multimedia
compression with existing applications in the fields of mobile
and wireless communications and information processing. Our
current product portfolio includes:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Wavelet Image Software Developers Kit (SDK) Version
	4.1  This product allows software developers to
	incorporate wavelet compression technology within their
	products. The Summus Wavelet Image SDK will be updated to
	include support for JPEG2000, an international still image
	compression standard approved in January 2001. The Wavelet
	Image SDK will be updated to support rendering of JPEG2000
	images as well as advanced features available only through
	Summus wavelet implementations.
|
| |  | Photo ID Software Developers Kit (SDK) Version
	2.0  This product provides all the standard features
	of the Wavelet Image SDK with the addition of specialized
	compression technology to handle portrait-style images, such as
	passport, license and credit card photos.                                                                                                                                                                                                                              

9



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Future Products

We anticipate that our future wireless and mobile device related
products will, among other things, shorten the time by which
multimedia information is broadly available using such devices,
enhance and expand the multimedia experience for the mobile and
wireless device user and establish a foundation for our future
growth. Such products are expected to address features that
participants in this market have identified as key to delivering
on the overall value proposition, including:



| |   |                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------
| |  | cool processing focused (to address size, display, battery life,
	power dissipation and memory constraints or limitations);
|
| |  | form factor and application adaptive;                                                                                      
|
| |  | technology agnostic and wireless telephony standards sensitive;                                                            
|
| |  | modular and flexible architecture/framework;                                                                               
|
| |  | application-specific end-to-end solutions focused;                                                                         
|
| |  | always-on/on-the-fly decision support;                                                                                     
|
| |  | privacy vs. individualization;                                                                                             
|
| |  | information sharing networks; and                                                                                          
|
| |  | fast, reliable and robust information access.                                                                              

Although the rapid and significant technological change
occurring within the wireless communications industry may
dictate a change in the Companys product development
strategy, the Company anticipates that its future product
portfolio will include the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | THE EFFICIENCY ENGINE  an operating framework
	designed to efficiently route, store and monitor multimedia
	traffic in a network. Our framework is the basis for making it
	possible to efficiently transmit and view multimedia content
	over current and future wired or wireless networks. We
	anticipate marketing the Efficiency Engine to wireless
	carriers, device manufacturers and content providers.                                                                                                                                                                                                                                                                                                                           
|
| |  | BLUEFUEL VIDEO  video compression software for
	multimedia applications. The software will enable the delivery
	of multimedia content faster and more efficiently than other
	methods available today. The BlueFuel Video software will
	offer content on existing and next generation devices in smaller
	file sizes and at faster speeds than prevailing technologies.
	Because of its efficiency, mobile handsets will be optimized to
	deliver exceptional video quality  even with
	low-bandwidth connection speeds  while at the same
	time conserving battery power. We anticipate marketing
	BlueFuel Video, in conjunction with wireless carriers and
	manufacturers of cell phones and PDAs, primarily to content
	providers.
|
| |  | BLUEFUEL CREATE  a content creation tool
	designed specifically for optimized user experience for specific
	types of devices in both the wired and wireless market.
	BLUEFUEL Create will run primarily in a PC environment and
	take advantage of the EFFICIENCY ENGINEs operating
	environment to provide content for both wired and wireless
	markets. In addition, a subset of BlueFuel Create may be
	available in specific devices to take advantage of content
	compression within the device. This creation tool will support
	our proprietary technology as well as industry standard formats.
	We anticipate marketing BlueFuel Create to content
	providers.                                                               
|
| |  | BLUEFUEL SERVER  Our multimedia streaming
	server will be designed for optimized delivery over wired and
	wireless networks. This server will utilize our Efficiency
	Engine operating environment to serve content to both
	wired and wireless end user devices. Our server will support our
	proprietary framework as well as industry standard formats. We
	anticipate marketing BlueFuelServer to content providers,
	wireless portals and wireless carriers.                                                                                                                                                                                                                                                                        

10



---





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | BLUEFUEL PLAYER  BlueFuel Player software
	will be designed for wireless, PC and handheld devices.
	BlueFuelTM Player will be optimized to support
	content created and served with BlueFuel Create and
	BlueFuel Server, utilizing the Efficiency Engine
	framework. In addition, BlueFuelTM Player will
	support content provided from third party servers and support
	REAL and MPEG4 formats. We anticipate marketing BlueFuel
	Player to manufacturers of cell phones and PDAs.

We are presently focusing our product development resources on
porting BlueFuel to the Qualcomm BREW platform. This
effort is expected to consume the majority of our technical and
business development resources through the balance of 2001. We
anticipate that the first version of the BlueFuel
Efficiency Engine will be available during the fourth
quarter of 2001. We are targeting commercial release of
BlueFuel Video solution (including BlueFuel Player,
BlueFuel Create and BlueFuel Server) in the first
quarter of 2002. In parallel with this effort, we are dedicating
additional resources to define, develop and execute a beta/field
trial for BlueFuel Video to support our internal
development efforts and begin to develop market awareness for
BlueFuel. This beta/field trial is planned for the second
half of 2001.

During the second half of 2001, we intend to identify a second
major platform for BlueFuel Video and begin porting
efforts. This will require focused engineering resources to
execute. We are targeting commercial release of products ported
on this platform in the second quarter of 2002.

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

Sales and Marketing

We intend to market our technology primarily through our direct
sales force and through leading semiconductor and device
designers and manufacturers and programming providers. We are
continuing to build a team of application and field engineers to
support our direct sales force in business development and sales
activities.

Our lack of financial resources has hampered our ability to
fully capitalize on our marketing strategy, which is focused
primarily on increasing awareness of the capabilities of our
technology, developing relationships with content providers,
wireless carriers and Internet portals. We are also engaged in
promoting our brand name and creating demand for our software
and services. We market our products through industry trade
shows, press releases, public relations initiatives (including
through consultants) and our web site. In addition, we are
actively working with a number of trade publications and
industry analysts to educate the market on the deployment and
benefits of our software. As of May 31, 2001, we had 5
employees in our marketing and sales department, and we expect
this number to increase over the next 12 months, subject to
our liquidity constraints.

Competition

Our financial and operating success depends, among other things,
on the success of our existing and anticipated products and
services. If those products and services fail to keep pace with
the rapid changes in technology and customer and supplier
demands, we may not become or remain profitable. There can be no
assurance that our products and services will achieve market
acceptance or commercial success. We expect competition to
persist and intensify in the future.

11



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We believe that the primary competitive factors of multimedia
business for the mobile and wireless environments will include:



| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | pricing and licensing terms;                                                                                
|
| |  | compatibility with new and existing image, graphics and video
	compression formats;                         
|
| |  | compatibility with the users existing network components
	and software systems;                            
|
| |  | compatibility with the users need for on-the-fly
	information processing;                                  
|
| |  | quality and reliability;                                                                                    
|
| |  | access to distribution channels necessary to achieve broad
	distribution and use of technology and products;
|
| |  | capability to license or develop and support secure formats for
	digital media delivery, particularly video;
|
| |  | ease of use and interactive user features in products; and                                                  
|
| |  | ease of finding and accessing content over the Internet and
	wireless networks.                             

Our failure to adequately address any of the factors listed
above could harm our business strategy and our operating results.

The markets for our technology are rapidly evolving. In seeking
to establish a presence in the mobile and wireless Internet, we
expect to face competition from, among others:



| |   |                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | wireless infrastructure, equipment and device manufacturers,
	including Ericsson, Lucent Technologies, Matsushita
	Communications, Motorola, NEC Corporation, Nokia, Nortel,
	Samsung Electronics, Microsoft Corporation, PacketVideo
	Corporation and Toshiba, many of which are developing or have
	announced plans to develop competitive products;
|
| |  | Microsoft Corporation, which has announced that it intends to
	support multimedia capability in its Windows CE operating system
	for mobile information devices;                                                                                                                                                                                      
|
| |  | developers of streaming media technologies such as Apple
	Computer, Emblaze Systems and RealNetworks, Inc.;                                                                                                                                                                                                                                           
|
| |  | developers of video compression technology;                                                                                                                                                                                                                                                                                                           
|
| |  | wireless service providers, such as NTT DoCoMo, Orange, Sonera
	and US West;                                                                                                                                                                                                                                                                          
|
| |  | semiconductor designers and manufacturers such as Intel,
	Qualcomm and Texas Instruments, which may develop their own
	software to embed on the hardware they already produce; and                                                                                                                                                                    
|
| |  | providers of wireless software applications and content
	aggregation, such as Phone.com and InfoSpace, which may
	capitalize on their existing market share and expand their
	product offerings.                                                                                                                                                      

We may not be able to establish or maintain any significant
competitive position against current and potential competitors,
especially those with significantly greater financial,
marketing, service, support, technical and other resources.

We continually strive to incorporate new technology into our
products. Introducing new technology involves numerous technical
challenges, substantial amounts of personnel resources and
frequently requires months to complete. There can be no
assurance that we will be successful at integrating new
technology on a timely basis or without degrading the
responsiveness and speed of our existing products or that, once
integrated, such technology will function as expected.

Research and Development

The market for our services is, and is likely to remain,
characterized by rapid technological change and evolving
industry standards, making timely product innovations critical.
The introduction of products

12



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Intellectual Property Rights

We regard our copyrights, trademarks, trade secrets and similar
intellectual property as critical to our success and attempt to
protect our rights by relying on patent, trademark, service
mark, copyright and trade secret laws and restrictions on
disclosure and transferring title and other methods. We have
filed a United States trademark application for BlueFuel.
There can be no assurances that these steps will be adequate,
that we will be able to secure trademark registrations for all
of our marks in the United States or other countries or that
third parties will not infringe upon or misappropriate our
copyrights, trademarks, service marks and similar proprietary
rights.

We currently have no issued patents but have filed certain
provisional patent applications. We are also examining whether
further patent protection will be sought. There can be no
assurance that patents will become a significant part of our
intellectual property in the foreseeable future.

Effective trademark, service mark, copyright, trade secret and
patent protection may not be available in every country in which
our products may be distributed and policing unauthorized use of
our proprietary information will be difficult, if not impossible.

We generally enter into confidentiality agreements with our
employees and consultants and generally control access to and
distribution of our documentation and other proprietary
information. It may be possible for a third party to copy or
otherwise obtain and use our proprietary information without
authorization or to develop similar technology independently.

Legal standards relating to the validity, enforceability and
scope of protection of certain proprietary rights in
Internet-related businesses are uncertain and still evolving and
no assurance can be given as to the future viability or value of
any of our proprietary rights within this market. There can be
no assurance that the steps we have taken will prevent
misappropriation or infringement of our proprietary information
or rights. Any such misappropriation or infringement could have
a materially adverse effect on our business, results of
operations and financial condition. In addition, litigation may
be necessary to enforce and protect our intellectual property
rights, or to determine the validity and scope of the
proprietary rights of others. Such litigation might result in
substantial costs and diversion of resources and management
attention and could have a materially adverse effect on our
business, results of operations and financial condition.

From time to time, third parties have asserted and may assert
exclusive patent, copyright, trademark and other intellectual
property rights to technologies and related standards that are
important to us or to third party providers of technology to us.
We and/or such third party providers of technology may
increasingly face infringement claims as the number of
competitors in our industry segments grows and the functionality
of products and services in different industry segments
overlaps. Other than as disclosed in Item 3 of this
Form 10-K, we do not have any intellectual property
infringement claims or suits against us of any kind. However, we
may be party to additional litigation in the future. Any
third-party claims, with or without merit, could be
time-consuming to defend, result in costly litigation, divert
managements attention and resources or require us to enter
into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms
acceptable to us, if at all. A successful claim of infringement
against us could harm our future competitiveness and
profitability.

13



---



Government Regulation

Because of our contracts with governmental agencies, we are
required to comply with various government regulations and
policies. For instance, we are required to maintain employment
policies relating to equal employment opportunities, and are
subject to audit by the government to confirm compliance with
these policies. If we fail to comply with regulations that apply
to us, as a government contractor, we may face sanctions,
including substantial fines and disqualification from future
contract awards.

We are not otherwise currently subject to direct federal, state
or local government regulation, other than regulations that
apply to businesses generally. The telecommunications industry
is subject to regulation by federal and state agencies,
including the Federal Communications Commission (FCC), and
various state public utility and service commissions. While such
regulation does not necessarily affect us directly, the effects
of these regulations on the wireless network operators with whom
we are seeking to develop relationships may, in turn, negatively
affect our business. FCC regulatory policies affecting the
availability and licensing of bandwidth and other terms on which
service providers conduct their business may impede our plans
for the deployment of our technology.

Legislative proposals have been made in the U.S. that, if
enacted, would afford broader protection to owners of databases
of information such as stock quotes, weather and traffic
information and sports scores. If enacted, this legislation
could result in an increase in the price of services that
provide data to wireless communications devices and could create
potential liability for unauthorized use of this data.

Employees

As of May 31, 2001 we had 38 full-time employees, including
5 in marketing and sales, 19 in research and development, 7 in
corporate operations and administration and 7 in our
wholly-owned subsidiary, Douglas May & Co. We are not
subject to any collective bargaining agreements and believe that
our relationship with our employees is good. Our success depends
to a significant extent upon the performance of our executive
officers and other key personnel.

14



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RISK FACTORS

  We have incurred substantial
losses, expect to incur losses in the future and may never
achieve profitability.

We have, since commencing business operations in
August 1998, incurred (and expect to continue to incur for
an extended period of time) net losses. For the years ended
December 31, 2000 and 1999, we had a net loss of
$12,441,655 and $9,684,529, respectively. As of
December 31, 2000, we had an accumulated deficit of
$24,264,113 and a working capital deficit of $3,051,731.

Summus, Ltd. has also incurred net losses. For the years ended
December 31, 2000 and 1999, Summus, Ltd. had a net loss of
$11,451,281 and $8,846,980, respectively. As of
December 31, 2000, Summus, Ltd. had an accumulated deficit
of $23,414,113 and a working capital deficit of $3,727,660.

To date, we have generated limited revenue from our operations
and have been dependent upon issuances of our equity to raise
the necessary operating capital to sustain our operations. We
intend to continue to expend significant financial and
management resources on the development of our proposed products
and services, and other aspects of our business.

We will need to increase significantly our revenues to achieve
and maintain profitability. If our revenues grow more slowly
than anticipated or if operating expenses increase more than
expected, or are not reduced sufficiently, we may never achieve
profitability. With the foregoing in mind, our auditors have
included in their report on our financial statements a
qualification that our financial condition raises substantial
doubt about our ability to continue as a going concern.

  If we are unable to obtain
substantial additional financing we may not be able to remain in
business.

We require substantial working capital to fund our business. For
us to implement our business plan, we anticipate that we will
need approximately $5 million in working capital in the
next twelve months. We have had significant net losses and
negative cash flow from operations since inception and expect to
continue to do so for the foreseeable future. Our capital
requirements will depend on several factors, including the rate
of market acceptance of our products and services, the ability
to establish and expand a customer base and the growth and
effectiveness of our marketing efforts. If capital requirements
vary materially from those currently planned, we may require
additional financing. At present we have no arrangements or
commitments for any financing. Financing may not be available
when needed on terms favorable to us, or at all. If adequate
funds are not available or are not available on acceptable
terms, we may be unable to develop further or enhance our
products and services, take advantage of future opportunities,
respond to competitive pressures or, ultimately, to continue in
business.

  We are in default for non-payment
under several of our material contracts with previous and
existing vendors and such vendors may seek payment through
litigation or otherwise.

As of May 31, 2001, we had approximately $5.7 million
of accounts payable, accrued expenses, notes payable and capital
lease obligations and are in default of payment terms with
several of our vendors. The vendors for which more significant
amounts are owed have been contacted. We are in discussions with
such vendors for purposes of seeking to negotiate down the
amounts due, extend the payment terms and/or satisfy amounts due
through a combination of cash and stock. In certain cases, we
are in the process of structuring extended payment terms
providing from 9-18 months of additional time to effect
payment. In addition to our indebtedness to vendors, we are also
delinquent in the payment of amounts due legal and other
advisors. There can be no assurance that our vendors and
advisors will be willing to agree to any concessions or that we
will be able to generate sufficient funds to satisfy our debts.

15



---



  We are attempting to commercialize
a new technology and new product line in what is for us a new
market and, to date, have invoiced no sales from this product
line.

We are attempting to commercialize our technology in what is,
for us, a new market. Although the Company is in the process of
building relationships with wireless and mobile device
manufacturers, content providers and cellular carriers, the
Company has not entered into any formal contractual agreements
with these parties and, to date, has not executed any product
orders for this product line.

  With the contemplated divestiture
of Douglas May & Co., Inc. and our MaxxSystem-based rich
media direct service offering, the business operations of the
Company that will remain will, in essence, be entirely that of
Summus, Ltd. A significant percentage of Summus, Ltd.s
revenue stream in recent years has been derived from agencies of
the U.S. government. If the government uses less of our services
or terminates its relationship with us, our revenues could
decline substantially and our business could be harmed.

We are in the process of divesting ourselves of Douglas May
& Co., Inc. and our MaxxSystem-based rich media direct
service offering. Our intention is to license and provide source
code to a portion of the MaxxSystem product suite as part of
this divestiture. Once we have done so, our continuing business
operations will, in essence, be entirely that of Summus, Ltd. at
the time of our acquisition of substantially all that
companys assets in February 2001. In the years ended
December 31, 2000 and 1999, 60% and 76%, respectively, of
Summus, Ltd.s revenues were derived from agencies of the
U.S. government, principally the Department of Defense. We
believe that government projects are likely to continue to
account for a significant portion of our revenues for the
foreseeable future.

Government contracts are often subject to a competitive bidding
process, which is governed by applicable federal and state
statutes and regulations. The procurement process for government
contracts is complex and can be very time consuming. Contracts
with governmental agencies are subject to the risk of unilateral
termination by the government for its convenience and reductions
in services, or modifications in contractual terms, due to
changes in the governments requirements or to budgetary
constraints. In addition, the government may not continue to
fund projects on which we work. Even if funding continues, we
may not obtain this funding.

  The U.S. government has certain
rights relating to our intellectual property.

Much of our technology is the result of retaining ownership of
inventions made under U.S. government-funded research and
development projects. With respect to any invention made with
government assistance, the government has a non-exclusive,
non-transferable, irrevocable, paid-up license to use the
technology or have the technology employed for or on its behalf
throughout the world. Under certain conditions, the U.S.
government has march-in rights. These rights
enable the U.S. government to require us to grant a
non-exclusive, partially exclusive or exclusive license in any
field of use to responsive applicants, upon terms that are
reasonable under the circumstances. If we refuse, the government
can grant the license itself, provided that it determines that
such action is necessary because we have not achieved practical
application of the invention, or to alleviate health or safety
needs, or to meet requirements for public use specified by
federal regulations, or because products using such inventions
are not being produced substantially in the United States. The
exercise of these rights by the government could create
potential competitors for us if we later determine to develop
the technologies and utilize the inventions in which the
government has exercised these rights.

  Under the terms of his executive
employment agreement, we granted Dr. Bjorn Jawerth, our Co-Chief
Executive Officer and Chief Scientist, a license to make and use
new technology developed during the 12-month period following
our acquisition of Summus, Ltd.s assets, subject to his
fiduciary duties as a director and/or officer of the Company.

In connection with our acquisition of Summus, Ltd.s assets
in February 2001, we entered into an executive employment
agreement with Dr. Bjorn Jawerth. For a more complete
description of the terms of that employment agreement, see
Item 11. Executive Compensation 
Employment Agreements. Under

16



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In addition, if the Company were to cease to be a going concern,
its liquidation value would likely be diminished because, though
the technology subject to this license is proprietary to the
Company, Dr. Jawerths license may reduce the value of
such technology upon liquidation.

  Both the Company and Summus, Ltd.
have issued equity securities for consideration or, in the case
of stock options, with exercises prices below market value which
has resulted and will result in the recording of compensation
expense and, in turn, an increase in our net loss.

In the year ended December 31, 1999, the Company awarded
stock options to its employees, consultants and directors
exercisable for a total of 1,075,000 shares of common stock, and
options to non-employees exercisable for a total of 1,140,000
shares of common stock, at exercise prices below market value on
the date of grant. We also issued 335,500 shares of our common
stock in 1999 for consideration less than the market value of
such shares at the time of issuance (after applying a discount
to the market value based on the restricted nature of the
securities issued). For the year ended December 31, 1999,
we incurred compensation expense and non-cash charges related to
the stock option grants and share issuances in the approximate
amount of $4.3 million. Our net loss for 1999 increased by
the corresponding amount of the compensation expense and
non-cash charges.

As explained in Item 1. Business  Our
History, the acquisition of the assets of Summus, Ltd.,
which closed on February 16, 2001, is to be accounted for
as a reverse purchase in which Summus, Ltd. is
treated as the accounting acquirer. As of February 16,
2001, for accounting purposes the historical financial
statements of the Company are those of Summus, Ltd.,
not High Speed Net Solutions, Inc. Operating results thereafter
will reflect the combined operations of Summus, Ltd. and High
Speed Net Solutions, Inc. Thus, the issuance by Summus, Ltd. of
equity securities for consideration or, in the case of options,
with exercise prices below market value, has resulted and will
result in the recording of compensation expense and an increase
in the net loss of the Company.

In the year ended December 31, 2000, Summus, Ltd. awarded
stock options to its employees and directors exercisable for
1,613,838 shares of its common stock at exercise prices below
market value on the date of grant. Summus, Ltd. issued 53,401
shares of its common stock in 1999 for consideration less than
the market value of such shares at the time of issuance. For the
year ended December 31, 2000 and 1999, Summus, Ltd.
incurred compensation expense related to the stock option grants
and share issuances in the amount of $3,106,472 (of which
$2,127,962 was amortized to expense) and $2,670,050,
respectively.

As of December 31, 2000, we anticipate that the Company
will incur additional expense in the approximate amount of
$978,510 over the next three years ending December 31,
2003. Our earnings/(net loss) will be decreased/(increased) by
the corresponding amount of compensation expense in each of the
stated years. We may also compensate our employees and directors
with stock options or grant warrants to purchase our common
stock in the future that may have a dilutive effect on our
earnings.

17



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  The sale of a large number of
shares of our common stock could depress our stock price.

Of the 34,056,179 shares of our common stock outstanding as of
May 31, 2001, an aggregate of 26,009,908 shares are freely
tradable without restriction in the public market unless the
shares are held by affiliates, as that term is
defined in Rule 144(a)(1) under the Securities Act of 1933.
This includes the 20,197,797 shares of common stock issued in
connection with the acquisition of Summus, Ltd.s assets.
The terms of the asset purchase agreement governing this
transaction include a market stand-off provision
under which the Summus, Ltd. shareholders who received shares of
the Companys common stock in the transaction have agreed
to a limitation in the number of shares that may be sold during
the twelve-month period following the closing of the transaction
(which occurred February 16, 2001). Specifically, only 1.5%
of the shares held by any such shareholder may be sold or
otherwise disposed of in public market transactions in each of
the third through twelfth months following the closing. This
restriction does not, however, apply to an indeterminate number
of shares issued to Dr. Bjorn Jawerth and his ex-spouse
equal in value to $2.5 million and $1.0 million,
respectively. Upon the first anniversary of the closing, there
will be no contractual restrictions on the sale or disposal of
any of the shares issued in the transaction.

In addition, as of May 31, 2001, there were outstanding
warrants to purchase 4,437,064 shares of common stock and
options to purchase 3,819,176 shares of common stock, 2,006,141
of which were fully vested.

In accordance with registration rights that we have granted to
various individuals and entities, we are obligated to register
approximately 10.4 million shares of our common stock for
public resale. We intend to file a registration statement on
Form S-1 to register any and all shares for which the
holders seek to have covered by such registration statement as
soon as reasonably practicable. Further, the Company may be
obliged to grant registration rights in connection with future
issuances of securities providing for accelerated entry into the
marketplace of such securities.

The market price of our common stock could decline as a result
of sales of a large number of shares of our common stock in the
market, or the perception that such sales could occur. These
sales might also make it more difficult for us to sell equity
securities in the future at a price that we think is
appropriate, if at all.

  The wireless multimedia industry is
new and rapidly evolving, and we may not be able to accurately
predict its size, needs, development or rate of growth.

The market for our software and technologies is new and rapidly
evolving. Wireless service providers are only beginning to offer
commercial services that require our software today and, as a
result, we cannot assess current or future demand for wireless
delivery of multimedia content. We also do not know whether our
software will address the needs of the wireless Internet market
or whether this market will be large enough to sustain our
business. We may not be able to develop and introduce software,
software enhancements or services that respond to market
demands, technology developments, increased competition or
industry standards on a timely basis, or at all. If this market
does not evolve in the manner or in the timeframe that we
anticipate, or if we are unable to respond to new market
developments promptly, our business and prospects may suffer.

  The success of our business will
greatly depend on our ability to develop and enter into
strategic relationships with wireless service providers,
semiconductor and device designers, wireless device
manufacturers and content providers.

Our business will depend on our ability to develop relationships
and enter into agreements with companies in key industry groups,
including:



| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | wireless service providers that we expect will deploy our
	technology to deliver multimedia content and services to their
	subscribers;                           
|
| |  | semiconductor and device designers and manufacturers that we
	expect will embed our technology in their products to enable the
	viewing of multimedia content; and

18



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| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | content providers that we expect will rely on our technology to
	deliver multimedia content over wireless networks.

We are in the early stages of developing these relationships.
None of these relationships have been formalized as yet in
binding agreements. In particular, our relationships with
wireless service providers are at a very early stage and, as a
result, we have not determined whether our contemplated revenue
model will be accepted by them. We may need to modify our
revenue model to suit the needs of particular wireless service
providers. If we are unable to establish a sufficient number of
strategic relationships on terms commercially favorable to us,
our business and prospects are likely to be adversely affected.

  Our business will depend on others
providing multimedia content and developing applications for
mobile information devices.

The amount and availability of multimedia content and
applications for delivery over wireless networks will likely be
key factors in determining whether, and the rate at which,
wireless service providers deploy our software and technology.
This will, in turn, likely depend on how rapidly wireless
carriers build out the third generation wireless infrastructure.
Our business will depend on third parties to adapt their
existing content and develop new content for delivery over
wireless networks. If third parties fail to develop sufficient
quantities of multimedia content and applications, wireless
service providers may not commercially deploy our software and
technology, and our business and prospects would be adversely
affected.

  Our business will depend on
wireless service providers adopting our software and on their
subscribers demand for multimedia content.

Our success will depend heavily on timely deployment by wireless
service providers of our software in their networks. Wireless
service providers may not deploy, or may be slow in deploying,
our software due to a number of factors including the
availability of competing products, lack of subscriber demand,
as well as interoperability, implementation, support or
maintenance concerns. In addition, if our current or future
field trials with wireless service providers are unsatisfactory,
they may not deploy our software at all or may require costly or
time-consuming modifications to our software before deployment.

Even if wireless service providers offer multimedia content
services based on our software, their subscribers may not be
willing to buy these services. Subscribers are accustomed to
viewing video images on the comparatively large displays of
television screens and PC monitors and may not be willing to use
mobile information devices, which typically have smaller screen
sizes, to view multimedia content. Additionally, subscribers may
not be willing to pay to view multimedia content on mobile
information devices because this content can be viewed at a
lower cost using other connections, such as satellite and
wireline connections. Also, subscribers may not be willing to
purchase new devices or upgrade their existing devices to
include multimedia content viewing capability.

  If mobile information devices for
delivery of multimedia content are not widely adopted or if
semiconductor and device designers and manufacturers fail to
embed our technology in their products, our business will be
harmed.

We believe that mobile information devices will be the principal
means for the wireless delivery of multimedia content. Only a
small percentage of these devices are currently capable of
receiving and displaying multimedia content. In order to enhance
the viewing of such content, new or upgraded devices that offer
more advanced displays and support higher bandwidth wireless
services are required. If semiconductor and device designers and
manufacturers are unable to design, manufacture and widely
distribute mobile information devices capable of displaying
multimedia content in a timely manner, our business will suffer.

We are in the early stages of building relationships with
semiconductor and device designers and manufacturers. Even if we
secure binding agreements with these designers and
manufacturers, they may not produce, promote or sell devices
that incorporate our technology. If we fail to achieve
widespread distribution of our technology in mobile information
devices, our business will be adversely affected.

19



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  If we fail to commercialize our
software and technology, or to develop and commercialize
additional enhancements to our software and technology, we may
not be able to compete effectively and our business will
suffer.

Our software and technology is new and has not yet been
commercially deployed. Our success depends on our ability to
commercially release our software based on our technology in a
timely manner. Our success also depends on our ability to
develop and commercialize new enhancements to our technology in
a timely manner. If we fail to commercialize successfully our
software and technology, or to develop new software and
technology, we will not be able to compete successfully.

  Summus, Ltd. has in the past
experienced delays in product releases, and we may similarly
experience delays in the release of products and upgrades in the
future.

We will need to continue to introduce, on a timely basis, new
products and product upgrades to add new features, functionality
and technology that our target customer base desires. In the
past, Summus, Ltd. has experienced delays in the planned release
dates of certain of its software products and upgrades of such
products, including certain modules that were to comprise
MaxxSystem. As a result, no assurances can be provided that we
will be able to successfully complete the development of
currently planned or future products in a timely and efficient
manner. Due to the complexity of these products, internal
quality assurance testing and customer testing of pre-commercial
releases may reveal product performance issues or desirable
feature enhancements that could lead us to postpone the release
of products or product upgrades. In addition, the reallocation
of resources associated with any such postponement would likely
cause delays in the development and release of other future
products or enhancements to our currently available products.
This could have a material adverse effect on our results of
operations.

  We expect that the wireless
communications industry and its technology will undergo
significant change in the foreseeable future. If we do not
continuously improve our technology in a timely manner, our
products could be rendered obsolete.

The wireless communications industry is experiencing rapid and
significant technological change. This change includes the
increase in pace of upgrades in existing wireless systems,
evolving and constantly changing industry standards, ongoing
improvements in the capacity and quality of digital and
compression technologies, and changes in consumer needs and
preferences. Alternative technologies may develop for the
provision of wireless services and the provision of other
compression technologies to wireless services that may provide
wireless services or compression technologies superior to those
that we plan to offer to the wireless market. These changes and
developments may render our products and technologies obsolete
in the future. Accordingly, our success depends on our ability
to adapt to these changes, particularly to develop or adapt
products and services or acquire new products and services that
can compete successfully. There can be no assurance that we will
select and develop appropriate technology and products on a
timely basis. Our failure to develop or obtain appropriate
technology could adversely affect our ability to be competitive.

  Our products are complex and we may
not be able to prevent defects that could decrease their market
acceptance, result in product liability or harm our
reputation.

Our compression and multimedia software and other technology is
complex, and the steps we take to ensure that such software and
technology is free of errors or defects, particularly when first
introduced or when new versions or enhancements are released,
may not be successful. We cannot guarantee that current or
enhanced versions of our products will be free of significant
software defects or bugs. Despite our testing, and testing by
third-parties, current or future products may contain serious
defects. Serious defects or errors could result in lost revenue
or delay in market acceptance of our products and could
seriously harm our credibility and materially affect the market
acceptance and sales of our products. The occurrence of these
types of problems could materially adversely affect the
Companys business, results of operations and financial
condition.

20



---



Errors in our products may also be caused by defects in
third-party hardware or software incorporated into our products.
If so, we may be unable to fix these defects without the
cooperation of third-party providers. Because these defects may
not be as significant to these providers as they are to us, we
may not receive the rapid cooperation that may be required to
avoid serious harm to our business and operating results.
Errors, defects or other performance problems with our products
could also harm our customers businesses or result in
potential product liability claims. Even if unsuccessful, a
product liability claim brought against us would likely be
time-consuming, costly and harmful to our reputation.

  If we expand into international
markets we will become subject to additional business risks.

We may determine to expand into international operations. To do
so we would likely have to enter into relationships with foreign
business partners. This strategy contains risks, including
difficulty in managing international operations due to distance,
language and cultural differences, and an inability to
successfully market and operate services in foreign markets.
There are also risks inherent in doing business on an
international level, including unexpected changes in regulatory
requirements, trade barriers, difficulties in staffing and
managing foreign operations, fluctuations in currency exchange
rates, longer payment cycles in general, problems in collecting
accounts receivable, difficulty in enforcing contracts,
political and economic instability, and potentially adverse tax
consequences.

  Our planned business operations as
a wireless technology provider are subject to various government
regulatory restrictions.

The wireless communications industry is subject to regulation by
the Federal Communications Commission and various state
regulatory agencies. From time to time, legislation and
regulations could be adopted that could adversely affect this
industry.

Changes in regulatory environments governing the wireless
telecommunication industry could negatively affect our plans to
offer products and services. The licensing, ownership and
operation of wireless communications systems and the grant,
maintenance or renewal of applicable licenses and radio
frequency allocations are all subject to significant government
regulation. This government regulation may have an adverse
effect on the wireless telecommunication companies to which we
plan to market and sell our to-be-developed compression and
multimedia technology software packages. Delays in receiving
required regulatory approvals and licenses or the enactment of
new and adverse regulatory requirements may adversely affect our
ability to offer our technology and other new products and
services. In addition, legislative, judicial and regulatory
agency actions could negatively affect our ability to offer new
technologies to wireless telecommunication companies.

  Our common stock currently trades
on the Pink Sheets® and, as a result, there may be limited
trading volume in the stock, as well as a greater spread between
bid and asked prices.

Our common stock currently trades on the Pink Sheets®, a
quotation service operated by Pink Sheets, LLC. The Pink
Sheets®does not impose listing standards or requirements,
does not provide automatic trade executions, and does not
maintain relationships with quoted issuers. Issuers whose
securities are traded on the Pink Sheets® may experience a
greater spread between the bid and asked
prices of their securities, and a limited liquidity in their
securities. In addition, many investors have policies against
the purchase or holding of securities traded in the
over-the-counter markets. Trading in the over-the-counter
markets has, and will continue to, affect both the trading
volume and the market value of our common stock for the
foreseeable future.

21



---



  We may acquire technologies or
companies in the future, and these acquisitions could dilute the
value of our stock and disrupt our business.

We may acquire technologies or companies in the future. Entering
into an acquisition entails many risks, any of which could harm
our business, including:



| |   |                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------
| |  | diversion of managements attention from other business
	concerns;                                                
|
| |  | failure to integrate the acquired company with our pre-existing
	business;                                        
|
| |  | failure to motivate, or loss of, key employees from either our
	existing business or the acquired business;       
|
| |  | inability to incorporate acquired technology into our software;                                                   
|
| |  | potential impairment of relationships with our employees and
	companies with whom we have strategic relationships;
|
| |  | additional operating expenses not offset by additional revenue;                                                   
|
| |  | incurrence of significant non-recurring charges; and                                                              
|
| |  | dilution of our stock as a result of issuing equity securities.                                                   

  We may be unable to adequately
protect the intellectual property used in our software.

We have applied for provisional patents with respect to some of
our technologies, and expect to apply for additional patents in
the future. These patent applications may not be granted or, if
granted, the resulting patents may be challenged or invalidated.
In addition to patents, we rely on copyright and trademark laws,
trade secrets, confidentiality provisions and other contractual
provisions to protect our proprietary rights. These measures,
which require the expenditure of substantial resources, afford
our intellectual property only limited protection because our
competitors and third parties independently may develop similar
technologies or may infringe our intellectual property.
Infringement is difficult to detect and costly to prevent. With
respect to the protection of our proprietary rights
internationally, the laws of some foreign countries may not
protect our proprietary rights adequately. In addition, we will
not have patent protection in countries where we do not file
patent applications. Thus, the measures we are taking to protect
our proprietary rights in the United States and abroad may not
be adequate and our business may be harmed as a result.

  We may be sued by third parties for
infringement of their intellectual property.

The wireless equipment and software industries are subject to
frequent intellectual property litigation. As the number of
entrants into our market increases, the likelihood of
infringement claims also increases. We may unknowingly be
infringing the intellectual property of others. In addition,
because patent applications can take many years to be approved,
there may be one or more patent applications now pending that
could lead to infringement actions against us if issued in the
future. If we are unable to successfully defend against a
product infringement claim, we may be precluded from using the
intellectual property or may have to license it on commercially
disadvantageous terms, either of which could harm our business.
Even if we successfully defend against an infringement claim, we
may have to devote significant time and resources to litigation
which could also harm our business.

  We face intense competition as a
technology provider in the wireless telecommunications
industry.

The wireless communications market is highly competitive. Our
failure to establish a customer base as a technology provider to
this industry will adversely affect operating results. The
competition with other technology providers to form alliances
with wireless telecommunications companies and Internet service
providers is significant. The loyalty of wireless industry
customers we may obtain could be easily influenced by a
competitors new offerings, especially if those offerings
provide cost savings or new methods of compression and
multimedia technology applicable to wireless communications. We
will face significant competition from traditional
telecommunications companies, virtually all of which have
greater market share and financial resources than we do. These
traditional telecommunications companies are better positioned
to finance

22



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  Our share ownership is concentrated
in certain shareholders, which could make it more difficult or
prevent a change in control or other transactions.

The interest of management in our common stock could conflict
with the interest of our other shareholders. As of May 31,
2001, our executive officers and directors beneficially own, on
a fully-diluted basis (but exclusive of the 2,000,000 shares of
common stock, on an as-converted basis, held in escrow under the
terms of the asset purchase agreement governing the
Companys acquisition of the Summus, Ltd. assets), an
aggregate of approximately 39.1% of our outstanding shares of
common stock. As a result, these shareholders will be able to
exercise greater control over the election of directors and
approval of significant corporate transactions. This could have
the effect of delaying or preventing a change of control, and
make some transactions more difficult or impossible without the
support of these shareholders, including proxy contests,
mergers, tender offers, and open-market share purchase programs
that could provide our shareholders with the opportunity to
realize a premium over the then-prevailing market price for
shares of our common stock, which, in turn, could reduce the
market price of such shares.

  We anticipate issuing additional
equity securities, which may dilute the interests of current
shareholders or carry rights or preferences senior to our shares
of common stock.

We anticipate issuing additional equity securities in order to
raise working capital. Accordingly, existing shareholders may
experience additional dilution of their percentage ownership
interest in the Company. In addition, the new equity securities
may have rights, preferences or privileges senior to those of
existing holders of shares of our common stock.

  We depend on key personnel to
operate our business.

Our future success depends on the continued services and
performance of our senior management and other key personnel,
including Dr. Bjorn Jawerth and Richard F. Seifert, our
co-Chief Executive Officers; Gary E. Ban, our Chief Operating
Officer/ Chief Information Officer; Robert S. Lowrey, our Chief
Financial Officer; Dr. Jiangying Zhou, our Vice President
of Research, Mr. Leonard Mygatt, our Executive Vice President of
Advanced Technology; and Barry J. Johnson, our Vice President
 Products. The loss of the services of any member of our
senior management or other key employees could cause significant
disruption in our business. We have employment agreements with
certain members of senior management but we do not currently
maintain any key person life insurance. Our future
success also depends on our ability to identify, attract, hire,
train, retain and motivate other highly skilled technical,
managerial, operations, sales and marketing and customer service
personnel. Competition for qualified personnel is intense,
particularly where we are located in Raleigh, North Carolina. If
we do not succeed in attracting new personnel or retaining and
motivating our current personnel, our business could be harmed.

  Requirements of the SEC with regard
to low-priced penny stock may adversely affect the
ability of shareholders to sell their shares in the secondary
market.

Penny stock is low-priced, generally highly
speculative stock selling at less than $5.00 per share. Our
common stock is subject to Rule 15g-9 under the Securities
Exchange Act of 1934, which imposes additional sales practice
requirements on broker-dealers who sell such securities to
persons other than established customers and accredited
investors (generally, an individual with a net worth in
excess of $1,000,000 or an annual income exceeding $200,000 or
$300,000 together with his or her spouse). For transactions
covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received
the purchasers written consent to the transaction prior to
sale. The rule also requires the delivery, prior to the
transaction, of a risk disclosure document mandated by the SEC
relating to the penny stock market. The broker-dealer must also
disclose the commissions payable for the transaction, current
quotations for the stock, and, if applicable, the fact that it
is the sole market maker in the stock. Consequently, the rule
may adversely

23



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Item 2.  Properties.

Our principal executive offices are located at 434 Fayetteville
Street Mall, Suite 600, Raleigh, North Carolina 27601. We occupy
an aggregate of approximately 19,100 square feet of leased space
at such location under two leases. A lease for 17,189 square
feet, representing the principal executive offices of Summus,
Ltd. prior to our acquisition of substantially all of its
assets, expires on October 31, 2005. The current annual
base rent for such space is approximately $267,000 and will
increase to approximately $313,000 by the last year of the term.
We are obligated to pay additional rent in the amount of roughly
$5,900 per month for the seven month period beginning
May 1, 2001. The additional rent is for a buildout of this
office space in March 2000. We also lease 1,911 square feet
of space in the same office building, representing the space
occupied by the Company prior to the Summus, Ltd. asset
acquisition. The lease term expires on October 31, 2005.
The current annual base rent for this space is approximately
$33,400. We are obligated to pay additional rent in the amount
of roughly $2,000 per month for the 24-month period beginning
August 1, 2001. The additional rent is to be paid in
connection with our termination of the lease of approximately
4,900 square feet of office space at this location.

We believe the terms of these leases are consistent with terms
in the local market generally and that the space will be
adequate for our reasonably foreseeable future needs.

Item 3.  Legal Proceedings.

The Analysts International
Corporation Litigation

On March 30, 2001, Analysts International Corporation
(AIC) filed a civil summons and complaint in General
Court of Justice, District Court Division, County of Wake, North
Carolina, against High Speed Net Solutions, Inc. The complaint
alleges that we breached certain contracts with AIC, dated
December 9, 1999, February 11, 2000, April 25,
2000, May 9, 2000, and May 23, 2000, under which AIC
provided us with computer programming services. AIC has
requested that the court enter judgment in its favor for
$358,426, plus pre-judgment interest from September 26,
2000 on certain invoices at the rate of 18% per annum,
post-judgment interest at the rate of 8% per annum, reasonable
costs of AIC and other relief the court deems equitable. We are
negotiating with AIC to resolve the matter.

The Cale Yarborough
Litigation

On April 25, 2001, Cale Yarborough, a Company shareholder,
filed a summons and complaint against High Speed Net Solutions,
Inc., David Gordon, Bear Stearns Securities Corp., MidSouth
Capital, Inc., and Interwest Stock Transfer Co. in the United
States District Court, District of South Carolina, Florence
Division, alleging, among other things, (i) breach of an
agreement Mr. Yarborough entered into with David Gordon under
which Mr. Gordon was to provide an opinion letter as to
Mr. Yarboroughs ability to resell shares of our
common stock in accordance with Rule 144 promulgated under
the Securities Act of 1933, (ii) violation of
Rule 144, (iii) professional negligence and breach of
fiduciary duty, and (iv) violation of federal and state
securities laws. All of the causes of action in the complaint
stem from the alleged failure to properly advise
Mr. Yarborough as to when the shares of our common stock
held by Mr. Yarborough could properly be resold under
Rule 144.

On May 17, 2001, the complaint was dismissed without
prejudice. As such, it is subject to being reopened upon the
showing of good cause within the 60-day period following the
issuance of the dismissal order. We believe that
Mr. Yarborough and Mr. Gordon are in the process of
reaching a settlement of this matter.

The ENELF Litigation

On March 15, 2001, ENELF, LLC filed a civil lawsuit in the
United States District Court for the Eastern District of Texas
alleging patent infringement by Microsoft Corporation, Texas
Instruments, Incorporated

24



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The Pin High Company
Litigation

In February, 2001, the Pin High Company, Inc. filed suit against
Summus, Ltd. and us in the Superior Court of Wake County, North
Carolina, for non-payment of consulting services rendered. On
April 30, 2001, we, Summus, Ltd. and Pin High entered into
a Release and Settlement Agreement. Under the terms of the
agreement, Summus, Ltd. agreed to pay an aggregate amount of
$20,145.08 in eight installments, the last of which will be due
in December, 2001. The agreement stipulates that if Summus, Ltd.
defaults in its payment obligations, Pin High will have the
right to file a confession of judgment previously executed by
both the Company and Summus, Ltd. making us jointly and
severally liable for the amounts due under the agreement, plus
costs and attorneys fees.

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

During the fourth quarter of the year covered by this report, no
matter was submitted to a vote of the security holders of the
Company.

25



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PART II



|        |                                                                       
|------- | ----------------------------------------------------------------------
|Item 5. | Market For Registrants Common Stock And Related
	Shareholder Matters.

Market Information

Our common stock, par value $.001 per share, currently trades on
the Pink Sheets®. Until October 24, 2000, our common
stock was quoted on the Over-The-Counter (OTC) Bulletin
Board®. The following table provides information about the
high and low bid prices of our common stock for each quarter
during the last two years on the OTC Bulletin Board® and on
the Pink Sheets®. These quotations reflect inter-dealer
prices without markup, markdown or commissions, and may not
necessarily represent actual transactions.

TRADING HISTORY OF OUR COMMON STOCK

|               |  |     |       |      |  |   |        | 
|-------------- |  | --- | ----- | ---- |  | - | ------ | 
|2000           |  | Low |       | High
|               |  |     |       |     
|First Quarter  |  | $   | 6.750 |      |  | $ | 31.875 | 
|              
|              
|              
|              
|Second Quarter |  | $   | 3.000 |      |  | $ | 13.250 | 
|              
|              
|              
|              
|Third Quarter  |  | $   | 3.938 |      |  | $ | 7.438  | 
|              
|              
|              
|              
|Fourth Quarter |  | $   | 1.300 |      |  | $ | 6.900  | 

|               |  |     |       |      |  |   |       | 
|-------------- |  | --- | ----- | ---- |  | - | ----- | 
|1999           |  | Low |       | High
|               |  |     |       |     
|First Quarter  |  | $   | 1.000 |      |  | $ | 6.250 | 
|              
|              
|              
|              
|Second Quarter |  | $   | 1.125 |      |  | $ | 4.875 | 
|              
|              
|              
|              
|Third Quarter  |  | $   | 1.500 |      |  | $ | 6.625 | 

Holders

As of May 31, 2001, we had 255 record holders of our common
stock. This number does not include the number of persons whose
shares of common stock are held in nominee or in street
name accounts through brokers. As of such date, 34,056,179
shares of common stock were issued and outstanding. An
additional 4,437,064 and 3,819,176 shares of common stock were
subject to outstanding warrants and options, respectively.

Dividends

We have never paid any cash dividends on our common stock. We
anticipate that we will retain earnings, if any, to finance the
growth and development of our business. Therefore, we do not
expect to pay cash dividends on our common stock for the
foreseeable future. Any future determination to pay cash
dividends will be at the discretion of our Board of Directors
and will depend upon our financial condition, operating results,
capital requirements and whatever other factors that our Board
of Directors may deem relevant.

Penny Stock

The Companys common stock is subject to the provisions of
Section 15(g) and Rule 15g-9 of the Securities
Exchange Act of 1934 (the Exchange Act), commonly
referred to as the penny stock rule.
Section 15(g) sets forth certain requirements for
transactions in penny stocks and Rule 15g-9(d)(1)
incorporates the definition of penny stock that is found in
Rule 3a51-1 of the Exchange Act.

The SEC generally defines penny stock to be any equity security
that has a market price less than $5.00 per share, subject to
certain exceptions. If the Companys common stock is deemed
to be a penny stock, trading in the shares will be subject to
additional sales practice requirements on broker-dealers who
sell penny stocks to persons other than established customers
and accredited investors (generally, an individual
with a net worth in excess of $1,000,000 or an annual income
exceeding $200,000 or $300,000 together with his or her spouse).
For transactions covered by this rule, a broker-dealer must make
a special suitability determination for the purchaser and have
received the purchasers written consent to the transaction
prior to sale. The rule

26



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OTC Bulletin Board® Eligibility Rules

The Companys common stock was quoted on the OTC Bulletin
Board® under the symbol HSNS until
October 24, 2000.

On January 4, 1999, the SEC granted approval of amendments
to the NASD OTC Bulletin Board Eligibility Rules 6530 and
6540 (the Eligibility Rules). The Eligibility Rules
require a company listed on the OTC Bulletin Board® to be a
reporting company with the SEC to maintain the listing of its
stock on the OTC Bulletin Board®. In the Companys
case, the Eligibility Rules required the Company to become fully
compliant by May 17, 2000 (its Phase-in Date).
On February 22, 2000, the Company filed a registration
statement on Form 10 for such purpose. The Company filed an
amendment to such registration statement on March 13, 2000,
in response to the comments received from the staff of the SEC.
The Eligibility Rules require that the SEC come to a position of
no further comment regarding any registration statement on
Form 10 before the NASD considers a company compliant. The
Company, having determined that it would not be possible to
clear the SEC staffs comments by its Phase-in Date,
withdrew the registration statement on Form 10 on
April 19, 2000.

The Company, instead, sought to become an Exchange Act reporting
company through its acquisition, in late April 2000, of
J.S.J. Capital Corporation, a publicly-held shell corporation.
On May 8, 2000, the Company filed a Current Report on
Form 8-K in connection with the acquisition of J.S.J.
Capital. The Company was unaware at the time that the staff of
the SEC staff had issued a letter to the Director of Listing
Qualifications of Nasdaq, dated April 7, 2000, indicating
that a non-Exchange Act reporting company, upon acquiring a
reporting blank check company (i.e., a development
stage company that has no specific business plan or purpose),
would not be deemed to be a successor issuer to that
company. Further, the non-reporting company would have to file a
registration statement on Form 10 or Form 10-SB, or a
Current Report on Form 8-K with a minimally acceptable
level of information, with such filing being subject to SEC
staff review and comment, to become an Exchange Act reporting
company. Since the Company was not able to clear the SEC
staffs comments on the Form 8-K, the Company was not
able to become fully compliant by its Phase-in Date.

The Company was able to obtain from the SEC a temporary stay of
Nasdaqs delisting of its common stock from the OTC
Bulletin Board® pending its appeal of Nasdaqs
delisting decision. However, the Companys appeal was
unsuccessful. The Companys common stock was removed from
the OTC Bulletin Board®, effective October 24, 2000,
and has since traded on the Pink Sheets®. The Company
intends to file with the SEC a registration statement on
Form 10 concurrent with the filing of this annual report on
Form 10-K to again seek to have its common stock made
eligible for quotation on the OTC Bulletin Board®.

Shares Eligible for Future Sale

Of the 34,056,179 shares of common stock outstanding as of
May 31, 2001, an aggregate of 26,009,908 shares are freely
tradable without restriction in the public market unless the
shares are held by affiliates, as that term is
defined in Rule 144(a)(1) under the Securities Act of 1933,
as amended (the Securities Act). For purposes of
Rule 144, an affiliate of an issuer is a person
that, directly or indirectly through one or more intermediaries,
controls, or is controlled by or is under common control with,
the issuer. The freely tradable shares include:



| |   |                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 20,197,797 shares that were issued in connection with the
	Summus, Ltd. asset acquisition (such shares having been issued
	in a transaction exempt from registration under
	Section 3(a)(10) of the Securities Act of 1933); and

27



---





| |   |                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 5,812,111 shares issued in transactions exempt from registration
	under Rule 504 of Regulation D, promulgated under the
	Securities Act of 1933, when that rule provided that shares
	issued thereunder would be deemed unrestricted securities.

The remaining shares of common stock outstanding are
restricted securities under the Securities Act of
1933 and may be sold in the public market upon the expiration of
the holding periods under Rule 144, described below,
subject to the volume, manner of sale and other limitations of
Rule 144, as applicable.

In general, under Rule 144 as currently in effect, a person
who has beneficially owned shares for at least one year,
including an affiliate, is entitled to sell, within
any three-month period, a number of shares that does not exceed
the greater of:



| |   |                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |  | 1% of the then outstanding shares of the Companys common
	stock; or                                                               
|
| |  | the average weekly trading volume during the four calendar weeks
	preceding filing of notice of the sale of shares of common stock.

Sales under Rule 144 are also subject to certain manner of
sale provisions, notice requirements and the availability of
current public information about the Company. A shareholder who
is deemed not to have been an affiliate of the
Company at any time during the 90 days preceding a sale,
and who has beneficially owned restricted shares for at least
two years, would be entitled to sell shares under
Rule 144(k) without regard to the volume limitations,
manner of sale provisions or public information requirements.

In addition to sales pursuant to Rule 144, we have issued
approximately 10.4 million shares with registration rights
requiring us to offer to the holders of these shares the
opportunity to have their shares included in a registration
statement that we may file with the SEC under the Securities Act
of 1933. We intend to file a registration statement on
Form S-1 to register any and all shares for which the
holders of such shares seek to have covered by such registration
statement as soon as reasonably practicable.

Recent Sales of Unregistered
Securities

From January 1, 1998 through December 31, 2000, we
have issued an aggregate of 30,297,116 shares of our common
stock to approximately 100 persons, and 2000 shares of our
Series A convertible preferred stock to three persons.
These securities were not registered under the Securities Act of
1933. Except as noted below, the issuances of the securities
described below were issued in transactions deemed to be exempt
from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act as transactions by an
issuer not involving any public offering. All of such
securities, except for those issued in reliance upon
Rule 504 of Regulation D, promulgated under the
Securities Act, are deemed to be restricted
securities as defined in Rule 144(a)(3) under the
Securities Act. Except as noted below, no commissions were paid
in connection with any of the issuances.

Stock Issuances in
connection with Business Combinations/ Acquisitions

In August 1998, we issued 9,275,000 shares of our common
stock to Marketers World, Inc., in partial consideration for all
the assets of Marketers World. In August 1999, following
negotiations, on an individual basis, with each of the holders
of the shares issued in connection with this transaction, such
holders agreed to surrender an aggregate of 5,161,100 shares.

In September 1998, we issued 775,000 shares of common stock
to Ormond Trust, an affiliate of Mr. Richdale, in
consideration for all the issued and outstanding shares of
capital stock of Brad Richdale Direct, Inc.

In September 1998, we issued 100,000 shares of common stock
to Mr. Richdale in expectation of consummating the acquisitions
of HealthTec, Inc. and National Direct Corporation. Our
expectation was that we would receive all the issued and
outstanding shares of capital stock of these companies. However,
these transactions were not consummated and in August 1999 the
shares issued by the Company were returned for cancellation.

28



---



In February 1999, we granted an option to purchase
1,000,000 shares of common stock to Mr. Richdale at an
exercise price of $.01 per share as part of the consideration
paid to acquire the licensing and marketing rights, held by Brad
Richdale Direct, to certain products under development by
Summus, Ltd. In August 1999, Ormond Trust, as assignee of
the option, exercised the option in full and we waived payment
of the exercise price.

In August 1999, we issued 795,001 shares of our common
stock (valued at $643,951, or $0.81 per share) to five
individuals  Cale Yarborough (366,667 shares),
William R. Dunavant (350,000 shares), Rick Turbin (30,000
shares), Robert Chalnick (30,000 shares) and Wallace Permenter
(18,334 shares)  and made a cash payment of $102,000
($100,000 to Mr. Dunavant and $2,000 to an attorney), in
exchange for an aggregate of 402,000 shares of stock of Summus
Technologies, Inc. held by these individuals. Concurrent with
the acquisition of such shares of Summus Technologies
stock, affiliates of Mr. Richdale transferred an additional
598,182 shares of Summus Technologies stock to the
Company. The issuance of the Companys securities was
deemed to be exempt from registration under the Securities Act
in reliance upon the exemption provided by Rule 504 of
Regulation D.

In May 2000, under an agreement and plan of merger, dated
as of April 18, 2000, between High Speed and J.S.J Capital
Corp., we acquired all the outstanding shares of common stock of
J.S.J. Capital Corp. from its sole stockholder in exchange for
50,000 shares of our common stock.

Effective July 10, 2000, we acquired from Douglas May, the
sole shareholder of Douglas May & Co., Inc., all the
issued and outstanding shares of that companys capital
stock in exchange for an aggregate of 183,070 shares of our
common stock.

Stock Issuances for Cash/
Satisfaction of Indebtedness

In August 1998, we issued an aggregate of 3,766,600 shares
of common stock for average consideration of $0.084 per share,
to 8 investors, including 2,446,000 shares to Mr. Rene
Hamouth, our sole director and officer at the time, and the
Hamouth Family Trust, and 1,100,000 shares to StoneLeigh Ltd.,
an affiliate of Mr. Richdale. The total consideration
received for these shares was $317,000. The issuance of these
securities was deemed to be exempt from registration under the
Securities Act in reliance upon the exemption provided by
Rule 504 of Regulation D.

In September 1998, we issued 1,550,000 shares of common
stock to Mr. Richdale in satisfaction of our indebtedness to
Mr. Richdale in the aggregate amount of $149,820. This
represents a per share value of the shares issued of $0.097. The
issuance of these securities was deemed to be exempt from
registration under the Securities Act in reliance upon the
exemption provided by Rule 504 of Regulation D.

In February 1999, we issued 157,323 shares of our common
stock to GEM Singapore in consideration for GEM Singapores
agreement to pay $471,987 (or $3.00 per share). In
July 1999, the shares were cancelled for lack of
consideration.

From February to April 1999, we issued an aggregate of
338,188 shares of our common stock to 15 investors (all of whom
were unaffiliated with the Company) for a price per share
ranging from $1.00 to $2.50 and aggregate consideration of
$347,500. The issuance of these securities was deemed to be
exempt from registration under the Securities Act in reliance
upon the exemption provided by Rule 504 of
Regulation D.

In August 1999, we issued 1,500,000 shares of our common
stock to Summus, Ltd. in lieu of the fourth and final cash
payment (in the amount of $750,000) due under the
February 1999 Marketing License Agreement.

In August 1999, we issued 250,000 shares of our common
stock to Mr. and Mrs. Seifert (the parents of Richard F.
Seifert, our current co-Chief Executive Officer) for total
consideration of $250,000 ($1.00 per share). Because the
purchase price per share was below the fair market value of the
common stock on the date of purchase (i.e., $4.38 per share), we
recorded $845,000 of expense for the year ended
December 31, 1999 in connection with this issuance.

29



---



On February 28, 2000, we issued 2,000 shares of
Series A convertible preferred stock, par value $.001 per
share, to three investors for an aggregate consideration of
$2,000,000 ($1,000 per share) and net proceeds of $1,850,952.
The investors were F. van Lanschot Bankiers (350 shares),
Insinger de Bearfort (250 shares) and AAA Trust Company, Ltd.
(1,400 shares). Each share of Series A convertible
preferred stock is convertible into shares of common stock equal
to the liquidation preference ($1,000) divided by a conversion
price, which is subject to adjustment, of $14.24. We recorded a
beneficial conversion feature in the amount of $294,900 in
connection with the issuance of these shares, which were
convertible on the date of issuance.

From July through October 2000, we issued an aggregate of
650,012 shares of our common stock, and warrants to purchase
1,300,024 shares of our common stock for an aggregate
consideration of $3,000,000, to two investors: AAA Trust
Company, Ltd. (281,671 shares and warrants to purchase 563,342
shares); and Van Ernst Jakobs (368,341 shares and warrants to
purchase 736,682 shares). The warrants have an exercise price of
$4.625 per share and are exercisable during the five-year period
beginning January 31, 2001. In connection with these
transactions, we issued an additional 32,501 shares of our
common stock as a placement fee. The shares and warrants were
issued in transactions deemed to be exempt from registration
under the Securities Act in reliance upon the exemption provided
by Rule 506 of Regulation D.

In November and December 2000, we issued an aggregate of
861,777 shares of our common stock to 37 investors for a price
ranging from $1.38 to $3.00 per share, and issued warrants to
purchase, at an exercise price of $4.00 per share, an additional
697,540 shares of our common stock, for aggregate consideration
of $1,777,554. Each warrant has a term of five years. The shares
and warrants were issued in transactions deemed to be exempt
from registration under the Securities Act in reliance upon the
exemption provided by Rule 506 of Regulation D.

Issuances of Convertible
Debentures/ Underlying Shares of Common Stock

Between February 1, 1999 and August 18, 1999, we
issued 8.0% convertible debentures in the aggregate principal
amount of $2,655,749 ($2,157,999 to Mr. Richdale and his
affiliates) to 11 investors. Debentures in the aggregate
principal amount of $2,097,109 were issued to Mr. Richdale
and his affiliates in partial consideration for his cash
payment, on our behalf, of virtually all of the first three cash
payments of $750,000 each due Summus, Ltd., under the
February 1999 Marketing License Agreement.

The debentures were convertible into shares of our common stock
at prices ranging from $0.25 to $1.33 per share. All such
debentures were converted in 1999 into an aggregate of 4,852,860
shares of our common stock. Because the conversion price of the
debentures was below the fair market value of the common stock
at the time of issuance, the Company recorded a $2,655,749
beneficial conversion feature as debt discount and additional
paid-in-capital on the date the debentures were issued. The
resulting interest expense was immediately recognized because
the debentures were convertible upon issuance.

Stock Issuances for Services
Rendered

In September 1998, we issued a total of 565,000 shares of
our common stock (including 225,000 shares issued in connection
with the acquisition of Brad Richdale Direct) to
Mr. Michael Cimino, our President at the time, and 100,000
shares to Mr. Marc Zboch for services rendered, including
services in connection with contemplated acquisitions, to the
Company. These shares were valued at $66,500 ($0.10 per share)
based on the estimated fair value of the Companys common
stock, as determined by sales of such stock near the time of
such issuances. The Companys common stock was not publicly
traded at the time. In August 1999, 530,000 shares
(including 100,000 shares issued to each of Messrs. Cimino,
Richdale and Zboch in connection with the contemplated
acquisitions of HealthTec and National Direct Corporation were
surrendered for cancellation when the contemplated transactions
were ultimately not pursued or were not consummated.

In 1999, we issued an aggregate of 85,500 shares of our common
stock to consultants for services rendered. These shares were
valued at $130,814 based on the traded value of our common stock
at the time of such issuances. In July 1999, we issued 500
shares of our common stock to Mr. Jason Parsons in exchange
for all rights in and to our Company logo. In July 1999, we
issued to Mr. Ron de Jong 50,000 shares of our

30



---





In November 2000, we issued 8,988 shares of our common
stock to Alfred Williams & Company in lieu of rental
payments due under an office furniture lease.

Stock/ Option Issuances to
Directors, Officers and Employees

Issuances in 1999

During the year ended December 31, 1999, we granted options
to purchase an aggregate of 1,315,000 shares of our common stock
to our officers and employees as follows:

|                   |  |            |             |                   |  |                |         |  |  |   |       | 
|------------------ |  | ---------- | ----------- | ----------------- |  | -------------- | ------- |  |  | - | ----- | 
|                   |  |            |             | Number of         |  |               
|Recipient          |  | Grant Date |             | Underlying Shares |  | Exercise Price
|                   |  |            |             |                   |  |               
|Peter Rogina       |  |            | March 1999  |                   |  |                | 100,000 |  |  | $ | 0.01  | 
|                  
|                  
|                  
|                  
|Myung Kim          |  |            | April 1999  |                   |  |                | 200,000 |  |  | $ | 0.01  | 
|                  
|                  
|                  
|                  
|Myung Kim          |  |            | April 1999  |                   |  |                | 50,000  |  |  | $ | 4.00  | 
|                  
|                  
|                  
|                  
|Michael Cimino     |  |            | May 1999    |                   |  |                | 425,000 |  |  | $ | 0.01  | 
|                  
|                  
|                  
|                  
|Richard F. Seifert |  |            | May 1999    |                   |  |                | 200,000 |  |  | $ | 0.01  | 
|                  
|                  
|                  
|                  
|Richard F. Seifert |  |            | May 1999    |                   |  |                | 50,000  |  |  | $ | 4.00  | 
|                  
|                  
|                  
|                  
|Alan R. Keinmaier  |  |            | August 1999 |                   |  |                | 50,000  |  |  | $ | 4.00  | 
|                  
|                  
|                  
|                  
|Andrew L. Fox      |  |            | August 1999 |                   |  |                | 160,000 |  |  | $ | 13.00 | 
|                  
|                  
|                  
|                  
|Andrew L. Fox      |  |            | August 1999 |                   |  |                | 80,000  |  |  | $ | 4.38  | 

We also issued options to purchase an additional 1,140,000
shares of our common stock to non-employees. Specifically, we
issued options to purchase 1,000,000 shares to Mr. Richdale
(see the disclosure under Stock Issuances in connection
with Business Combinations/ Acquisitions above) and
options to purchase 140,000 shares of our common stock to Peter
Rogina, who was at the time of issuance of such options a former
employee. See the disclosure below.

Our grant in 1999 of options to officers and directors to
purchase an aggregate of 1,075,000 shares with exercise prices
below the fair value of the Companys common stock at
issuance resulted in the recording of $2,006,250 in non-cash
compensation expense. Additional information regarding the
option grants reflected in the above table is provided below.

In April 1999, we granted to Mr. Myung Kim options to
purchase 200,000 shares of our common stock at an exercise price
of $0.01 per share and additional options to purchase 50,000
shares at an exercise price of $4.00 per share under the terms
of an employment and stock option agreement. Non-cash
compensation expense has been recognized related to the grant of
these options. In August 1999, Mr. Kim exercised the
options to purchase 200,000 shares and we waived payment of the
exercise price.

In May 1999, we granted to Mr. Cimino options to
purchase 425,000 of our common shares at an exercise price of
$0.01 for services rendered. Non-cash compensation expense has
been recognized related to the grant of these options. In
June 1999, Mr. Cimino exercised the option in full and
we waived payment of the exercise price.

In May 1999, we granted to Mr. Richard F. Seifert
options to purchase 200,000 shares of our common stock at
an exercise price of $0.01 per share and additional options to
purchase 50,000 shares at an exercise price of $4.00 per
share under the terms of his employment and stock option
agreement. Non-cash compensation expense has been recognized
related to the grant of these options. In August 1999,
Mr. Seifert exercised the options to purchase 200,000
shares and we waived payment of the exercise price.

31



---



In August 1999, we granted to Mr. Alan R. Kleinmaier
options to purchase 50,000 shares of our common stock at an
exercise price of $4.00 per share under the terms of an
employment offer letter. The options vested upon Mr.
Kleinmaiers acceptance of such offer. Non-cash
compensation expense has been recognized related to the grant of
these options.

In August 1999, we granted to Mr. Andrew Fox options
to purchase 160,000 and 80,000 shares of our common stock
at an exercise price of $13.00 and $4.38 per share,
respectively, under the terms of an employment offer letter.
Options exercisable for 80,000 shares (at an exercise price
of $4.38 per share) vested on August 25, 2000, and options
exercisable for 80,000 shares each (at an exercise price of
$13.00 per share) will vest on the first and second
anniversaries of that date.

On September 22, 1999, the Company entered into a
settlement agreement with Summus, Ltd. and Peter Rogina in
settlement of a dispute under Mr. Roginas employment and
stock option agreement that provided for payment of an aggregate
amount of $110,000 to Mr. Rogina, along with the issuance
of options to purchase 240,000 shares of our common stock
at an exercise price of $0.01 per share. Options to purchase
100,000 shares were to have been issued upon
Mr. Roginas execution of his employment and stock
option agreement in March 1999. By the terms of the
settlement agreement, the Company issued options to purchase
200,000 shares of our common stock, subject to the provisions of
Mr. Roginas employment and stock option agreement.
These options are exercisable over a period of ten years from
the commencement date of Mr. Roginas employment.
Options for the remaining 40,000 shares of common stock are, by
the terms of the settlement agreement, exercisable beginning on
or after July 1, 2000 and within five years of the date of
the settlement agreement, at an exercise price of $0.01.
Non-cash expense has been recognized related to the grant of
these options.

Issuances in 2000

During the year ended December 31, 2000, we granted options
to purchase an aggregate of 780,800 shares of our common
stock to our directors, officers and employees under our 2000
Equity Compensation Plan in consideration for services rendered.
Options exercisable for 200,500 shares of common stock were
cancelled in 2001 in connection with employment terminations or
resignations of employees and directors prior to vesting.

With the exception of the grant of options to purchase an
aggregate of 15,000 shares of common stock issued to
Mr. Seifert (described in the next paragraph), the options
granted under the Plan were, in each case, granted with exercise
prices equal to the fair market value at the time of grant and
were subject to a three-year vesting schedule tied to the
recipients continued employment with the Company or
continued service as a director, as applicable.

In February 2000 we granted to Mr. Seifert options to
purchase 15,000 shares of common stock at an exercise price of
$4.00 per share in connection with his termination of employment
with the Company and in consideration for his continued service
as a director of the Company. Non-cash compensation expense of
$333,750 has been recognized based on the difference between the
exercise price and the traded value of the common stock on the
date of grant.

In addition to the options granted to directors, officers and
employees under our 2000 Equity Compensation Plan, in
February 2000 we granted to Mr. Kim options to
purchase 15,000 shares of common stock at an exercise price of
$4.00 per share in settlement of his employment and stock option
agreement. Also, in December 2000, we entered into a
revised settlement agreement with Peter Rogina amending certain
provisions of the original settlement agreement. Under the terms
of the revised settlement agreement we issued options to
purchase 35,000 shares of our common stock at an exercise
price of $0.01 per share. The options for the 35,000 shares are
exercisable at any time before September 22, 2004. In
addition, we agreed to use our best efforts to include
Mr. Roginas option shares in any registration of our
securities. We recorded non-cash expense in the aggregate amount
of $468,171 related to these option issuances.

32



---



In June 2000, we issued an aggregate of 7,500 shares
of our common stock to Mr. Gregory S. Gush as partial
consideration for Mr. Gushs acceptance of employment
as an Executive Vice President of the Company pursuant to the
terms of an employment letter agreement dated June 21, 2000.

Stock Issuances in
Settlement of Litigation

In June 2000, we settled a lawsuit brought against us by
Mr. Dunavant. The settlement agreement was subsequently
amended and restated. As of December 31, 2000 we had issued
an aggregate of 1,700,000 shares under the settlement
agreement, as amended and restated. See Item 13.
Certain Relationships and Related Transactions.

Item 6.  Selected Financial Data.

As disclosed above in Item 1. Business 
Our History, in accordance with generally accepted
accounting principles, the Companys acquisition of the
assets of Summus, Ltd. is accounted for as a reverse
purchase in which Summus, Ltd. is treated as the
accounting acquirer; the Company, the acquired corporation.

The acquisition of substantially all the assets of Summus, Ltd.
closed on February 16, 2001. Generally accepted accounting
principles dictate that the historic financial information
presented in our periodic filings with respect to periods from
and after the date of the closing of the transaction be that of
Summus, Ltd. In this annual report on Form 10-K for the
year ended December 31, 2000, we are including selected
financial data, managements discussion and analysis and
financial statements of both Summus, Ltd. and High Speed Net
Solutions, Inc.

Summus, Ltd. Selected Financial Data

Summus, Ltd.s financial statements for the year ended
December 31, 1999, have been restated. All financial
information included in this annual report on Form 10-K
reflect the restatements. For a discussion of the restatements,
see Summus, Ltd.s financial statements and related notes
included elsewhere in this annual report on Form 10-K.

The following selected historical financial data has been
derived from the financial statements of Summus, Ltd. The
financial statements as of December 31, 1999 and 2000, and
for the years ended December 31, 1999 and 2000, have been
audited by Ernst & Young LLP, independent certified public
accountants, as indicated in their report included elsewhere
herein, which includes a qualification that Summus, Ltd.s
financial condition raises substantial doubt about the
companys ability to continue as a going concern. Summus,
Ltd.s financial statements as of and for the year ended
December 31, 1998 have been audited by Bauknight Pietras
& Stormer, P.A., independent certified accountants, as
indicated in their report included elsewhere herein.

The financial data set forth below should be read in conjunction
with Managements Discussion and Analysis of
Financial Condition and Results of Operations and Summus,
Ltd.s audited and financial statements and notes, which
are, contained elsewhere in this prospectus.

We have presented all amounts, except per share
amounts, in dollars.

33



---



SUMMUS, LTD.

SELECTED FINANCIAL DATA


|                                                     |                                          |                          |           |         |         |      |           |         |         |      |            |         |         |   |            |            |            |   |             |            |            |  
|---------------------------------------------------- | ---------------------------------------- | ------------------------ | --------- | ------- | ------- | ---- | --------- | ------- | ------- | ---- | ---------- | ------- | ------- | - | ---------- | ---------- | ---------- | - | ----------- | ---------- | ---------- | -
|                                                     |                                          |                         
|                                                     |                                          | Year ended December 31  
|                                                     |                                          |                         
|                                                     |                                          | 1996                     |           | 1997    |         | 1998 |           | 1999    |         | 2000
|                                                     |                                          |                          |           |         |         |      |           |         |         |     
|Statement of Operations Data:                        |                                          |                          |           |         |         |      |           |         |         |      |            |         |         |   |            |            |            |   |             |           
|                                                    
|                                                    
|                                                    
|                                                    
|Revenues:                                            |                                          | $                        | 658,591   |         |         | $    | 606,633   |         |         | $    | 556,638    |         |         | $ | 515,216    |            |            | $ | 1,068,658   |           
|                                                    
|                                                    
|                                                    
|                                                    
|Cost of revenues                                     |                                          |                          | 399,724   |         |         |      | 528,346   |         |         |      | 271,701    |         |         |   | 281,254    |            |            |   | 398,326     |           
|                                                    
|                                                    
|                                                    
|                                                    
|Selling, general and administrative expenses         |                                          |                          | 271,284   |         |         |      | 342,833   |         |         |      | 2,720,152  |         |         |   | 3,797,067  |            |            |   | 6,221,362   |           
|                                                    
|                                                    
|                                                    
|                                                    
|Non-cash compensation charges                        |                                          |                          |          |         |         |      |          |         |         |      |           |         |         |   | 2,670,050  |            |            |   | 2,127,962   |           
|                                                    
|                                                    
|                                                    
|                                                    
|Research and development                             |                                          |                          |          |         |         |      |          |         |         |      | 421,685    |         |         |   | 1,356,686  |            |            |   | 1,119,333   |           
|                                                     |                                          |                          |           |         |         |      |           |         |         |      |            |         |         |   |            |            |            |   |             |           
|Operating loss                                       |                                          |                          | (12,417   | )       |         |      | (264,546  | )       |         |      | (2,856,900 | )       |         |   | (7,589,841 | )          |            |   | (8,798,325  | )         
|                                                    
|                                                    
|                                                    
|                                                    
|Other income (expense):                              |                                          |                          |          |         |         |      |          |         |         |      |           |         |         |   |           |            |            |   |            |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Gain on sale of stock of equity investee |                          |           |        |         |      |           |        |         |      |            |        |         |   |            | 2,314,390  |            |   |             | 3,680,065  |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Participation in loss of equity investee |                          |           |        |         |      |           |        |         |      |            |        |         |   |            | (3,447,110 | )          |   |             | (6,356,932 | )         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Loss on disposal of assets               |                          |           | (19,224 | )       |      |           | (262    | )       |      |            | (9,869  | )       |   |            | (119,180   | )          |   |             |            |           
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest income (expense), net           |                          |           | (4,951  | )       |      |           | (15,617 | )       |      |            | (14,455 | )       |   |            | (5,239     | )          |   |             | 23,911     |           
|                                                     |                                          |                          |           |         |         |      |           |         |         |      |            |         |         |   |            |            |            |   |             |           
|                                                     |                                          | Total other expense, net |           |         | (24,175 | )    |           |         | (15,879 | )    |            |         | (24,324 | ) |            |            | (1,257,139 | ) |             |            | (2,652,956 | )
|                                                    
|                                                    
|                                                    
|                                                    
|Net loss                                             |                                          | $                        | (36,592   | )       |         | $    | (280,425  | )       |         | $    | (2,881,224 | )       |         | $ | (8,846,980 | )          |            | $ | (11,451,281 | )         
|                                                     |                                          |                          |           |         |         |      |           |         |         |      |            |         |         |   |            |            |            |   |             |           
|Net income (loss) applicable to common
	shareholders |                                          | $                        | (36,952   | )       |         | $    | (280,425  | )       |         | $    | (2,881,224 | )       |         | $ | (8,846,980 | )          |            | $ | (11,451,281 | )         
|                                                    
|                                                    
|                                                    
|                                                    
|Net loss per share (basic and diluted)               |                                          | $                        | (.004     | )       |         | $    | (.03      | )       |         | $    | (0.31      | )       |         | $ | (0.94      | )          |            |   | (1.20       | )         
|                                                     |                                          |                          |           |         |         |      |           |         |         |      |            |         |         |   |            |            |            |   |             |           
|Weighted average common shares outstanding           |                                          |                          | 8,376,142 |         |         |      | 8,376,142 |         |         |      | 9,189,165  |         |         |   | 9,428,075  |            |            |   | 9,546,768   |           
|                                                     |                                          |                          |           |         |         |      |           |         |         |      |            |         |         |   |            |            |            |   |             |           

|                                    |  |             |         |      |  |      |          |      |  |      |         |  |  |   |           |  |  |   |            |  
|----------------------------------- |  | ----------- | ------- | ---- |  | ---- | -------- | ---- |  | ---- | ------- |  |  | - | --------- |  |  | - | ---------- | -
|                                    |  |            
|                                    |  | December 31
|                                    |  |            
|                                    |  | 1996        |         | 1997 |  | 1998 |          | 1999 |  | 2000
|                                    |  |             |         |      |  |      |          |      |  |     
|Balance Sheet Data:                 |  |             |         |      |  |      |          |      |  |      |         |  |  |   |           |  |  |   |            |  
|                                   
|                                   
|                                   
|                                   
|Cash                                |  | $           | 66,108  |      |  | $    | 11,819   |      |  | $    | 137,038 |  |  | $ | 647,704   |  |  | $ | 208,495    |  
|                                   
|                                   
|                                   
|                                   
|Total Assets                        |  |             | 479,588 |      |  |      | 441,128  |      |  |      | 726,764 |  |  |   | 7,382,646 |  |  |   | 1,406,271  |  
|                                   
|                                   
|                                   
|                                   
|Total Shareholders Equity (Deficit) |  |             | 246,297 |      |  |      | (302,033 | )    |  |      | 316,828 |  |  |   | 3,345,692 |  |  |   | (4,653,812 | )
|                                    |  |             |         |      |  |      |          |      |  |      |         |  |  |   |           |  |  |   |            |  

High Speed Net Solutions, Inc. Selected Financial Data

The Companys consolidated financial statements for the
year ended December 31, 1999, have been restated. All
financial information included in this annual report on
Form 10-K reflect the restatements. For a discussion of the
restatements, see the Companys consolidated financial
statements and related notes included elsewhere in this annual
report on Form 10-K.

The following selected historical financial data has been
derived from the Companys consolidated financial
statements. The Companys consolidated financial statements
as of and for the years ended December 31, 1998, 1999 and
2000 have been audited by Ernst & Young LLP, independent
certified public accountants, as indicated in their report
included elsewhere herein, which includes a qualification that
the Companys financial condition raises substantial doubt
about its ability to continue as a going concern.

The financial data set forth below should be read in conjunction
with Managements Discussion and Analysis of
Financial Condition and Results of Operations and the
Companys audited historical consolidated

34



---





We have presented all amounts, except per share
amounts, in dollars.

HIGH SPEED NET SOLUTIONS, INC.

SELECTED FINANCIAL DATA


|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |             |  
|-------------------------------------------- | -------------------------------------------------------------------- | ---------------------- | ---------- | ---------- | - | ---- | ---------- | ---------- | - | - | ----------- | ----------- | -
|                                             |                                                                      |                       
|                                             |                                                                      | Year ended December 31
|                                             |                                                                      |                       
|                                             |                                                                      | 1998                   |            | 1999       |   | 2000
|                                             |                                                                      |                        |            |            |   |     
|Consolidated Statement of Operations Data:   |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|                                            
|                                            
|                                            
|                                            
|Revenues                                     |                                                                      |                        |           |            |   |      |           |            |   |   | 599,054     |            
|                                            
|                                            
|                                            
|                                            
|Costs of revenue                             |                                                                      |                        |           |            |   |      |           |            |   |   | 476,280     |            
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Gross profit                                 |                                                                      |                        |           |            |   |      |           |            |   |   | 122,774     |            
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative expenses |                                                                      | $                      | 374,841    |            |   | $    | 2,582,447  |            |   |   | 6,864,159   |            
|                                            
|                                            
|                                            
|                                            
|Non-cash compensation                        |                                                                      |                        |           |            |   |      | 2,813,000  |            |   |   | 333,750     |            
|                                            
|                                            
|                                            
|                                            
|Interest expense                             |                                                                      |                        |           |            |   |      | 2,655,749  |            |   |   | 15,192      |            
|                                            
|                                            
|                                            
|                                            
|Amortization expense                         |                                                                      |                        |           |            |   |      | 833,333    |            |   |   | 116,200     |            
|                                            
|                                            
|                                            
|                                            
|Impairment charges                           |                                                                      |                        |           |            |   |      |           |            |   |   | 3,953,182   |            
|                                            
|                                            
|                                            
|                                            
|Loss contingency charges                     |                                                                      |                        |           |            |   |      | 800,000    |            |   |   | 1,281,946   |            
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Loss from continuing operations              |                                                                      |                        | (374,841   | )          |   |      | (9,684,529 | )          |   |   | (12,441,655 | )          
|                                            
|                                            
|                                            
|                                            
|Loss from discontinued operations            |                                                                      |                        | (1,334,855 | )          |   |      |           |            |   |   |            |            
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Net loss                                     |                                                                      | $                      | (1,709,696 | )          |   | $    | (9,684,529 | )          |   | $ | (12,441,655 | )          
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Net loss applicable to common shareholders:  |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|                                            
|                                            
|                                            
|                                            
|                                             | Net loss                                                             |                        | $          | (1,709,696 | ) |      | $          | (9,684,529 | ) |   | $           | (12,441,655 | )
|                                            
|                                            
|                                            
|                                            
|                                             | Beneficial conversion feature of preferred stock                     |                        |            |           |   |      |            |           |   |   |             | (294,900    | )
|                                            
|                                            
|                                            
|                                            
|                                             | Preferred stock dividends                                            |                        |            |           |   |      |            |           |   |   |             | (133,333    | )
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Net loss applicable to common shareholders   |                                                                      | $                      | (1,709,696 | )          |   | $    | (9,684,529 | )          |   | $ | (12,869,888 | )          
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Per share amounts (basic and diluted):       |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|                                            
|                                            
|                                            
|                                            
|                                             | Loss applicable to common shareholders from
	continuing operations   |                        | $          | (0.03      | ) |      | $          | (0.51      | ) |   | $           | (0.60       | )
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|                                             | Loss applicable to common shareholders from
	discontinued operations |                        | $          | (0.11      | ) |      |            |           |   |   |             |            |  
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Net loss                                     |                                                                      | $                      | (0.14      | )          |   | $    | (0.51      | )          |   | $ | (0.60       | )          
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Weighted average common shares outstanding   |                                                                      |                        | 11,868,867 |            |   |      | 19,080,492 |            |   |   | 21,619,618  |            
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            

|                                    |  |             |          |      |  |      |           |  |  |   |           |  
|----------------------------------- |  | ----------- | -------- | ---- |  | ---- | --------- |  |  | - | --------- | -
|                                    |  |            
|                                    |  | December 31
|                                    |  |            
|                                    |  | 1998        |          | 1999 |  | 2000
|                                    |  |             |          |      |  |     
|Consolidated Balance Sheet Data:    |  |             |          |      |  |      |           |  |  |   |           |  
|                                   
|                                   
|                                   
|                                   
|Cash and Cash Equivalents           |  | $           | 18,609   |      |  | $    | 248,740   |  |  | $ | 326,622   |  
|                                   
|                                   
|                                   
|                                   
|Total Assets                        |  |             | 26,168   |      |  |      | 4,275,064 |  |  |   | 4,497,607 |  
|                                   
|                                   
|                                   
|                                   
|Total Shareholders Equity (Deficit) |  |             | (277,847 | )    |  |      | 2,785,373 |  |  |   | (351,652  | )

The following information has been provided to highlight certain
significant events reflected in the foregoing table.



| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In August of 1998 we acquired all the assets of Marketers World,
	Inc. By year-end, in part because of limited financial
	resources, we discontinued the operations of Marketers World and
	presented its operating results as discontinued operations in
	1998.

35



---





| |   |                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During 1999, we issued convertible debentures to
	Mr. Richdale and in return Mr. Richdale provided us
	financing. Non-cash interest expense of $2,655,749 was incurred
	in 1999 since the convertible debentures had common stock
	conversion prices below the fair market value of the common
	stock on the date the debentures were issued.
|
| |  | During 2000, we settled a lawsuit with Mr. Dunavant, a
	shareholder. Based on the terms of the settlement, we recorded a
	loss contingency of $1,281,946.                                                                                                                                                                                    
|
| |  | On July 10, 2000, High Speed acquired Douglas
	May & Co., Inc., a marketing and advertising firm.
	Revenues of $595,054 during the year ended December 31,
	2000, represent revenues earned by Douglas May & Co., Inc.                                                                                                                       

Item 7.  Managements Discussion and
Analysis of Financial Condition and Results of
Operations.

On February 16, 2001, we acquired substantially all of
Summus, Ltd.s assets, including its intellectual property
in encoding, manipulating, compressing, managing and
distributing digital multimedia content, and assumed
approximately $2.8 million of Summus, Ltd.s
liabilities. The asset purchase agreement under which the
transaction was consummated contemplates that Summus, Ltd. will
liquidate following the winding up of its business activities.

In accordance with generally accepted accounting principles, the
acquisition of the assets of Summus, Ltd. is accounted for as a
reverse purchase in which Summus, Ltd. is treated as
the accounting acquirer; the Company, the acquired corporation.
As such, we have included in this annual report on
Form 10-K for the year ended December 31, 2000,
financial statements of Summus, Ltd, as well as selected
financial data and managements discussion and analysis of
and pertaining to Summus. Ltd.

Summus, Ltd.

The following discussion is qualified in its entirety by, and
should be read in conjunction with, the more detailed
information in Summus, Ltd.s financial statements and the
notes thereto appearing elsewhere in this annual report on
Form 10-K.

As discussed in Note 2 to Summus, Ltd.s financial
statements, Summus, Ltd. has restated its financial statements
for the year ended December 31, 1999. The following
discussion gives effect to the restatement.

Overview

Since its organization in 1991, Summus, Ltd.s business has
focused on contract engineering and research and development for
U.S. government agencies, principally the Department of Defense.
Its government contract work has included battlefield and
armament imaging and object recognition, real-time imaging from
vehicles and portable radios over limited bandwidth private
radio systems, and application of Summus, Ltd.s
wavelet-based technology to space programs.

Summus, Ltd. developed its expertise in wavelets, a field of
mathematics, through its founder, Dr. Bjorn Jawerth, and
through ten years of government research work. Wavelets work in
a way similar to human vision by focusing on the shape
(edges) and motion that define objects. This enables
wavelets to achieve substantially higher compression ratios than
other existing compression technologies, without the blocky
effects, resulting in a more visually appealing compressed image.

In 1998, Summus, Ltd. commercialized some of its technology
through software development kits and packaged software sales.
In 1999, Summus, Ltd. focused on the commercialization of, among
other things, compression software designed for viewing still
images and a video e-mail-like product for recording,
compressing and e-mailing personal video clips recorded from a
personal computer video camera. Summus, Ltd. licensed these
products to High Speed Net Solutions, Inc. (HSNS)
under the terms of the February 1999 Marketing License
Agreement. In 2000, Summus, Ltd. shifted its focus to the
MaxxSystem suite of software products targeted at advancing the
delivery of rich media for online advertising and the
development of wireless Internet applications for its technology.

36



---



Over the last several years, Summus, Ltd. used its revenues from
government projects, that had historically represented a
significant percentage of its revenues (60% and 76% in the years
ended December 31, 2000 and 1999, respectively), to support
its research and development efforts. Summus, Ltd. sought to
continue to grow its government business, leverage its expertise
in object and pattern recognition, image processing and
multimedia compression through the commercialization of its
technology.

Results of Operations

The following discussion and analysis of Summus, Ltd.s
results of operations and financial condition should be read in
conjunction with Summus, Ltd.s financial statements and
related notes included in Item 8 of this Form 10-K.

Year ended December 31, 2000 Compared to the Year ended
December 31, 1999

Revenues. Revenues for the year ended December 31,
2000 were $1,068,658 compared to $515,216 for the year ended
December 31, 1999, an increase of 107%. The following
provides a breakdown of revenues:

|                                       |  |              |         |      |  |   |         | 
|-------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                                       |  |             
|                                       |  | Year ended  
|                                       |  | December 31,
|                                       |  |             
|                                       |  | 2000         |         | 1999
|                                       |  |              |         |     
|Government projects                    |  | $            | 636,349 |      |  | $ | 388,957 | 
|                                      
|                                      
|                                      
|                                      
|Licensing of software development kits |  |              | 292,142 |      |  |   | 101,682 | 
|                                      
|                                      
|                                      
|                                      
|Contract Work                          |  |              | 138,196 |      |  |   | 19,029  | 
|                                      
|                                      
|                                      
|                                      
|Licensing of MaxxNote                  |  |              | 1,971   |      |  |   | 5,548   | 

Summus, Ltd. follows the provisions of AICPA Statement of
Position 97-2, Software Revenue Recognition, as
amended by AICPA Statement of Position 98-9 Modification
of SOP No. 97-2 Software Revenue Recognition with respect
to Certain Transactions. Revenues from software license
fees and hardware sales are generally recognized upon delivery
provided that a contract has been executed, the vendor fee is
fixed or determinable, no significant vendor obligations or
uncertainties surrounding customer acceptance remain, and
collection of the resulting receivable is deemed probable.

Costs of Revenues. Costs of revenues primarily represent
costs of providing contract services. The cost of software
license fee revenue is not separately maintained and
historically has not been significant. Costs of revenues for the
year ended December 31, 2000 were $398,326 compared to
$281,254 in the prior year.

Gross Profit. Gross profit for the year ended
December 31, 2000, was $670,332, representing an increase
of $436,370 over the prior year. The increase in revenues and
gross profit was primarily due to the expansion of government
research projects with the Office of Naval Research,
specifically Summus, Ltd.s side scan sonar project and
expanded sales efforts with respect to wavelet-based technology
licensing of the companys photo ID and wavelet-based
software development kit product lines.

Selling, General and Administrative Expenses. Selling,
general and administrative expenses consist primarily of
salaries, consulting fees, office operations, administrative and
general management activities, including legal, accounting and
other professional fees. Selling, general and administrative
expenses for the year ended December 31, 2000, were
$6,221,362 compared to $3,797,067 for the year ended
December 31, 1999. The increase was primarily due to
increased staffing in sales, marketing, business development,
product development and administrative personnel, in connection
with Summus, Ltd.s efforts to bring to market finished
products, including the photo ID and wavelet image software
development kits, the MaxxSystem suite of products, and customer
contract work.

Non-Cash Compensation. Non-cash compensation for the year
ended December 31, 2000 was $2,127,962 compared to
$2,670,050 for the year ended December 31, 1999. During the
year ended December 31, 2000, stock options were granted to
directors and employees at prices below the estimated fair value
of the underlying common stock resulting in total compensation
of $3,106,472, of which $2,127,962 was charged to expense in
2000. The remaining amount, $978,510, has been classified as
deferred compensation

37



---





Research and Development. Research and development costs
for the year ended December 31, 2000 were $1,119,333
compared to $1,356,686 for the year ended December 31,
1999. Such costs consist primarily of the salaries of employees
devoted to research and development activities. The decrease
resulted from a reduction of the research and development staff
that occurred in the second half of 2000. Given Summus,
Ltd.s financial condition, several research and
development personnel decided to pursue other opportunities.
However, management does not believe the attrition had a
significant adverse effect on its research and development
efforts.

Gain on Sale of Stock of Equity Investee. Gain on the
sale of stock of equity investee for the year ended
December 31, 2000 was $3,680,065 compared to $2,314,390 for
the year ended December 31, 1999. In 1999, Summus, Ltd.
acquired 11,042,360 shares of common stock of High Speed Net
Solutions, Inc. (HSNS). Summus, Ltd. acquired
1,500,000 shares of HSNS common stock in connection with
HSNSs issuance of such shares in lieu of a cash payment of
$750,000 due from HSNS under the terms of the February 1999
Marketing License Agreement. Summus, Ltd. acquired an additional
9,542,360 shares of HSNS common stock from Mr. Richdale and
his affiliates in exchange for 132,888 shares of Summus, Ltd.
common stock. The initial carrying amount of the HSNS shares was
recorded at the estimated fair value of the shares, factoring in
a discount associated with the shares constituting
restricted securities that were not freely tradable.
During the year ended December 31, 2000, Summus, Ltd. sold
1,171,579 shares of HSNS common stock for gross proceeds of
$4,492,799 (representing an average price per share of $3.83),
resulting in a gain on sale of $3,680,065. During the year ended
December 31, 1999, Summus, Ltd. sold 1,653,000 shares of
its HSNS common stock for gross proceeds of $2,977,500
(representing an average price per share of $1.80), resulting in
a gain on sale of $2,314,390.

Participation in loss of Equity Investee. Participation
in loss of equity investee for the year ended December 31,
2000, was $6,356,932 compared to $3,447,110 for the year ended
December 31, 1999. As noted above, in 1999, Summus, Ltd.
acquired a majority ownership interest in HSNS. Summus, Ltd.
accounted for its investment in HSNS using the equity method of
accounting. Under the equity method of accounting, Summus, Ltd.
adjusted its investment in HSNS for its share of HSNSs
losses subsequent to the date of its initial investment. As of
December 31, 1999 and 2000, Summus, Ltd.s ownership
interest in HSNS decreased to approximately 44% and 33%,
respectively.

Net Interest Income (Expense). Net interest income for
the year ended December 31, 2000 was $23,911 compared to
net interest expense of $5,239 for the year ended
December 31, 1999. The net increase in interest income
resulted from earnings on larger cash balances in 2000,
primarily generated by the sale of HSNS stock. Net interest
expense in 1999 related to interest costs associated with
capital lease obligations and note payable agreements.

Net Loss. As a result of the factors discussed above,
Summus, Ltd.s net losses for the years ended
December 31, 2000 and 1999 were $11,451,281 and $8,846,980,
respectively.

38



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Year ended December 31, 1999 Compared to the Year ended
December 31, 1998

Revenues. Revenues for the year ended December 31,
1999 were $515,216 compared to $556,638 for the year ended
December 31, 1998, a decrease of 7%. The following provides
a breakdown of revenues:

|                                       |  |              |         |      |  |   |         | 
|-------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                                       |  |             
|                                       |  | Year ended  
|                                       |  | December 31,
|                                       |  |             
|                                       |  | 1999         |         | 1998
|                                       |  |              |         |     
|Government projects                    |  | $            | 388,957 |      |  | $ | 299,540 | 
|                                      
|                                      
|                                      
|                                      
|Licensing of software development kits |  |              | 98,497  |      |  |   | 105,112 | 
|                                      
|                                      
|                                      
|                                      
|Contract Work                          |  |              | 19,029  |      |  |   | 10,615  | 
|                                      
|                                      
|                                      
|                                      
|Licensing of video e-mail product      |  |              |        |      |  |   | 135,000 | 
|                                      
|                                      
|                                      
|                                      
|Licensing of MaxxNote                  |  |              | 5,548   |      |  |   | 6,371   | 

The decrease in revenues was primarily due to the reduction in
licensing fees associated with Summus, Ltd.s video e-mail
product following the combination of Summus, Ltd. and Summus
Technologies, Inc.

Costs of Revenues. Costs of revenues for the year ended
December 31, 1999 were $281,254 compared to $271,701 in the
prior year.

Gross Profit. Gross profit for the year ended
December 31, 1999, was $233,962, compared to $284,937 in
the prior year.

Selling, General and Administrative Expenses. Selling,
general and administration expenses for the year ended
December 31, 1999, were $3,797,067 compared to $2,720,152
for the year ended December 31, 1998. The increase was due
to increased staffing in sales and administrative personnel, as
Summus, Ltd. positioned itself to bring to market finished
products for the application of its wavelet-based technology.
Specifically, Summus, Ltd. developed a product
roadmap, established customer relations and
communications, attended trade shows, established a website, and
prepared marketing brochures to promote its commercial products.

Non-Cash Compensation. Non-cash compensation for the year
ended December 31, 1999 was $2,670,050, resulting from the
issuance of 53,401 share of common stock for services performed
by employees. There was no non-cash compensation cost in 1998.

Research and Development. Research and development costs
for the year ended December 31, 1999 were $1,356,686
compared to $421,685 for the year ended December 31, 1998.
The increase in these costs resulted from an increase in the
research and development staff in 1999. Technical expertise in
video, image and 3D was added to accelerate research with
respect to the above technologies.

Gain on Sale of Stock of Equity Investee. Gain on the
sale of stock of equity investee for the year ended
December 31, 1999 was $2,314,390. During 1999, Summus, Ltd.
acquired 11,042,360 shares of HSNS stock which it later sold to
third parties. During the year ended December 31, 1999, the
company sold 1,653,000 shares of its HSNS common stock for gross
proceeds of $2,977,500, resulting in a gain on sale of
$2,314,390. During 1998, Summus, Ltd. had no ownership interest
in HSNS.

Participation in Loss of Equity Investee. Participation
in loss of equity investee for the year ended December 31,
1999 was $3,447,110. During 1999, Summus, Ltd. acquired a
majority ownership interest in HSNS. Summus, Ltd. accounted for
its investment in HSNS using the equity method of accounting.
Under the equity method of accounting, Summus, Ltd. adjusted its
investment in HSNS for its share of HSNSs losses
subsequent to the date of its initial investment. As of
December 31, 1999 and 2000, Summus, Ltd.s ownership
interest in HSNS decreased to approximately 44% and 33%,
respectively.

Loss on Disposal of Assets. Loss on disposal of assets
for the year ended December 31, 1999 was $119,180 compared
to $9,869 for the year ended December 31, 1998. The loss for the
year ended December 31, 1999 was primarily due to the move
of the companys headquarters from Columbia, South Carolina
to Raleigh, North Carolina, and the resulting abandonment of
computers, software, furniture and equipment, including
telephone equipment and leasehold improvements.

39



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Net Interest Income (Expense). Net interest expense for
the year ended December 31, 1999 was $5,239 compared to
$14,455 for the year ended December 31, 1998. The decrease in
expense was due to interest earning cash balances generated by
the sale of HSNS stock in the last two months of 1999. Net
interest expense in 1998 relates to interest costs associated
with capital lease obligations and note payable agreements.

Net Loss. As a result of the factors discussed above,
Summus, Ltd.s net losses for the year ended
December 31, 1999 and 1998 were $8,846,980 and $2,881,224,
respectively.

Liquidity and Capital Resources

As of December 31, 2000, Summus, Ltd. had $208,495 of cash
on hand and negative working capital of approximately
$3.7 million. As of such date, Summus, Ltd. had
approximately $2.6 million of accounts payable, accrued
expenses, notes payable and capital lease obligations and was in
default of payment terms with several of its vendors. The
vendors for which more significant amounts are owed have been
contacted. Summus, Ltd. was in discussions with such vendors for
purposes of seeking to negotiate down the amounts due, extend
the payment terms and/or satisfy amounts due through a
combination of cash and stock.

Summus, Ltd.s principal sources of liquidity for operating
activities and capital expenditures for the three year period
ended December 31, 2000, consisted of capital contributed
and borrowings from certain principal shareholders and their
affiliates, the sale of shares of common stock of its equity
investee, HSNS, the licensing of software products to HSNS under
the February 1999 Marketing License Agreement and loans
from HSNS under the Asset Purchase Agreement entered into with
HSNS under which Summus, Ltd. agreed to the sale of
substantially all of its assets to HSNS. As of December 31,
2000, Summus, Ltd. anticipated that the sale of its equity
securities would represent the primary source of the
companys funding, as the company had no credit facilities.
Summus, Ltd.s continuation as a going concern depended on
its ability to generate sufficient cash flow to meet its
obligations on a timely basis, to obtain additional financing as
may be required and ultimately to attain profitability.

Cash Flow used in Operating Activities. Net cash used in
operating activities was $5,971,072, $4,394,770 and $2,794,972
during the years ended December 31, 2000, 1999, and 1998,
respectively. The key factors affecting cash flow used in
operating activities were greater salaries due to increased
staffing in sales, marketing, business development, product
development, research and development and administrative
personnel. Operating costs also increased during the year ended
December 31, 1999, in connection with Summus, Ltd.s
move from Columbia, South Carolina to Raleigh, North Carolina
during 1999.

Cash Flow from Investing Activities. Net cash flow
provided by investing activities of $4,360,566 during the year
ended December 31, 2000, represented cash proceeds of
$4,492,799 from the sale of 1,171,579 shares of HSNS common
stock that Summus, Ltd. acquired in 1999, less capital
expenditures of $132,233 for office furniture and equipment.

Net cash flow provided by investing activities of $4,909,211
during the year ended December 31, 1999, represented cash
proceeds of $2,977,500 from the sale of 1,653,000 shares of HSNS
common stock that Summus, Ltd. acquired in 1999, less capital
expenditures of $318,289 for office furniture and equipment,
plus $2,250,000 in cash payments it received under the terms of
the February 1999 Marketing License Agreement Summus, Ltd.
entered into with HSNS in February 1999. Under the terms of
that agreement, Summus, Ltd. was to have received four payments
of $750,000 each over the course of the first several months of
the three-year agreement. Mr. Richdale paid in cash all but
$60,000 of the first three payments under the agreement on
HSNSs behalf. The fourth and final payment due under the
MLA was paid by HSNS to Summus, Ltd. through the issuance of 1.5
million shares of HSNS common stock.

Net cash flow used in investing activities of $512,590 during
the year ended December 31, 1998, represented capital
expenditures of $205,100 for office furniture and equipment and
salary costs of $307,490 capitalized as software development
costs.

Cash Flow from Financing Activities. Net cash flow
provided by financing activities of $1,171,297 during the year
ended December 31, 2000, represented $1,435,000 in proceeds
from a loan from HSNS extended under the terms of the asset
purchase agreement with HSNS. Under that agreement, Summus, Ltd.

40



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Net cash flow used in financing activities of $3,775 during the
year ended December 31, 1999, represented proceeds from
note agreements of $268,075, less cash payments on capital lease
and note agreements of $271,850.

Net cash flow provided by financing activities of $3,432,781
during the year ended December 31, 1998, represented cash
proceeds of $3,500,083 from the sale of 831,000 shares of
Summus, Ltd. common stock, less payments on capital lease and
note agreements of $92,302, less proceeds from note agreements
of $25,000.

High Speed Net Solutions, Inc.

The following discussion contains forward-looking statements
that involve risks and uncertainties. Our actual results could
differ materially from those anticipated in these
forward-looking statements as a result of certain factors. The
following discussion is qualified in its entirety by, and should
be read in conjunction with, the more detailed information in
the Companys consolidated financial statements and the
notes thereto appearing elsewhere in this annual report on
Form 10-K.

As discussed in Note 2 to the Companys consolidated
financial statements, the Company has restated its consolidated
financial statements for the year ended December 31, 1999.
The following discussion gives effect to the restatement.

Overview

Acquisition of Marketers
World, Inc./ Brad Richdale Direct, Inc.

High Speed Net Solutions, Inc. was originally incorporated in
1984 under the name of EMN Enterprises, Inc. EMN Enterprises
remained a non-operating shell company until August 1998.
In August 1998, EMN Enterprises acquired all the assets
(with a book value of $495,259) and assumed the liabilities (in
the amount of $75,000) of Marketers World, Inc., a private
company that intended to engage in leasing computer systems to
businesses and performing related services. Upon acquiring the
Marketers World assets, the Company changed its name to
Zzap.net.inc. Marketers World received 10,000,000 shares of EMN
Enterprisess common stock in the transaction, of which EMN
Enterprises issued 9,275,000 shares and Mr. Rene Hamouth,
the then President of EMN Enterprises, transferred 725,000
shares. Upon distribution of the shares received in the
transaction by Marketers World, Ormond Trust, an affiliate of
Mr. Richdale, held a controlling interest in EMN Enterprises. At
the time of the transaction, EMN Enterprises had no assets or
liabilities and, accordingly, the transaction was accounted for
as a recapitalization of the Company. Since the acquisition was
accounted for as a recapitalization of EMN Enterprises, the
shares of its common stock issued in the transaction were not
valued and, consequently, no goodwill was recorded.

In September 1998, zzap.net.inc. issued a total of
1,000,000 shares of its common stock in partial consideration
for all the issued and outstanding shares of capital stock of
Brad Richdale Direct, Inc. (BRD). Of the shares
issued in the transaction, 775,000 shares were issued to Ormond
Trust (an entity established by Mr. Richdale), valued at
$77,500, and 225,000 shares were issued to Michael Cimino, the
then President of both BRD and Zzap.net.inc. in consideration
for services rendered. The primary purpose of this transaction
was to obtain licensing and marketing rights, held by BRD, to
certain products under development by Summus, Ltd. Zzap.net.inc.
intended to use these products in connection with the planned
operations of Marketers World. Since BRD had nominal assets and
operations, this transaction was accounted for as an acquisition
of licensing rights, rather than as a business combination. The
value attributed to this transaction was based on recent
transactions in Zzap.net.inc.s common stock near the date
of the transaction.

41



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By year-end 1998, Zzap.net.inc., in part because of its limited
financial resources, determined to discontinue the operations of
the former Marketers World business. Accordingly, the net book
value of the assets associated with this business, in the amount
of $68,890, was written off at December 31, 1998 as part of
the loss from discontinued operations. Coincident with that
decision, the Company changed its name to its present
name  High Speed Net Solutions, Inc.

The Marketing License
Agreement with Summus, Ltd.

In February 1999, the Company entered into the Marketing
License Agreement (MLA) with Summus, Ltd. under
which the Company obtained rights to resell stand-alone software
products specified in the MLA over the three-year term of the
agreement. In consideration for such rights, the Company agreed
to pay an upfront royalty payment of $3,000,000, to be paid in
four installments of $750,000 each, the first such payment due
upon execution of the MLA and the last three payments due in
monthly intervals at the end of each of the three months
thereafter. Mr. Richdale paid all but $60,000 of the first
three payments under the agreement on the Companys behalf.
The Company issued convertible debentures in the aggregate
principal amount of $2,157,998 to Mr. Richdale or entities he
controlled in partial consideration for such payments. The
Company issued 1.5 million shares of its common stock to
Summus, Ltd. in lieu of the final cash payment due under the MLA.

Since each of the four products specified under the MLA were
completed and ready for resale, the Company capitalized the
upfront royalty payment, in the amount of $4,528,125
(representing the cash payments of $2,250,000 and
1.5 million shares of the Companys common stock
valued at $2,278,125), as prepaid software royalties
(essentially license fees) in accordance with the provisions of
Statement of Financial Standards No. 86, Accounting
for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed, as each of the four software products
specifically referred to in the MLA had reached
technological feasibility within the meaning of
Paragraphs 4 and 38 of that statement. The Company has since
determined to restate the value of 1.5 million shares by
applying a discount to the traded value of the Companys
common stock at the time of issuance based on the discount
associated with private sales of shares of its common stock
(such shares being restricted securities as defined
in Rule 144 under the Securities Act of 1933) within close
proximity to the time of the issuance of such shares. The
revaluation of these shares has resulted in a reduction of
$1,528,125 in the original recorded value of the prepaid
royalties (i.e., from $4,528,125 to $3,000,000).

In August 1999, Summus, Ltd. acquired a majority of the
then outstanding shares of common stock of the Company. Summus,
Ltd. subsequently sold a portion of its shares of the
Companys common stock to third parties such that by
December 31, 1999, Summus, Ltd.s interest had been
reduced to approximately 44%. In connection with the
transaction, the Companys existing management team was
replaced with new management designated by Summus, Ltd. Over the
next several months, the new management team determined to
revise the Companys business plan. Rather than function as
a reseller of Summus, Ltd. software products, management
determined that the Company should function as an application
service provider or service bureau, utilizing Summus Ltd.s
compression technology to enhance the effectiveness of
e-commerce, digital advertising, direct marketing campaigns and
multimedia  what the Company termed rich media
direct (RMD).

Planned Service Bureau
Business Using Summus, Ltd.s MaxxSystem

As a result of the change in business plan, the Company entered
into negotiations with Summus, Ltd., beginning in
December 1999, to modify the companies contractual
relationship under the MLA. These negotiations resulted in the
companies execution of several agreements (i.e., a master
agreement, software license agreement, software maintenance
agreement, revenue sharing agreement and software escrow
agreement) in mid-February 2000. These agreements
superseded the MLA in its entirety. Under these agreements,
Summus, Ltd. granted to us a non-exclusive license to use a
suite of software products referred to as MaxxSystem.

42



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Under the new agreements, the Company did not become obligated
to make any additional payments, in cash or other consideration,
to Summus, Ltd. for the software products to be provided
thereunder. In fact, the Company received approximately
$2.2 million in credits toward future fees due and payable
to Summus, Ltd. Under the circumstances, the Company determined
that, in the absence of any information that would have
indicated that the net realizable value of any of the products
licensed under the MLA had been adversely affected by its change
in business plan or that the unamortized capitalized costs
exceeded the net realizable value of such products, no
impairment-related write off under SFAS No. 86 was
appropriate as of December 31, 1999. As of that date, the
Company fully expected to generate future revenues, in its
contemplated service bureau business, through the use of the
Summus, Ltd. software products covered by the several agreements
then being negotiated, sufficient to recover the carrying value
of the prepayments under the MLA.

The software license agreement provided the Company with rights
to use of Summus, Ltd.s MaxxSystem suite of products in
the Companys planned service bureau business. The
agreement did not permit the Company to resell any of the
software products constituting MaxxSystem. As such, the Company
determined that the MaxxSystem suite of software products
constituted internal use software subject to
Statement of Position 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal
Use. Although the software license agreement (and the
related agreements) were executed in mid-February 2000, the
terms of such agreement had been substantially negotiated and
agreed to at the time the Companys financial statements as
of and for the year ended December 31, 1999, were issued in
February 2000. For this reason, the Company also gave
consideration to the question of impairment of the prepaid
royalties as of December 31, 1999, under the provisions of
SOP 98-1. SOP 98-1 requires an evaluation of
capitalized software costs for impairment in accordance with
FASB Statement No. 121. SFAS 121 requires an estimate
of future cash flows to determine if an asset that is in use is
impaired. SOP 98-1 includes examples of indicators that
internal use software has been impaired, including: (i) the
software is not expected to provide substantive service
potential; (ii) a change occurs in the extent or manner in
which the software is used or expected to be used; or
(iii) a significant change to the software is made or
expected to be made. The change in the Companys business
plan was driven primarily by the view that delivery of
multimedia over the Internet through use of the MaxxSystem suite
of software products offered greater future cash flows than the
resale of the software products licensed under the MLA. As noted
above, under the agreements the Company did not become obligated
to make any additional payments, in cash or other consideration,
to Summus, Ltd. for the software products to be provided
thereunder. In fact, the Company received approximately
$2.2 million in credits from the prepaid royalties paid in
connection with the MLA toward future fees due and payable to
Summus under the terms of the Master Agreement. In view of these
considerations, the Company determined that an
impairment-related write off of the prepaid royalties was not
appropriate as of December 31, 1999 under SOP 98-1 and
SFAS 121.

The Company has concluded it is appropriate to restate the
accompanying financial statements as of and for the year ended
December 31, 1999, to reduce the recorded value of the
prepaid royalties by $833,333 to reflect the amortization of the
prepaid software royalties in 1999 in accordance with the
provisions of SFAS No. 86. Originally, no amortization was
recorded as the Company planned to directly offset the prepaid
royalties against future royalty payments otherwise due under
the terms of the MLA. The amount amortized ($833,333) was
derived based upon the downward adjustment in the prepaid
royalties carrying amount associated with the revaluation of the
shares of the Companys common stock (as explained above)
and applying the straight-line method over the three-year
estimated economic life of the products licensed under the MLA.

As explained in Item 1. Business  Our
History, toward the end of the first quarter of 2000, a
combination of market conditions and potential government
regulatory actions caused us to modify our short- and
longer-term plans for revenue generation as an application
service provider of multimedia content over the Internet. Market
resistance developed to the delivery of Internet services via
.exe file types following certain software
vendors delivery of such files with viruses. This prompted
many companies to configure firewalls to block all files with an
 .exe extension. This limited the market for e-mail distribution
using the MaxxNote (i.e., the video e-mail-like module of
MaxxSystem). At about the same time, the Federal Trade Commission

43



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In view of these developments, on March 28, 2000, the
Company engaged Nexgenix, an e-business systems integrator, to
evaluate the Companys business model and one specific
planned application of MaxxSystem: distribution and campaign
management services. In May 2000, Nexgenix presented to the
Company the results of its evaluation and recommended three
software solutions for distribution and campaign software for
the Companys service bureau business. The recommended
solutions did not include MaxxServer, the MaxxSystem module
designed to facilitate distribution and campaign management
applications. Based on the Nexgenix presentation, the
Companys management determined to select another
vendors product to provide the distribution and campaign
management functionality for the Companys service bureau
business. Nexgenixs evaluation did not affect the other
modules of MaxxSystem. Indeed, the MaxxSystem suite of software
products, utilizing Summus, Ltd.s wavelet-based
technology, continued to represent the primary tool that the
Company anticipated would drive its service bureau business. For
this reason, at the time of filing its Form 10-Q for the
quarterly period ended March 31, 2000, the Companys
management did not believe any impairment of the carrying value
of its capitalized software license fees relating to the
MaxxSystem software had occurred.

Based on Nexgenixs recommendations, in July 2000 the
Company licensed software developed by E.Piphany for the
distribution and campaign management functions of its service
delivery. The E.Piphany product was selected as a more robust
management and delivery vehicle for the Companys
rich media direct (RMD) 2.0 and future releases
of RMD service offerings. One of the key criteria for selecting
the E.Piphany software was that the Company would continue to be
able to use the MaxxNote module as part of RMD 1.0 and
future releases of RMD service offerings. This was consistent
with the Companys strategy to maximize the use of Summus,
Ltd.s. wavelet-based technology in its service offerings,
since the Company believed that wavelet-based technology would
provide it with a competitive advantage over other service
providers in its contemplated target market.

On June 27, 2000, the Company ran its first e-mail
campaign, for Buy It Now.com, using the MaxxNote component of
MaxxSystem. This was a test campaign, for which the Company
received no fees. In July 2000, the Company generated
revenues of $4,000 by running a RMD 1.0 campaign for
Continental Airlines. Thus, at the end of the second quarter of
2000 the Company was proceeding toward implementation of its
service bureau business and management concluded that no
impairment charge was warranted as of June 30, 2000.

The customer analysis and feedback from both the Buy It Now.com
and Continental Airlines campaigns made evident that video
streaming (together with the computer hardware, network and
support facilities to enable use of video streaming) needed to
be added to the Companys service delivery in order to make
its service business more viable in the marketplace. Summus,
Ltd. was obligated to provide the streaming software (i.e.,
MaxxServer) under the terms of the software license agreement.
However, since the MaxxServer component of MaxxSystem was not
yet completed and the Company did not have the required
infrastructure in place, the Company commenced a search for a
total streaming and related infrastructure solution. Although
MaxxServer was not yet finalized at this time, Summus, Ltd. was
in the process of completing this module of MaxxSystem. In
January 2001 Summus, Ltd. delivered a beta version of its
streaming software to the Company for use in its service
delivery demonstration.

Following the Companys search for a total streaming and
infrastructure solution, the Company, in September 2000,
entered into a licensing agreement with All Video Network, Inc.
(AVN) to secure both the streaming and the required
infrastructure to conduct streaming. AVN provided a full
streaming service. It was anticipated that Summus, Ltd.s
wavelet-based technology would be integrated into this full
streaming service when Summus, Ltd. completed its software
development. AVNs real value to the Company was in the
infrastructure AVN provided to the Company, enabling it to gain
a quicker entry into this market. AVNs streaming service
was considered a complementary, not a substitute, solution,
because AVN had the

44



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The licensing of AVNs streaming service was viewed as a
possible indicator of impairment of the capitalized software
license fees related to the MaxxSystem software at the time of
the Companys preparation of its third quarter 2000
financial statements. However, this potential impairment
indicator was overcome by the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | AVNs streaming service was considered a complementary
	streaming solution, not a substitute solution, because AVN had
	the capability to stream both wavelet-based and MPEG4 compressed
	media.                                                                                                                                                                                                                                                                    
|
| |  | The AVN technology was intended to enable the Company to
	establish a presence in the marketplace and to help further
	assist in the evaluation of operational processes prior to the
	next release of RMD. The Companys intent remained to use
	Summus, Ltd.s wavelet-based technology in its service
	delivery, which the Company viewed as the basis of its
	differentiating its service offering from the competition and
	providing value in the marketplace.
|
| |  | A key advantage to the AVN license was that it provided to the
	Company more than just streaming technology. It also provided
	the hardware and equipment infrastructure to conduct streaming.
	Under the terms of the Master Agreement, Summus, Ltd. was not
	obligated to provide the Company with the infrastructure
	necessary to conduct streaming.                                                                                                            
|
| |  | The AVN license was readily cancelable by the Company. The
	Company negotiated this to provide an exit strategy from the AVN
	streaming solution once the Companys infrastructure was in
	place.                                                                                                                                                                                                                                                                   

Acquisition of Summus, Ltd.
Assets

Because we viewed Summus, Ltd.s compression technology as
key to differentiating our rich media direct service delivery
from other service offerings, we entered into discussions with
Summus, Ltd. that led to the two companies entering into an
asset purchase agreement at the end of October 2000. The
transaction was contingent on the Company raising
$7.5 million within 60 days. The Company was not able to
raise the necessary funding to close the transaction within the
required time frame. Due to the lack of funding, the Company had
to temporarily delay its implementation and testing of
MaxxSystem in 2000 and became unable to effect payments to third
party vendors who were critical in completing this process.

Since the Company could not raise additional capital, management
determined that it was unlikely that funding would be available
to develop and rollout the service bureau business model as
previously planned. Under FASB 121, when it is no longer
probable that computer software will be placed in service, the
software should be reported at the lower of its carrying amount
or fair value. Under SOP 98-1, there is a rebuttable
presumption that if there are no plans to complete the software
or place it in service, the software has a fair value of zero.
SOP 98-1 describes several indicators that the software may
no longer be expected to be completed and placed in service,
including a lack of expenditures budgeted or incurred for
the project. Therefore, during the fourth quarter of 2000,
management determined that all of the assets associated with the
Companys service bureau business were impaired.
Accordingly, an impairment charge of approximately
$2.9 million was recorded in the fourth quarter of 2000
consisting of the net carrying value of the capitalized amounts
associated with MaxxSystem of approximately $2.2 million
and other capitalized costs incurred in the development of the
service bureau business of approximately $0.7 million.

On February 16, 2001, the Company and Summus, Ltd.
consummated the transactions contemplated by the asset purchase
agreement, as subsequently amended, without the Company having
secured any additional capital. The agreements entered into in
mid-February 2000 by the companies were cancelled in their
entirety. Following the acquisition of Summus, Ltd.s
assets, we revised our business plan, consistent with the
Summus, Ltd. business plan immediately prior to the asset
acquisition, to focus on applications of the acquired
compression software and technology in the wireless Internet
market.

45



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The consideration paid by the Company to acquire the assets of
Summus, Ltd. is described below:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company issued to Summus, Ltd. shareholders a total of
	20,197,797 shares of the Companys common stock and 6,000
	shares of Series B preferred stock (of which 2,000 shares
	were deposited with an escrow agent as security for any
	indemnification obligations of Summus, Ltd. and its shareholders
	under the asset purchase agreement). As a shareholder of Summus,
	Ltd., the Company was entitled to receive 3,604,445 of the total
	number of shares of common stock issued in the transaction.
	However, these shares were cancelled under the terms of the
	asset purchase agreement, resulting in a net issuance of
	16,593,352 shares of the Companys common stock. In
	addition, the asset purchase agreement provided for the
	cancellation of the 8,217,781 shares of the Companys
	common stock owned by Summus, Ltd. prior to the parties
	execution of the agreement.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has authorized the issuance of up to 6,500 shares of
	Series B preferred stock. The rights of the Series B
	preferred stock are as follows: each share of Series B
	preferred stock will be automatically converted into 1,000
	shares of common stock, subject to adjustment for stock
	dividends, stock splits and the like, after the Companys
	charter is amended to increase the number of authorized shares
	of common stock to at least 60 million shares. Under the
	terms of the asset purchase agreement, the Company is required
	to seek shareholder approval to amend its charter to increase
	the number of authorized shares of common stock so that there
	will be sufficient shares of common stock available and reserved
	for issuance upon conversion of the Series B preferred
	stock. The Company anticipates seeking shareholder approval of
	such an increase in connection with its 2001 annual meeting of
	shareholders. Until then, the Series B preferred stock will
	not be convertible. Each share of Series B preferred stock
	is entitled to receive dividends and participate in
	distributions upon liquidation pro rata with the common stock on
	an as-converted basis, and will vote equally with the common
	stock on an as-converted basis. These rights apply even if there
	is insufficient authorized common stock to permit conversion of
	the Series B preferred stock.



| |   |                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company issued to Summus, Ltd. warrants to purchase a total
	of 500 shares of its Series B preferred stock, exercisable
	for a period of 5 years from February 16, 2001. The
	exercise price of the warrants is $5,500.00 per share of
	Series B preferred stock ($5.50 per share of our common
	stock on an as-converted basis).
|
| |  | The Company assumed approximately $2.8 million of
	liabilities of Summus, Ltd. to third parties. All amounts owed
	by and between the Company and Summus, Ltd. were cancelled upon
	the closing of the asset acquisition.                                                                                                            

Acquisition of Douglas May
& Co., Inc.

On July 10, 2000, the Company acquired all of the issued
and outstanding capital stock of Douglas May & Co., Inc., a
marketing and advertising company, by issuing 183,070 shares of
its common stock to Douglas May, the sole shareholder of Douglas
May & Co., in a business combination accounted for as a
purchase. These shares were valued at $1,376,000.

The 183,070 shares of common stock were issued at closing in
three allotments:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The first allotment corresponded to $500,000 of value. The
	Company issued 50,000 shares of common stock, such shares being
	subject to adjustment if the OTC Bulletin Board trading price of
	the common stock on the first anniversary of the closing date of
	the transaction is less than $10.00 per share. Under such
	circumstances, the Company is obligated to issue additional
	shares of common stock that, when added to the 50,000 shares,
	and multiplied by the per share trading price on the first
	anniversary of the closing date, shall equal $500,000 in value.
	The issuance of the 50,000 shares has been recorded at the
	guaranteed amount of $10.00 per share on the date of
	issuance, July 10, 2000. Payment or issuance of any
	additional shares will not change the recorded cost of the
	acquisition of May.
|
| |  | The second allotment of shares of common stock (87,498 shares)
	issued corresponded to $576,000 of value. The Company committed
	to file a registration statement with the SEC to register the
	resale of these shares. If the shares were not freely tradable
	on or before January 1, 2001, Mr. May had the right                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

46



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | to cause the Company to repurchase these shares from
	Mr. May at their stated redemption value (negotiated
	between the parties and based on the average of the last sales
	price of shares of such stock on the OTC Bulletin Board for the
	ten consecutive trading days ending two business days prior to
	the closing date) by making six cash installment payments
	totaling $576,000. Mr. May has not yet elected to have the
	Company repurchase these shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | The third allotment of shares of common stock (45,572 shares)
	issued corresponded to $300,000 of value (calculated in the same
	manner as with respect to the 87,498 shares described above).
	The Company committed to file a registration statement with the
	SEC to register the resale of these shares. If the shares were
	not freely tradable on or before the expiration of 90 days
	from the closing date, Mr.  May had the right to cause the
	Company to repurchase these shares from him by releasing funds,
	in the amount of $300,000, the acquisition agreement provided be
	placed into an escrow account, the funds being from certain
	accounts receivable of May that were collected subsequent to the
	acquisition date. In January 2001, based on the election of
	Mr. May, the Company repurchased and retired these shares
	for $300,000 using the funds from the escrow account. These
	shares will be treated as outstanding for loss per share
	purposes in accordance with the guidance set forth in SFAS No.
	128. All shares issued that are subject to repurchase by the
	Company have been presented on the Companys balance sheet
	as redeemable stock outside of stockholders equity.

The results of operations of Douglas May & Co. are included
in the Companys financial statements from the date of
acquisition. By virtue of the acquisition of Douglas May &
Co., the Company generated its first significant revenues and
thereby exited the development stage.

During 2000, Douglas May & Co. produced negative operating
cash flows. As explained above, the Company determined in the
fourth quarter of 2000 not to pursue its planned service bureau
business due to funding constraints. Management determined that
there was no basis upon which to project positive future cash
flows from Douglas May & Co. since the acquisition was
motivated by the anticipated synergies to be derived by
incorporating the Douglas May & Co. business into the
Companys planned service bureau business. Thus, in
accordance with the provisions of SFAS 121, the Company
concluded that the unamortized portion of the goodwill recorded
in connection with the acquisition of Douglas May & Co.
($1,058,177, net of the previously amortized amount of $116,260)
had become fully impaired and should be written off. Thus, the
Company recorded an impairment charge of $1,058,177 in the
fourth quarter of 2000. The Company is in the process of seeking
to divest the operations of Douglas May & Co.

Results of Operations

The following discussion and analysis of the Companys
results of operations and financial condition should be read in
conjunction with the Companys consolidated financial
statements and related notes included in Item 8 of this
Form 10-K.

Because of our limited operating history, comparisons between
results for different periods to date generally are not
meaningful.

Year ended December 31, 2000 compared to the Year ended
December 31, 1999

Revenues. Revenues for the year ended December 31,
2000, of $599,054 represent revenues by Douglas May &
Co. and the $4,000 generated from the rich media direct campaign
run for Continental Airlines. Revenues from the media creation
services provided by Douglas May & Co., including
creative design assistance and commercial content development,
is recognized at the time the services are rendered based on the
terms of individual contracts.

Costs of revenues. Costs of revenues for the year ended
December 31, 2000, also associated with Douglas May &
Co., were $476,280.

Gross Profit. Gross profit for the fiscal year ended
December 31, 2000, was $122,774.

47



---



During most of the year ended December 31, 1999, the
Company was positioning itself to engage in the resale of the
various software products licensed from Summus, Ltd. under the
February 1999 Marketing License Agreement. The Company
engaged in the development of a sales and marketing plan for
these products and endeavored to put in place the necessary
infrastructure. However, 1999 was characterized by several
management changes, including the change that followed Summus,
Ltd.s acquiring a controlling interest in the Company in
August 1999. Further, the Companys limited financial
resources greatly hampered its marketing and sales efforts. Of
necessity, the Company made such efforts primarily from its
website. In view of these disruptions and constraints, the
Company did not realize any revenues from these products. As
described in the Overview section, by year-end the
Company had determined to change its business plan and was in
the midst of negotiations with Summus, Ltd. to modify its
existing business relationship.

Selling, General and Administrative Expenses. Selling,
general and administrative expenses consist primarily of
salaries, office operations, administrative and general
management activities, including legal, accounting and other
professional fees. Selling, general and administrative expenses
for the year ended December 31, 2000, were $6,864,159
compared to $2,582,447 for the year ended December 31,
1999. Selling, general and administrative expenses for the year
ended December 31, 2000, included $1,754,560 in legal and
accounting fees. Of this amount, $400,000 related to our merger
with J.S.J. Capital and the remaining portion was attributable
to professional fees associated with Securities and Exchange
Commission filings and other general corporate activity.
Selling, general and administrative expenses for the year ended
December 31, 2000, also included $1,498,792 in salaries and
payroll costs and $860,602 in outside consulting fees. The
remaining balance is attributable to the development and rollout
of the Companys planned service bureau business.

Selling, general and administrative expenses in year 1999
included $1,391,000 in non-cash charges relating to the grant of
stock options exercisable for 1,140,000 shares of the
Companys common stock at a price ($0.01 per share) which
was below the fair value of the common stock at the time of
grant. This includes an option issued to Mr. Richdale
exercisable for 1,000,000 shares of the Companys common
stock. See the disclosure under Item 5. Recent Sales of
Unregistered Securities  Stock Issuances for Services
Rendered. The remaining costs related to salary and other
general operating costs.

[Non-Cash Compensation.] Non-cash compensation charges
for the year ended December 31, 2000, were $333,750 related
to the grant of stock options exercisable for 15,000 shares of
the Companys common stock to Richard F. Siefert, one of
the Companys directors, at a price below the estimated
fair of the common stock at the time of issuance.

Loss Contingency Charges. Loss contingency charges for
the year ended December 31, 2000 were $1,281,946 compared
to $800,000 for the year ended December 31, 1999. On
January 26, 2000, William R. Dunavant
(Dunavant), a former shareholder of Summus
Technologies, Inc., who received 350,000 shares of the
Companys common stock and $100,000 in cash in exchange for
his shares of Summus Technologies, Inc. stock, filed a lawsuit
against the Company. Former management of the Company had
entered into an agreement with Dunavant and Michael Cimino that
obligated the Company to file a registration statement with the
SEC to register the resale of these shares within a specified
time period. The Companys failure to register such shares
resulted in a lawsuit against the Company seeking damages of
$13,300,000. Pursuant to a settlement agreement entered into as
of May 4, 2000, as amended on June 6, 2000, the
Company agreed, among other things, to register the 350,000
shares then held by Dunavant and to issue to him an aggregate of
175,000 new shares of the Companys common stock with
registration rights. The Company subsequently entered into a
Second Amended and Restated Settlement Agreement, dated
October 26, 2000, which superseded all previous agreements
with Dunavant. By the terms of the Second Amended and Restated
Settlement Agreement (and a supplemental letter thereto, dated
December 5, 2000), the Company issued to Dunavant 1,700,000
shares of common stock in 2000. The value of these shares,
totaling $1.6 million, was based on a discount applied to
the traded value of the Companys common stock on the date
of issuance reflecting that the shares were not registered and
are, therefore, restricted securities within the
meaning of Rule 144 under the Securities Act of 1933. The
number of common shares held by Dunavant at December 31,
2000, totaled 2,050,000. Additionally, the Company became
obligated to issue 25,000 shares of restricted common stock per
month and pay $25,000 in cash per month to Dunavant until a
registration statement on Form S-1, covering the resale of
Dunavants shares, is declared effective by the SEC.
Accordingly, the loss

48



---





Interest Expense. Interest expense for the year ended
December 31, 2000, of $15,192 represents interest expense
incurred on capital lease obligations. During the year ended
December 31, 1999, we incurred non-cash interest expense of
$2,655,749 relating to the issuance of convertible debentures
that included common stock conversion prices which were below
the fair value of the common stock on the date the convertible
debentures were issued. The majority of these debentures were
issued to Mr. Richdale and/or his affiliates in connection
with Mr. Richdales payment on the Companys
behalf of all but $60,000 of the first three payments due
Summus, Ltd. under the February 1999 Marketing License
Agreement. See the disclosure under Item 5. Recent
Sales of Unregistered Securities  Issuances of
Convertible Debentures/ Underlying Shares of Common Stock.

Amortization Expense. Amortization expense for the year
ended December 31, 2000 was $116,200 compared to $833,333 for
the year ended December 31, 1999. Amortization expense for
the year ended December 31, 2000 related to the
amortization of goodwill resulting from the acquisition of
Douglas May & Co. in July 2000. Amortization
expense of $833,333 for the year ended December 31, 1999
related to the amortization of the prepaid software royalty
costs capitalized in 1999 under the February 1999 Marketing
License Agreement. See Note 2 to the Companys Consolidated
Financial Statements.

Impairment Charges. An impairment charge for the year
ended December 31, 2000 of $2,895,005 relates to the
cessation of the Companys rollout of its planned service
bureau business model. During the fourth quarter of 2000, the
Company could not raise the necessary capital to complete the
development and rollout of its planned service bureau business
and therefore management determined that all costs associated
with the service bureau business were impaired. Accordingly, an
impairment charge of $2,895,005 was recorded in the fourth
quarter of 2000 consisting of the net carrying amount of the
capitalized costs incurred in the development of the service
bureau business. Included in these costs was approximately
$2.2 million of costs associated with MaxxSystem and
$0.7 million of other capitalized costs incurred in the
development of the service bureau business. See Note 6 to
the Companys Consolidated Financial Statements.

An impairment charge for the year ended December 31, 2000
of $1,058,177 related to the impairment to the goodwill recorded
in connection with the acquisition of Douglas May & Co.
During the fourth quarter of 2000, management determined that
the expected synergies and expected future prospects of
incorporating the business of Douglas May & Co. into the
Companys planned rich media direct-based
service bureau business would not be realized. Accordingly,
$1,058,177 represents the unamortized portion of the goodwill
recorded in connection with the acquisition of Douglas May &
Co. See Note 4 to the Companys consolidated financial
statements.

Net Loss. As a result of the factors discussed above, our
net losses for the year ended December 31, 2000 and 1999
were $12,441,655 and $9,684,529, respectively.

Year Ended December 31, 1999 as compared to the Year
Ended December 31, 1998

Revenue. As previously described, during most of the year
ended December 31, 1999, the Company was positioning itself to
engage in the resale of the various software products licensed
from Summus, Ltd. under the February 1999 Marketing License
Agreement. The Company engaged in the development of a sales and
marketing plan for these products and endeavored to put in place
the necessary infrastructure. However, 1999 was characterized by
several management changes. Further, the Companys limited
financial resources greatly hampered its marketing and sales
efforts. In view of these disruptions and constraints, the
Company did not realize any revenues from these products.

For the first seven months of the year ended December 31,
1998, the Company was inactive. The Company effected the
acquisition of Marketers World, Inc. in August 1998 and
Brad Richdale Direct, Inc. in September 1998, but did not
engage in any revenue generating activity during the balance of
1998. By year-

49



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Selling, General And Administrative Expenses. Selling,
general and administrative expenses for the year ended
December 31, 1999 were $2,582,447 compared to $374,841 for
the year ended December 31, 1998. Selling, general and
administrative expenses in 1999 included a $1,391,000 non-cash
charge relating to the above-described grants of stock options
exercisable for 1,140,000 shares of the Companys common
stock at a price ($0.01 per share) which was below the fair
value of the common stock at the time of grant. The remaining
costs related to the Companys efforts to resell the
software products licensed under the February 1999
Marketing License Agreement and to salary and other general
operating costs, which increased from 1998 to 1999 due to the
additional corporate overhead implemented in order to commence
the Companys business.

Non-Cash Compensation. Non-cash compensation charges for
the year ended December 31, 1999, were $2,813,000 related
to the grant of stock options exercisable for 1,075,000 shares
of the Companys common stock and issuances of an aggregate
of 250,000 shares of common stock (representing the shares
issued to family members of Mr. Seifert, one of the
Companys directors, at a time when the Company had a
critical need for financing) at prices below the estimated fair
value of the common stock at the time of issuance. The stock
options vested upon issuance and had a nominal exercise price of
$0.01.

Interest Expense. Non-cash interest expense of $2,655,749
incurred in the year ended Decembers 31, 1999, related to the
issuance in 1999 of convertible debentures with conversion
prices below the fair value of the common stock on the date the
debentures were issued.

Amortization Expense. Amortization expense of $833,333
incurred in the year ended December 31, 1999 related to the
above-described amortization of the prepaid software royalty
costs capitalized in 1999 under the February 1999 Marketing
License Agreement.

Loss Contingency Charges. Loss contingency charges of
$800,000 incurred during the year ended December 31, 1999,
related to the initial accrual associated with the Dunavant
lawsuit and settlement.

Loss from Discontinued Operations. The Company recorded a
loss from discontinued operations of $1,334,855 for the year
ended December 31, 1998, related to the previously
described termination of the Marketers World operations at the
end of 1998.

Net Loss. As a result of the factors discussed above, our
net loss for the year ended December 31, 1999 was
$9,684,529 and our net loss for the year ended December 31,
1998 was $1,709,696.

Liquidity and Capital Resources

As of May 31, 2001, we had $250,000 of cash on hand and
negative working capital of $5.5 million. As of such date,
we had approximately $5.7 million of accounts payable,
accrued expenses, notes payable and capital lease obligations
and were in default of payment terms with several of our
vendors. The vendors for which more significant amounts are owed
have been contacted. We are in discussions with such vendors for
purposes of seeking to negotiate down the amounts due, extend
the payment terms and/or satisfy amounts due through a
combination of cash and stock. In certain cases, we are in the
process of structuring extended payment terms providing from
9-18 months of additional time to effect payment. In
addition to our indebtedness to vendors, we are also delinquent
in the payment of amounts due legal and other advisors. There
can be no assurance that our vendors and advisors will be
willing to agree to any concessions or that we will be able to
generate sufficient funds to satisfy our debts.

On February 16, 2001, the Company acquired substantially
all of Summus, Ltd.s assets. In connection with this
transaction, we provided funding to Summus, Ltd totaling
$1,975,000, $1,435,000 of which was provided to Summus, Ltd. in
2000. The primary source of the funding the Company provided to
Summus, Ltd. was generated by sales of our common stock and
warrants in private placement transactions (all such

50



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The success and growth of the Companys business,
post-Summus, Ltd. asset acquisition, is dependent in large part
on our ability to partner and develop relationships within the
wireless industry. In order for the Company to execute on its
business plan, the Company anticipates that it will require
approximately $5 million in working capital within the next
twelve months, in part to expand its operations to Europe and
Asia where the wireless network infrastructure is currently more
developed than it is in North America. It is imperative that the
Company market and sell or license its products where the
infrastructure is capable of supporting our technology. This
will represent a significant cost to the Company but is critical
to its future success. By establishing operations in targeted
areas around the world, supported by the necessary marketing
resources, the Company expects to be able to work with local
carriers, device manufacturers and content providers and seek to
shorten sales cycles established with its targeted customer base.

Our continuation as a going concern depends on our ability to
generate sufficient cash flow to meet our obligations on a
timely basis, to obtain additional financing as may be required
and ultimately to attain profitability.

Cash Flow from Operating Activities. Net cash used in
operating activities was $3,822,295, $1,021,323 and $291,685
during the years ended December 31, 2000, 1999 and 1998,
respectively. The key factors affecting cash flow used in
operating activities were the greater amounts paid in salaries
as our workforce expanded, along with the operational costs
incurred in endeavoring to resell the software products licensed
under the February 1999 Marketing License Agreement (in
1999) and in the development and rollout of the planned service
bureau business (in 2000). For the year ended December 31,
1998, net cash used in discontinued operations of $1,265,965
represents the net cash used to operate Marketers World during
1998.

Cash Flow from Investing Activities. Net cash used in
investing activities of $968,557 during the year ended
December 31, 2000, represents capital expenditures for
office furniture and computer equipment. Net cash used in
investing activities of $106,052 during the year ended
December 31, 1999 included $4,052 paid for office
furniture, and $102,000 paid in connection with the acquisition
of our ownership interest in Summus Technologies, Inc. Our total
investment in Summus, Ltd. (following the merger of Summus
Technologies into Summus, Ltd.) was $1,855,937, consisting of a
cash payment of $102,000 and the issuance of 795,001 shares of
our common stock valued at $643,951, and a non-cash equity
contribution received from a significant shareholder of the
Company, valued at $1,109,986. Net cash used in investing
activities of $50,148 for the year ended December 31, 1998
included the purchase of equipment.

Cash Flow from Financing Activities. Our operations to
date have been primarily funded by private placements of our
preferred and common stock and the issuance of convertible
debentures to our principal shareholders and their affiliates.

Net cash provided by (or used in) financing activities of
$4,868,734 for the year ended December 31, 2000 related to:



| |   |                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the sale of 2,000 shares of our Series A convertible
	preferred stock (at a per share price of $1,000), generating net
	proceeds of $1,850,952;                                                                                                                                                                                                   
|
| |  | the sale of 1,544,290 shares of our common stock along with
	warrants to purchase an additional 1,997,564 shares of common
	stock at an exercise prices ranging from $4.00 to $4.625 per
	share (all such securities being restricted
	securities as defined in Rule 144) to accredited
	investors, generating aggregate proceeds of $4,777,553;
|
| |  | $1,435,000 in loans made to Summus, Ltd. under the terms of the
	October 30, 2000 asset purchase agreement. The Company was
	obligated to make cash payments of $235,000 to Summus, Ltd.
	beginning on October 30, 2000, and every two weeks
	thereafter. Shares of the Companys common                                                          

51



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| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | stock owned by Summus, Ltd. collateralized these payments. Upon
	the closing of the asset acquisition on February 16, 2001,
	the Company ceased to make any further advances to Summus, Ltd;
|
| |  | the restriction of $300,000 in cash under the terms of the share
	acquisition agreement entered into in connection with the
	acquisition of Douglas May & Co.; and                          
|
| |  | principal payments made on a capital lease of $5,448 and
	repayments to shareholders of $19,323.                                                                                            

Net cash provided by financing activities of $1,357,506 during
the year ended December 31, 1999 resulted from:



| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | the sale of 588,188 shares of our common stock at per share
	prices ranging between $1.00 and $2.50, generating net proceeds
	of $597,500;
|
| |  | the issuance of convertible debentures, generating cash proceeds
	of $558,640; and                                                        
|
| |  | net advances from shareholders totaling $210,852.                                                                                         

Net financing activities during the year ended December 31,
1998 of $1,626,407 included proceeds from the sale of common
stock of $317,000, shareholder capital contributions of
$1,091,648 and shareholder advances of $445,378, less $227,619
used to repurchase 38,500 shares of our common stock.

New Accounting Pronouncements

In June 1998, the FASB issued Statement of Financial
Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS 133
requires that derivative instruments be recognized as either
assets or liabilities in the consolidated balance sheet based on
their fair values. Changes in the fair values of such derivative
instruments will be recorded either in results of operations or
in other comprehensive income, depending on the intended use of
the derivative instrument. The initial application of SFAS 133
will be reported as the effect of a change in accounting
principle. SFAS 133 is effective for all years beginning after
June 15, 2000. Because the Company has not historically
used derivative financial instruments, the Company does not
anticipate that SFAS 133 will have a material impact on its
consolidated financial statements.

Item 7A.  Quantitative and Qualitative
Disclosures about Market Risk.

We do not use any derivative financial instruments for hedging,
speculative or trading purposes. Our exposure to market risk is
currently immaterial.

Item 8.  Financial Statements and Supplementary
Data.

The financial statements and supplementary data filed with this
report are set forth in the Index to Consolidated
Financial Statements and Schedule following Part IV hereof.

Item 9.  Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure.

On November 1999, we engaged Ernst & Young LLP as our
independent auditors for the year ended December 31, 1999,
to replace Barry L. Friedman, P.C. (Friedman), whom
we dismissed as our independent auditors on the date Ernst &
Young LLP was engaged. The decision to change independent
auditors was approved by our Board of Directors.

The reports of Friedman on our financial statements for years
1996 and 1997 and for the period commencing January 1, 1998
and ending July 22, 1998 did not contain an adverse opinion
or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. The
reports of Friedman on our financial statements for the period
January 1, 1998 to July 22, 1998 and for the two years
in the period ended December 31, 1997 included an
explanatory paragraph about our ability to continue as a going
concern. In connection with the audits of our financial
statements for the years ended December 31, 1996 and 1997,
and in the subsequent interim period preceding the dismissal of
Friedman, there were no disagreements with Friedman on any
matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if
not resolved to the satisfaction of Friedman, would have

52



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We requested and received from Friedman a letter addressed to
the Commission stating that Friedman agrees with the above
statements.

During 1996 and 1997 and through the date that we engaged Ernst
& Young LLP, we did not consult with Ernst & Young LLP
on matters relating to the application of accounting principles
to a specified transaction or the type of audit opinion that
might be rendered on our financial statements, or which
concerned the subject matter of a disagreement or reportable
event with the former auditor (as described in
Regulation S-K, Item 304).

53



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PART III

Item 10.  Directors and Executive Officers of
the Registrant.

Board of Directors

The following table provides information regarding the members
of our Board of Directors including their ages, the year they
were first elected as directors and the expiration of their
terms as directors:

|                   |  |     |    |            |  |         |      |  |  |  |      | 
|------------------ |  | --- | -- | ---------- |  | ------- | ---- |  |  |  | ---- | 
|                   |  |     |    | First Year |  |        
|                   |  |     |    | Elected    |  |        
|                   |  |     |    | as         |  | Term   
|Name               |  | Age |    | Director   |  | Expires
|                   |  |     |    |            |  |        
|Stuart Diamond     |  |     | 53 |            |  |         | 2001 |  |  |  | 2002 | 
|                  
|                  
|                  
|                  
|Dr. Bjorn Jawerth  |  |     | 48 |            |  |         | 2000 |  |  |  | 2002 | 
|                  
|                  
|                  
|                  
|Andrew L. Fox      |  |     | 37 |            |  |         | 2000 |  |  |  | 2002 | 
|                  
|                  
|                  
|                  
|Richard F. Seifert |  |     | 50 |            |  |         | 1999 |  |  |  | 2002 | 
|                  
|                  
|                  
|                  
|Herman Rush        |  |     | 71 |            |  |         | 2000 |  |  |  | 2002 | 
|                  
|                  
|                  
|                  
|Wendi Tush         |  |     | 43 |            |  |         | 2001 |  |  |  | 2002 | 

In addition to the above members, Christopher Gaertner is an
advisor to our Board of Directors and has no voting power.

By the terms of the agreement under which the Company acquired
substantially all of the assets of Summus, Ltd., the size of the
Companys Board of Directors was to be increased to ten
members immediately following the closing of the transaction.
Post-closing, the Board was to consist of four members from each
of the Company and Summus, Ltd. Upon the selection of a ninth
director by the 4 representatives of the Company, Ms. Tush
was to be appointed to the Board as the tenth member. However,
Ms. C. Cristine Wittriss (a Company member) and
Mr. Kenneth Marks (a Summus, Ltd. member) have since
resigned as directors of the Board and the Board has since
consisted of six directors.

Executive Officers

The following table provides information regarding our executive
officers, the capacity in which they serve the Company, when
they assumed office and their ages.

|                   |  |                                                         |  |               |      |     |  |  |    | 
|------------------ |  | ------------------------------------------------------- |  | ------------- | ---- | --- |  |  | -- | 
|Name               |  | Office                                                  |  | Officer Since |      | Age
|                   |  |                                                         |  |               |      |    
|Richard F. Seifert |  | Co-Chief Executive Officer                              |  |               | 2001 |     |  |  | 50 | 
|Dr. Bjorn Jawerth  |  | Co-Chief Executive Officer, Chief Scientist,
	President |  |               | 2001 |     |  |  | 48 | 
|Gary E. Ban        |  | Chief Operating Officer                                 |  |               | 2001 |     |  |  | 37 | 
|Robert S. Lowrey   |  | Chief Financial Officer,                                |  |               | 2000 |     |  |  | 41 | 
|                   |  | Treasurer                                               |  |               |      |     |  |  |    | 

Business Experience of Directors, Officers and Other Key
Employees

Stuart Diamondbecame a Board member in
February 2001 and is the current Chairman of the Board of
Directors. Mr. Diamond is president of Global Strategy
Group, which advises U.S. and foreign corporations on how to
effectively solve business problems, including negotiation,
valuation, strategy, mergers and internal issues.
Mr. Diamonds prior experience includes working at the
law firm of Sullivan & Cromwell and the investment bank of
Morgan Stanley. In a former career, he worked as a journalist
for The New York Times, where he was on a team that won the
Pulitzer Prize in 1987. Mr. Diamond is a graduate of
Harvard Law School and holds an M.B.A. with honors from the
Wharton Business School, where he is currently a member of the
faculty.

Dr. Bjorn Jawerthhas been on our Board of Directors
since February 2000 and has served as Co-Chief Executive
Officer, Chief Scientist and President since February 2001.
Dr. Jawerth founded Summus, Ltd. in

54



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Andrew L. Foxwas our Chief Executive Officer from
August 2000 through February 2001 and our acting
President and Chief Executive Officer from August 1999 through
August 2000. Mr. Fox has also been a director since
January 2000. Mr. Fox was Executive Vice President of
Sales and Marketing for Summus, Ltd. from August 1999
through January 2000. Although Mr. Fox ceased to be an
executive officer of the Company following the acquisition of
Summus, Ltd.s assets in February 2001, he remains an
employee of the Company, working primarily in the area of sales
and marketing. From December 1996 through June 1999,
Mr. Fox was Senior Marketing Manager of RealNetworks, Inc.,
a provider of software products and services for Internet media
delivery and a pioneer of streaming media systems enabling the
creation, real-time delivery and playback of audio, video and
multimedia content on the Web. From June 1991 through
November 1996, he was a Sales and Marketing Manager for
IBMs Wireless Data Division and a Product Manager at
IBMs Networking Hardware Division. Mr. Fox has a
M.B.A. from Duke Universitys Fuqua School of Business in
Durham, North Carolina and an undergraduate degree in computer
science and electrical engineering from Duke Universitys
School of Engineering.

Richard F. Seiferthas been a member of our Board of
Directors since February 1999 and has been our Co-Chief
Executive Officer since February 2001. He was our Vice
President of Operations from March through November 1999.
From 1995 through February 1999, Mr. Seifert was
self-employed marketing consultant. Mr. Seifert has a
degree in business administration from Montgomery County College
and Penn State University.

Herman Rushhas been a member of our Board of Directors
since March 2000. Since 1999, Mr. Rush has been
Chairman of the Board and Chief Executive Officer of
Infotainment International, Inc. and related companies,
companies that develop and produce content for the Internet.
Mr. Rush is a partner in Rush Cooperman Associates, LLC, an
Internet development and production company, as well as CEO of
Internet Program Providers, Inc., an Internet
distribution/syndication company. Mr. Rush served as
Executive Producer of The Montel Williams television programs
from 1990 through 1997 and currently is a consultant to the
program. Mr. Rush is a former President and CEO of the
Columbia Pictures Television Group and a former CEO of Coca-Cola
Telecommunications, Inc.

Wendi S. Tushhas been a member of our Board of Directors
since February 2001. Ms. Tush is currently a Managing
Director, Consulting Services, of HWH New Media, where she is
responsible for market research and the design of
Internet/multimedia marketing programs. She is also the chief
executive officer and co-founder of MediQuick.com, an online
service business targeted to healthcare providers. Ms. Tush
is also President of Columbia Process Partners, a consulting
company specializing in web site marketing. From 1996 to 1998,
Ms. Tush held the position of Executive Vice President,
Strategic Planning, of Princeton Media Group. Ms. Tush
holds a B.A. in psychology from Cornell University and an M.B.A.
from Columbia University.

Christopher W. Gaertnerhas been an advisor to our Board
of Directors and management since August 2000.
Mr. Gaertner is currently a Senior Vice President at Lehman
Brothers, Inc. in Menlo Park, California where he heads the West
Coast Software and Internet Infrastructure Group. From 1993 to
1999 he was employed by Warburg Dillon Read & Co., Inc., in
New York where he worked in the Technology Group of the
Corporate Finance Group. Mr. Gaertner earned a Master of
Science in engineering from Columbia University, an M.B.A. from
the Wharton Business School, and an undergraduate degree in
electrical engineering from the United States Military Academy.

55



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Gary E. Banjoined the Company as our Chief Operating
Officer in February 2001. In his past role as Chief Operating
Officer/ Chief Information Officer of Summus, Ltd., Mr. Ban
had supervisory responsibility over company operations,
information technology and human resources. Prior to joining
Summus, Ltd. in September 1999, Mr. Ban held a variety
of executive-level management positions establishing direction
and operational implementation for business, financial and
engineering systems integration. From November 1996 through
August 1999, Mr. Ban served as Director of Customer
Integration for ABB Power T&D Inc.s Electricity
Metering group, where he was responsible for global systems
integration for large-scale information management solutions.
From June 1996 to November 1996, Mr. Ban served
as Director of Re-engineering Services for the Pinnacle Group, a
consulting company, where he was instrumental in establishing a
consulting business offering re-engineering process management
focused on enterprise resource planning. Mr. Ban holds an
M.B.A. from Duke University, a bachelors degree in
industrial management and an associate applied science degree in
computer engineering from the Milwaukee School of Engineering.

Robert S. Lowreyhas been our Chief Financial Officer and
Vice President of Finance since June 2000. Prior to joining
the Company, Mr. Lowrey served as a senior audit manager
for Ernst & Young LLP in Raleigh, North Carolina from
November 1993 to May 2000. Mr. Lowrey is a
graduate of Grove City College in Grove City, Pennsylvania.

Dr. Jiangying Zhourecently was appointed our
Vice-President of Research; she had previously served as
Director of Research and Development at the Company and, before
that, at Summus, Ltd. Prior to joining Summus, Ltd. in
March 1998, Dr. Zhou was a research scientist at
Panasonic Information and Networking Technologies Laboratories,
Princeton, New Jersey, where she conducted research in the areas
of image analysis, information retrieval, and document
processing. Dr. Zhou received her Ph.D. in Electrical
Engineering from the University of New York at Stony Brook in
1993. She received her M.S. degree (1985) and B.S. degree
(1982), both in computer science, from Fudan University,
Shanghai, China. Dr. Zhou has taught in the Computer
Science Department of Fudan University. She has published 30
papers in international journals and conferences and has given
many talks at international conferences. She is also the owner
of five U.S. patents. Dr. Zhou is currently the co-chair
for the PSIE/ IS&T Document Recognition Conference. She also
served as session chair and as referee for several international
conferences and journals, including the SPIE Document
Recognition Conference, the Fifth International Conference on
Document Analysis and Information Retrieval, IEEE Transaction on
Pattern Recognition and Machine Intelligence, Journal of
Computer Vision, Graphics, and Image Processing, and Journal of
Electronic Imaging. Dr. Zhous research interests
include video/image analysis, pattern recognition, information
retrieval, character recognition, and document processing.

Mr. Leonard Mygatthas been our Executive Vice
President, Advanced Technology, since the Companys
acquisition of Summus, Ltd.s assets in February 2001.
Mr. Mygatt served in the same capacity with Summus, Ltd.
beginning in December 1995. Prior to his association with
Summus, Ltd., Mr. Mygatt was employed by Magnavox Electronic
Systems Company, where he served as a project leader for the
design, development and production of advanced tactical data
link systems and as a project manager and leader for a research
and development project investigating image and video
compression. Mr. Mygatt received a B.S. in electrical
engineering from the University of California at San Diego in
1983.

Mr. Barry J. Johnsonwas hired as Vice President,
Products in June 2001. Mr. Johnsons primary
responsibilities will be to prioritize the Companys
product development efforts and to position the Companys
new product line to maximize revenue generation.
Mr. Johnson most recently served as Vice President of
Operations at Dial2Go, Inc., where he was responsible for
developing new business for this start-up company. From May 1998
to February 2001, Mr. Johnson served as Director of Program
Management within Motorola, Inc.s Personal Communications
Sector, where he managed the team responsible for
Motorolas digital phone programs. From August 1997 to
April 1998, Mr. Johnson served as Marketing Director for
Motorolas Transmission Products Division. Mr. Johnson
has also served in various product marketing capacities at
Gateway, Zenith Data Systems and NCR. Mr. Johnson earned a
B.A. in economics from Hanover College and an M.B.A. in finance
from Indiana University.

56



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Family Relationships

There are no family relationships between or among any of our
directors and executive officers.

Committees of the Board of Directors

Our Board of Directors is responsible for establishing broad
corporate policies and for our overall performance. On
February 27, 2001 our Board of Directors constituted the
following committees:

Employment and Compensation Committee. The
Employment and Compensation Committee reviews and approves the
Companys compensation plans covering executive officers
and other key management employees, reviews the competitiveness
of the Companys total compensation practices, determines
the annual base salaries and incentive awards to be paid to
executive officers, and reviews and approves special hiring and
severance arrangements with executive officers. The Employment
and Compensation Committee currently consists of two members,
Messrs. Rush and Jawerth.

Audit Committee. The Audit Committee recommends to
the Board for appointment the independent auditors to be
selected to audit the financial statements of the Company. The
Audit Committee discusses with the auditors their independence
and obtains at least annually the auditors written
statement describing their independent status. The Audit
Committee reviews with management and the independent auditors
the Companys financial statements and any financial
reports submitted to the public. The Audit Committee also has
periodic discussions with management and the independent
auditors regarding the quality and adequacy of the
Companys internal controls. The Audit Committee currently
consists of two members, Mr. Rush and Ms. Tush.

Section 16(a) Beneficial Ownership Reporting
Compliance

Section 16(a) of the Exchange Act of 1934, as amended (the
Exchange Act), and related regulations of the
Securities and Exchange Commission, requires the Companys
directors, officers and beneficial owners of more than 10% of
the Companys common stock (collectively, reporting
persons) to file with the SEC initial reports of ownership
and reports of changes in ownership of any and all classes of
equity securities of the Company. The reporting persons are
required by SEC regulations to furnish the Company with copies
of all such filings. Specific due dates for these reports have
been established and the Company is required to identify in this
annual report on Form 10-K those persons who failed to
timely file these reports.

Based on its review of the copies of filings received by the
Company with respect to the year ended December 31, 2000,
the Company believes that all reporting persons complied with
the Section 16(a) filing requirements in the year ended
December 31, 2000, other than as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Herman Rush, who was appointed a director on March 15,
	2000, failed to file a Form 3 (Initial Statement of
	Beneficial Ownership of Securities) within ten days of the
	Companys being deemed to have a class of equity securities
	registered pursuant to Section 12 of the Exchange Act
	following its acquisition of J.S.J Capital in April 2000.
	Mr. Rush also, on two occasions, failed to file a
	Form 4 (Statement of Changes of Beneficial Ownership
	of Securities) within ten days after the end of each of
	the months of May and October 2000 upon his receipt in such
	months of option grants exercisable for 20,000 and 30,000 shares
	of common stock, respectively.
|
| |  | Dr. Bjorn Jawerth failed to file a Form 3 within ten
	days of the Companys being deemed to have a class of
	equity securities registered pursuant to Section 12 of the
	Exchange Act following its acquisition of J.S.J. Capital in
	April 2000. Dr. Jawerth also failed to file a
	Form 4 within ten days after the end of the months of June
	(100,000), September (216,579) and October (40,000), 2000, in
	connection with the sale by Summus, Ltd. of 356,579 shares of
	the Companys common stock.                                                                                                                                                                                 
|
| |  | Richard F. Seifert failed to file a Form 3 within ten days
	of the Companys being deemed to have a class of equity
	securities registered pursuant to Section 12 of the
	Exchange Act following its acquisition of J.S.J. Capital in
	April 2000. In addition, Mr. Seifert failed to file a
	Form 4 within ten days after the                                                                                                                                                                                                                                                                                                                                                             

57



---



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | end of the month of October 2000 upon his receipt in
	October 2000 of an option grant exercisable for 30,000
	shares of common stock.                                                                                                                                                                                                                                                                          
|
| |  | Andrew L. Fox failed to file a Form 3 within ten days of
	the Companys being deemed to have a class of equity
	securities registered pursuant to Section 12 of the
	Exchange Act following its acquisition of J.S.J. Capital in
	April 2000.                                                                                                                                                                  
|
| |  | C. Cristine Wittriss, a former director of the Company, failed
	to file a Form 3 within ten days of the Companys
	being deemed to have a class of equity securities registered
	pursuant to Section 12 of the Exchange Act following its
	acquisition of J.S.J. Capital in April  2000.                                                                                                                       
|
| |  | William B. Silvernail, a former director of the Company, failed
	to file a Form  3 within ten days of the Companys
	being deemed to have a class of equity securities registered
	pursuant to Section 12 of the Exchange Act following its
	acquisition of J.S.J. Capital in April  2000.                                                                                                                     
|
| |  | Alan R. Kleinmaier, a former officer of the Company, failed to
	file a Form 3 within ten days of the Companys being
	deemed to have a class of equity securities registered pursuant
	to Section 12 of the Exchange Act following its acquisition
	of J.S.J. Capital in April  2000.                                                                                                                          
|
| |  | Robert S. Lowrey, who was appointed an officer on June 1,
	2000, failed to file a Form 3 within ten days of such
	appointment on June 1, 2000. In addition, Mr. Lowrey
	failed to file a Form 4 within ten days after the end of
	the month of June 2000 upon his receipt in June  2000
	of an option grant exercisable for 100,000 shares of common
	stock.                                                   
|
| |  | Douglas D. May, who was appointed an officer on July 10,
	2000, failed to file a Form 3 within ten days of such
	appointment. In addition, Mr. May failed to file a
	Form 4 within ten days after the end of the month of
	January 2001 when the Company repurchased 45,572 shares of
	common stock (issued to Mr. May in connection with the
	Companys acquisition of Douglas May & Co., Inc. in
	July 2000).
|
| |  | Gregory S. Gush, who was appointed an officer on June 21,
	2000, failed to file a Form 3 within ten days of such
	appointment.                                                                                                                                                                                                                                                                                 

All of the above deficiencies relating to the Companys
current officers and directors have been cured.

Item 11.  Executive Compensation.

The following table provides certain summary information
concerning all compensation earned by our Chief Executive
Officer (the Named Executive Officer). No other
executive officer or persons annual salary and bonus for
the year ended December 31, 2000 exceeded $100,000 in the
aggregate.

Summary Compensation Table(1)

|                   |                    |      |      |        |  |          |         |                  |  |               |        |              |  |  |     |     |  |  |     |         |  |  |     |     | 
|------------------ | ------------------ | ---- | ---- | ------ |  | -------- | ------- | ---------------- |  | ------------- | ------ | ------------ |  |  | --- | --- |  |  | --- | ------- |  |  | --- | --- | 
|                   |                    |      |      |        |  |          |         |                  |  | Long-Term     |        |             
|                   |                    |      |      |        |  |          |         |                  |  | Compensation/ |        |             
|                   |                    |      |      |        |  |          |         |                  |  | Securities    |        |             
|Name and           |                    |      |      |        |  |          |         | Restricted Stock |  | Underlying    |        | All Other   
|Principal Position |                    | Year |      | Salary |  | Bonus(2) |         | Awards(3)        |  | Options(4)    |        | Compensation
|                   |                    |      |      |        |  |          |         |                  |  |               |        |             
|Andrew L. Fox      |                    |      | 2000 |        |  | $        | 146,314 |                  |  | $             | 28,500 |              |  |  | N/A |     |  |  | N/A |         |  |  | N/A |    
|                   | Director and Chief |      |      | 1999   |  |          |         | 66,100           |  |               |        | 85,891       |  |  |     | N/A |  |  |     | 240,000 |  |  |     | N/A | 
|                   | Executive Officer  |      |      | 1998   |  |          |         | N/A              |  |               |        | N/A          |  |  |     | N/A |  |  |     | N/A     |  |  |     | N/A | 




|    |                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The aggregate amount of prerequisites and other personal
	benefits, if any, did not exceed the lesser of $50,000 or 10% of
	the total amount of salary and bonus for any year for the Named
	Executive Officer and has therefore been omitted.
|   
|(2) | Bonuses are reported in the year earned, even if actually paid
	in a subsequent year.                                                                                                                                                         
|   
|(3) | We did not grant any restricted stock awards to the Named
	Executive Officer.                                                                                                                                                                 
|   
|(4) | The options granted are without tandem stock appreciation rights
	and we did not grant any other stock appreciation rights to the
	Named Executive Officer.                                                                                   

58



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Option Grants During Last Year

We did not grant any options to purchase shares of our common
stock to our Named Executive Officer during the year ended
December 31, 2000.

Aggregated Options Exercised During Last Year and Year End
Option Values

Our Named Executive Officer did not exercise any of his options
to purchase any of our equity securities during the last year.
The Company does not have any outstanding stock appreciation
rights. The following table provides additional information,
with respect to our Named Executive Officer, concerning options
held as of December 31, 2000.

|              |  |          |     |                |  |                     |     |                     |  |                      |        |  |  |  |           |   |  |  |     | 
|------------- |  | -------- | --- | -------------- |  | ------------------- | --- | ------------------- |  | -------------------- | ------ |  |  |  | --------- | - |  |  | --- | 
|              |  |          |     |                |  | Number of           |     | Number of           |  |                     
|              |  |          |     |                |  | Securities          |     | Securities          |  | Value of Unexercised
|              |  | Shares   |     |                |  | Underlying          |     | Underlying          |  | In-the Money        
|              |  | Acquired |     | Value Realized |  | Unexercised Options |     | Unexercised Options |  | Options at Fiscal   
|              |  | on       |     | on Exercise    |  | at Fiscal Year-End  |     | at Fiscal Year-End  |  | Year-End ($)        
|Name          |  | Exercise |     | ($)(1)         |  | Exercisable         |     | Unexercisable       |  | Exercisable(1)      
|              |  |          |     |                |  |                     |     |                     |  |                     
|Andrew L. Fox |  |          | N/A |                |  |                     | N/A |                     |  |                      | 80,000 |  |  |  | 160,000(2 | ) |  |  | N/A | 

[Additional columns below]

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

|              |  |                      |     | 
|------------- |  | -------------------- | --- | 
|              |  | Value of Unexercised
|              |  | In-the Money        
|              |  | Options at Fiscal   
|              |  | Year-End            
|Name          |  | Unexercisable(1)    
|              |  |                     
|Andrew L. Fox |  |                      | N/A | 




|    |                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The closing price of our common stock as reported on the Pink
	Sheets® on December 29, 2000 was lower than the
	exercise price of the options and, therefore, none of the
	options were in the money.
|   
|(2) | Mr. Fox was issued options to purchase an additional
	197,500 shares of our common stock during 2001, of which options
	to purchase 190,000 shares of common stock have vested.                      

Employment Agreements

Employment Agreement with Dr. Bjorn
Jawerth

Upon the closing of the Companys acquisition of
substantially all the assets of Summus, Ltd., the Company
entered into a three-year employment agreement with
Dr. Bjorn Jawerth. The employment agreement provides that
Dr. Jawerth will serve as the Companys co-Chief
Executive Officer (on a temporary basis until a new chief
executive officer is hired) and Chief Scientist. If and when a
new chief executive officer is hired, Dr. Jawerth has the right
to request that he be elected the Chairman of the Board of the
Board of Directors

Under the employment agreement, Dr. Jawerth is to receive:



| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | an initial base salary of $350,000 (which is subject to increase
	on an annual basis by at least 10%);                       
|
| |  | performance bonuses and options as are generally available to
	other senior management and Board members of the Company;     
|
| |  | a car allowance of $750/month;                                                                                               
|
| |  | a corporate apartment for a period of 6 months and expenses
	of up to $2,500/month in connection with apartment expenses; and
|
| |  | the Companys health and other benefits.                                                                                     

In addition to the foregoing, Dr. Jawerth is to be paid
$500,000 in cash as compensation for his non-competition
covenants (which have an 18 month term). In lieu of such
cash payment, we issued to Dr. Jawerth options to purchase
166,667 shares of our common stock exercisable for $0.50 per
share and options to purchase 333,333 shares of our common stock
exercisable for $3.75 per share.

Under the terms of the employment agreement, we also granted to
Dr. Jawerth a personal, non-exclusive, non-transferable
worldwide license, without the right to sublicense, to make and
use new technology that is developed during the twelve months
following the closing. Any of Dr. Jawerths rights
under this license are subject to his fiduciary duties as a
director and officer of the Company and to his obligations under
the non-compete provisions of the employment agreement. This
license will terminate twelve months after the closing or such
later date as may be determined by the Board of Directors,
excluding Dr. Jawerth. If the Company

59



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The Company has agreed to assist Dr. Jawerth in the private
sale of his shares of our common stock to generate net proceeds
of $2,500,000. In addition, the Company is obligated to issue to
him options, with an exercise price of $1.50 per share,
exercisable for three times the number of shares of common stock
sold in such private sale. The options will be exercisable
during the second through the fifth year after issuance.

If the Company terminates Dr. Jawerths employment
without cause or Dr. Jawerth terminates his employment for good
reason, he is entitled to a severance payment equal to two years
of his then current base annual salary, to be paid in a lump sum
at the time of termination. Further, all options issued to him
shall immediately vest

Employment Agreement with Andrew L. Fox

Under an employment letter agreement, effective August 25,
1999, we employed Andrew L. Fox as our acting President and
Chief Executive Officer and Executive Vice President and
appointed him a director of the Company. In August 2000,
Mr. Fox was appointed Chief Executive Officer. Under the
letter agreement, Mr. Fox receives an annual salary of
$135,000 and is eligible to receive a bonus of up to an amount
equal to his base annual salary. The bonus is based upon goals
and objectives to be established by the Board of Directors
annually following our year-end. While employed as acting Chief
Executive Officer, Mr. Fox received an additional bonus of
$2,500 per month. Mr. Fox receives a $600 per month car
allowance.

Under the letter agreement, the Company confirmed its prior
grant to Mr. Fox of options to purchase 240,000 shares of our
common stock that vest on August 25, 2006, if Mr. Fox
remains in the Companys employment on such date. The
letter agreement provides that the vesting period may be
accelerated if the Company attains certain performance goals
tied to revenue, EBITDA or other metrics to be determined by the
Companys Board of Directors. The Board has determined that
these performance goals have been met. Accordingly, options
exercisable for 80,000 shares (at an exercise price of $4.38 per
share) vested on August 25, 2000, and options exercisable
for 80,000 shares each (at an exercise price of $13.00 per
share) will vest on the first and second anniversaries of that
date. Under the terms of an addendum to the letter agreement, in
the event of a change in control (defined as a merger or
consolidation, tender offer for 50% of the shares of the Company
or any other acquisition or reorganization of the corporate
capital structure) of the Company, the options are to
immediately vest.

If we terminate Mr. Foxs employment we are obligated
to pay him six months of salary, to be paid monthly or in a lump
sum at the discretion of the Company. The Company and
Mr. Fox are currently in discussions regarding the
termination of Mr. Foxs employment with the Company.
In connection with such termination, it is expected that the
Company will enter into a consulting agreement with Mr. Fox.

Stock Option Plan

The following summary description of our 2000 Equity
Compensation Plan is not intended to be complete, and is
qualified by reference to the copy of the Equity Compensation
Plan, filed as an exhibit to this report.

The 2000 Equity Compensation Plan, adopted by the Board of
Directors on January 27, 2000, and approved by our
shareholders on February 11, 2000 (the Plan),
is intended to provide incentives:



| |     |                                                                                                                                                                                                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | to the officers and other employees of the Company and its
	subsidiaries by providing them with opportunities to purchase
	shares of common stock in the Company pursuant to options
	granted under the Plan which qualify as incentive stock
	options (ISOs) under Section 422(b) of
	the Internal Revenue Code of 1986, as amended (the
	Code);
|
| | (b) | to directors, officers, employees and consultants of the Company
	and its subsidiaries by providing them with opportunities to
	purchase shares of common stock in the Company pursuant to
	options                                                                                                                                                    

60



---



| |     |                                                                                                                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | granted under the Plan which do not qualify as ISOs
	(non-qualified options) (ISOs and non-qualified
	options being referred to as options); and                                                                                                  
|
| | (c) | to directors, officers, employees and consultants of the Company
	and its subsidiaries by providing them with stock appreciation
	rights, awards of restricted stock or deferred stock, stock
	awards, performance shares or other stock-based awards.

The Equity Compensation Plan is administered by the Employment
and Compensation Committee (the Committee)
consisting of two or more members of the Board of Directors. The
Committee has the exclusive right to interpret, construe and
administer the Plan, to determine the individuals associated
with the Company and its subsidiaries from among the class of
individuals eligible to whom options, awards and authorizations
to make purchases may be granted in accordance with the terms of
the Plan, and to determine the number, form, terms, conditions
and duration of any such grant.

ISOs. ISOs may be granted at any time through the tenth
anniversary of the effective date of the Plan (which was
January 31, 2000). The ISO exercise price is to be no less
than 100% of the Fair Market Value (as defined in
the Plan) of the common stock on the grant date. No ISO may be
granted to an individual owning more than 10% of the total
combined voting power of all classes of stock issued by the
Company unless the purchase price of the underlying shares of
common stock is at least 110% of the Fair Market Value of the
shares issuable on exercise of the ISO determined as of the date
the ISO is granted. ISOs granted under the Plan may have maximum
terms of not more than ten years (five years in the case of an
individual that owns more than 10% of the total combined voting
power of all classes of the Companys stock), or such
shorter period as the Committee specifies in an individual
award. Generally, ISOs granted under the Plan may remain
outstanding and may be exercised at any time up to three months
after the person to whom such ISO was granted is no longer
employed. ISOs granted under the Plan are subject to the
restriction that the aggregate Fair Market Value (determined as
of the date of grant) of ISOs which first become exercisable in
any calendar year cannot exceed $100,000.

Stock Appreciation Rights. Stock appreciation rights may
be granted to eligible participants in tandem with an ISO or
non-qualified option, or may be granted independent of any
related option. A tandem stock appreciation right entitles the
holder of the option, within the period specified for exercise
of such option, to surrender the unexercised option or a portion
thereof and receive in exchange a payment in cash or shares of
common stock having an aggregate value equal to the amount by
which the Fair Market Value of each share of common stock
exceeds the per share option exercise price, multiplied by the
number of underlying shares of common stock surrendered. Each
tandem stock appreciation right is subject to the same terms and
conditions as the related option.

With respect to non-tandem stock appreciation rights, the
Committee is to specify the number of shares of common stock
covered by such right and the base price of a share of common
stock (the Base Price), which is to be no less than
100% of the Fair Market Value of a share of common stock on the
date of grant. Upon exercise of a non-tandem stock appreciation
right, the participant is entitled to receive from the Company
cash and/or common stock having an aggregate Fair Market Value
equal to (i) the excess of (A) the Fair Market Value
of one share of common stock at the time of exercise, over
(B) the Base Price, multiplied by (ii) the number of
shares of common stock covered by the non-tandem stock
appreciation right. The Committee has the sole discretion to
determine in each case whether the payment is to be made in the
form of cash or shares of common stock.

The maximum number of shares of common stock that may be covered
by an option and stock appreciation rights granted to any one
individual during any calendar year is 500,000 shares.

Options and stock appreciation rights granted under the Plan are
generally not transferable, except by will or the laws of
descent and distribution, or under the terms of a qualified
domestic relations order as defined by the Code or ERISA.
However, non-qualified options (including a related tandem stock
appreciation right) may be transferred to the extent determined
by the Committee to be consistent with securities and other
applicable laws and with Company policy.

61



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Restricted Stock. The Committee may make restricted stock
awards to participants in the Plan as an incentive for the
performance of future services that will contribute materially
to the successful operation of the Company. Awards of restricted
stock may be made alone or in addition to or in tandem with
other awards made under the Plan. The Committee is to determine
the purchase price, if any, to be paid for the restricted stock,
the length of the restriction period, the nature of the
restrictions (e.g., in terms of the participants service
or performance), whether the restrictions are to lapse at the
end of the restriction period as to any or all of the shares
covered by the award, and whether dividends and other
distributions on the restricted stock are to be paid currently
to the participant or to the Company for the account of the
participant.

Deferred Stock. The Committee may make deferred stock
awards, together with cash dividend equivalents, to participants
in the Plan, conditioned upon the attainment of specified
performance goals or other factors or criteria as the Committee
determines. Deferred stock awards may not be sold, transferred,
pledged, assigned or encumbered during the deferral period, as
specified by the Committee. At the expiration of the deferral
period, share certificates are to be delivered to the
participant in a number equal to the shares of common stock
covered by the award. Upon termination of employment during the
deferral period, the deferred stock shall be forfeited by the
participant. However, the Committee may accelerate the vesting
of the award in the event of termination of employment due to
death, disability or retirement, or in the event of hardship or
other special circumstances.

Stock Awards. Stock awards are to be granted only in
payment of compensation that has been earned or as compensation
to be earned. All shares of common stock subject to a stock
award are to be valued at no less than 100% of the Fair Market
Value of such shares on the date of the stock awards
grant. Shares of common stock subject to a stock award may be
issued or transferred to the participant at the time of grant or
at a subsequent time, or in installments, as the Committee
determines. A stock award will be subject to the terms and
conditions the Committee determines. However, upon issuance of
the shares, the participant shall be entitled to receive
dividends, exercise voting rights and exercise all other rights
of a shareholder except as otherwise provided in the stock award.

Performance Shares. Performance shares may be made to
participants as an incentive for the performance of future
services to the Company. Awards of performance shares may be
made either alone or in addition to or in tandem with other
awards granted under the Plan. The Committee is to determine and
designate those participants to whom performance shares are to
be awarded, the performance period and/or performance objectives
(e.g., minimum earnings per share or return on equity), and any
adjustments to be made to such objectives, applicable to such
awards, the form of settlement of a performance share, and the
other terms and conditions of such awards.

Other Stock-Based Awards. The Committee may grant other
awards that are valued in whole or in part by reference to, or
are based on, the common stock, including convertible preferred
stock, convertible debentures, exchangeable securities, phantom
stock and stock awards or options valued by reference to book
value or performance.

Administration. The Plan provides that the Committee may
make equitable adjustment in the aggregate number of shares of
common stock that may be awarded under the Plan, the number of
shares and class of stock that may be subject to an award, the
purchase price to be paid per share under outstanding options,
and the terms, conditions or restrictions of any award in the
event of any reorganization, recapitalization, reclassification,
stock split, stock dividend, merger or consolidation or
separation, including a spin-off, of the Company, the sale or
other disposition of all or a portion of its assets and certain
other transactions involving the Company. However, the Plan
requires that all such adjustments shall be made such that ISOs
granted under the Plan shall continue to constitute ISOs within
the meaning of Section 422 of the Code.

Authorized but unissued shares of common stock of the Company,
shares of common stock that are not delivered or purchased under
the Plan, and shares reacquired by the Company for reasons
including a forfeiture, termination of employment, expiration or
cancellation of an option, can be issued under the Plan. Under
the Plan, 2,000,000 shares of common stock were initially
reserved for issuance. On February 13, 2001 the Board
adopted resolutions to amend the Plan to increase that number to
6,500,000 shares, such amendment being subject to shareholder
approval. Shareholders representing a majority of the outstanding

62



---





Amendment of the Plan. The Plan provides that our Board
of Directors may amend or terminate the Plan at any time,
provided, however, that specific types of amendments require
approval of our shareholders and no such action may be taken
which adversely affects any award previously granted to a
participant under the Plan without the written consent of the
Participant.

The Board of Directors amended the Plan, effective May 1,
2000. The amendment adds a provision that, in connection with
any underwritten public offering of our equity securities
covered by an effective registration statement filed under the
Securities Act of 1933, as amended, including an initial public
offering, a participant in the Plan may not sell, make any short
sale of, loan, hypothecate, pledge, grant any option for the
purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions
with respect to any stock acquired under the Plan without the
prior written consent of the Company or its underwriters. This
market stand-off restriction will be in effect for
whatever period of time from and after the effective date of the
final prospectus for the offering that the Company or its
underwriters request.

Compensation of Directors

Prior to February 27, 2001, each member of the Board of
Directors not employed with us full-time was:
(i) reimbursed for reasonable travel expenses incurred in
attending meetings of the Board of Directors or committees of
the Board of Directors; (ii) paid a fee of $1,000 for each
day on which the Board and/or committee meets or is in
conference, at which such director attended, except for
committee meetings held on the same date as a Board of Directors
meeting or conference; and (iii) was eligible for stock
option grants under the terms of our Equity Compensation Plan.
During 2000, the members of our Board of Directors were issued
the following number of options opposite their names:

|                      |  |                |        |                        |  |  |                           | 
|--------------------- |  | -------------- | ------ | ---------------------- |  |  | ------------------------- | 
|Name                  |  | Options Issued |        | Exercise Price/Vesting
|                      |  |                |        |                       
|Herman Rush           |  |                | 50,000 |                        |  |  | Fair Market Value/3 years | 
|                     
|                     
|                     
|                     
|Richard F. Seifert    |  |                | 30,000 |                        |  |  | Fair Market Value/3 years | 
|                     
|                     
|                     
|                     
|C. Cristine Wittriss* |  |                | 50,000 |                        |  |  | Fair Market Value/3 years | 




|  |                                                                                                        
|- | -------------------------------------------------------------------------------------------------------
|* | C. Cristine Wittress forfeited her options upon her resignation
	as a member of the Board of Directors.

On February 27, 2001, our Board of Directors, by
resolution, revised our Board of Directors compensation
for 2001. As of such date, each member of our Board of Directors
is entitled to:



| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | Options to purchase 10,000 shares of our common stock at a
	strike price of $3.00;                    
|
| |  | An attendance fee of $2,500 per regular meeting attended, four
	of which are scheduled per annum;     
|
| |  | An attendance fee of $1,000 for each special meeting attended in
	excess of two meetings each quarter;
|
| |  | $2,500 for each assignment as a member of a committee; and                                            
|
| |  | $1,000 for each assignment as a committee chair.                                                      

In addition, each officer of the Board of Directors is entitled
to an option to purchase 2,000 shares of our common stock at a
strike price of $3.00 per share.

Compensation Committee Interlocks and Insider
Participation

On February 27, 2001, we formed, by action of our Board of
Directors, an Employment and Compensation Committee consisting
of Herman Rush, as Chair and C. Cristine Wittress (who has since
resigned as a director and as a member of such committee) and
Bjorn Jawerth, as committee members. Prior to such date and
during the year ended 2000, all matters were addressed by the
full Board of Directors which consisted of Herman Rush, Richard
Seifert, Andrew L. Fox and, as of March 2000, C. Cristine
Wittress.

63



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Item 12.  Security Ownership of Certain
Beneficial Owners and Management.

The following table sets forth certain information regarding
beneficial ownership of our common stock and our Series B
preferred stock as of May 31, 2001, by (i) each of our
directors, (ii) each Named Executive Officer, (iii) all
directors and executive officers as a group, and (iv) each
person who is known to by the Company to own beneficially more
than 5% of the outstanding shares of our common stock. As of
May 31, 2001, we had 34,056,179 shares of common stock
issued and outstanding and 6,000 shares of Series B
preferred stock issued and outstanding (of which 2,000 shares
are held in escrow under the terms of the asset purchase
agreement entered into with Summus, Ltd.). As of that date, we
also had 2,000 shares of non-voting Series A preferred
stock issued and outstanding.

Beneficial ownership is determined in accordance with rules of
the Securities and Exchange Commission and includes generally
voting power and/or investment power with respect to securities.
Shares of common stock subject to options, and shares of
Series B preferred stock subject to warrants, currently
exercisable or exercisable within 60 days of May 31,
2001 are deemed outstanding for purposes of computing the
percentage beneficially owned by the person holding the options
but are not deemed outstanding for purposes of computing the
percentage beneficially owned by any other person. The persons
and entities named in the table have sole voting power and sole
investment power of the shares reflected by their names, except
as otherwise noted.

Unless otherwise specified, the address for each beneficial
owner is c/o High Speed Net Solutions, Inc., 434 Fayetteville
Street, Suite 600, Raleigh, NC 27601.

|                                                                              |  |                                           |  |                      |       |                      |  |  |       |  
|----------------------------------------------------------------------------- |  | ----------------------------------------- |  | -------------------- | ----- | -------------------- |  |  | ----- | -
|                                                                              |  |                                           |  | Percent of Shares of |       | Percent of Shares of
|Name and Address of                                                           |  | Shares Beneficially                       |  | Common Stock         |       | Class B Preferred   
|Beneficial Owner(1)                                                           |  | Owned(2)                                  |  | Outstanding          |       | Stock Outstanding   
|                                                                              |  |                                           |  |                      |       |                     
|Dr. Bjorn Jawerth                                                             |  | 11,501,467
	2000 (Series B Preferred)(3)  |  |                      | 33.28 | %                    |  |  | 33.33 | %
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Kerstin Jawerth                                                               |  | 4,405,635(4)                              |  |                      | 12.94 | %                    |  |  | N/A   |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Stuart Diamond                                                                |  | 4,711,888(5)                              |  |                      | 13.84 | %                    |  |  | N/A   |  
|Global Strategy Group
	200 S. Broad St., Suite 410
	Philadelphia, PA 19102    |  |                                           |  |                      |       |                      |  |  |       |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Andrew L. Fox                                                                 |  | 270,000(6)                                |  |                      | *     |                      |  |  | N/A   |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Richard F. Seifert                                                            |  | 495,833(7)                                |  |                      | 1.45  | %                    |  |  | N/A   |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Herman Rush                                                                   |  | 9,167(8)                                  |  |                      | *     |                      |  |  | N/A   |  
|Rush & Associates
	3340 Ocean Park Blvd.,
	Suite 3045
	Santa Monica, CA 90405 |  |                                           |  |                      |       |                      |  |  |       |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Wendi Tush                                                                    |  | 2,500(8)                                  |  |                      | *     |                      |  |  | N/A   |  
|HWH New Media
	1414 Avenue of the Americas
	12thFloor
	New York, NY 10019     |  |                                           |  |                      |       |                      |  |  |       |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Summus, Ltd.                                                                  |  | 1,814,753
	4,500 (Series B Preferred) (9) |  |                      | 5.33  | %                    |  |  | 69.23 | %

64



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|                                                                                                   |  |                                            |  |                      |       |                      |  |  |       |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------------------------ |  | -------------------- | ----- | -------------------- |  |  | ----- | -
|                                                                                                   |  |                                            |  | Percent of Shares of |       | Percent of Shares of
|Name and Address of                                                                                |  | Shares Beneficially                        |  | Common Stock         |       | Class B Preferred   
|Beneficial Owner(1)                                                                                |  | Owned(2)                                   |  | Outstanding          |       | Stock Outstanding   
|                                                                                                   |  |                                            |  |                      |       |                     
|Branch Banking And Trust                                                                           |  |                                            |  |                      |       |                      |  |  |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Company                                                                                            |  | 2,000 (Series B Preferred)                 |  |                      | N/A   |                      |  |  | 33.33 | %
|Corporate Trust
	223 West Nash Street
	Wilson, North Carolina 27893                                |  | (10)                                       |  |                      |       |                      |  |  |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|William R. Dunavant and
	Lucille H. Dunavant, as joint
	tenants                                    |  | 2,150,000(11)                              |  |                      | 6.31  | %                    |  |  | N/A   |  
|c/o Richard E. Brodsky, P.A.
	25 Southeast Second Avenue
	Suite 919
	Miami, Florida 33131          |  |                                            |  |                      |       |                      |  |  |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|Bradford Richdale                                                                                  |  | 1,727,674(12)                              |  |                      | 5.07  | %                    |  |  | N/A   |  
|c/o Alexander Dewar
	Alexander Westcott Securities
	400 Wall Street, 31stFloor
	New York, NY 10005 |  |                                            |  |                      |       |                      |  |  |       |  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|                                                                                                  
|All Executive Officers and
	Directors as a Group                                                   |  | 12,941,793
	2,000 Series B Preferred
	(13) |  |                      | 37.04 | %                    |  |  | 33.33 | %




| |   |                                                                                
| | - | -------------------------------------------------------------------------------
| | * | Represents beneficial ownership of less than one percent (1%) of
	common stock.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Based upon information supplied by officers and directors and
	filings under Section 13 of the Securities and Exchange Act
	of 1934, as amended (the Exchange Act).                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (2) | Unless otherwise indicated, refers to the Companys shares
	of common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | (3) | Includes (i) 4,405,635 shares of common stock owned by
	Kerstin Jawerth with respect to which Dr. Jawerth has sole
	voting power and (ii) 2,000 shares of Series B
	preferred stock for which Dr. Jawerth has shared
	dispositive and voting power in his capacity as Representative
	under an escrow agreement entered into in connection with the
	Asset Purchase Agreement by and among High Speed Net Solutions,
	Inc., Summus, Ltd. and certain shareholders of Summus, Ltd. (the
	Asset Purchase Agreement).                                                                          
|
| | (4) | Dr. Bjorn Jawerth has sole voting power over such shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | (5) | Includes 4,574,888 shares of common stock owned by Bjorn Jawerth
	that are subject to a voting trust agreement (the Trust
	Agreement) among Dr. Jawerth, the Company and Stuart
	Diamond, as trustee, entered into in connection with the Asset
	Purchase Agreement. Under the Trust Agreement, the trustee is to
	vote the subject shares as directed by a majority of the Board
	of Directors of the Company. Also includes 134,000 shares for
	which Mr. Diamond has sole beneficial ownership and 3,000
	shares of common stock underlying options that are exercisable
	within 60 days.
|
| | (6) | Represents shares of common stock underlying options that are
	exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (7) | Includes 125,000 shares held by the J. Seifert Trust and 125,000
	shares held by the Rita Seifert Trust established by
	Mr. Seiferts parents. Also includes 43,333 shares of
	common stock underlying options that are exercisable within
	60  days.                                                                                                                                                                                                                                                                                                                                         
|
| | (8) | Represents shares of common stock underlying options that are
	exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (9) | Represents (i) shares of common stock, (ii) 4,000
	shares of Series B preferred stock, and (iii) 500
	shares of Series B preferred stock underlying a warrant
	that is exercisable within 60 days, all held by Summus,
	Ltd. on behalf of Summus, Ltd. shareholders pending distribution
	to such shareholders on a pro rata basis in accordance with the
	Asset Purchase Agreement.                                                                                                                                                                                                          

65



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|     |                                                                                                                                                                                                                                                                                                                                                                                             
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Represents shares held in escrow on behalf of Summus,
	Ltd.s shareholders pending distribution to such
	shareholders on a pro rata basis in accordance with the Asset
	Purchase Agreement.                                                                                                                                                                                                 
|    
|(11) | Represents 350,000 shares of common stock issued to Mr. Dunavant
	in connection with our acquisition of shares of common stock of
	Summus Technologies, Inc. and 1,700,000 shares of our common
	stock issued under various settlement agreements entered into
	with Mr. Dunavant. Also includes up to 200,000 shares with
	respect to which Richard E. Brodsky has sole dispositive
	power.
|    
|(12) | Includes shares held by each of StoneLeigh, Ltd. and Ormond
	Trust, each an affiliate of Mr. Richdale.                                                                                                                                                                                                                                                                                      
|    
|(13) | Includes shares beneficially owned by all current directors and
	executive officers.                                                                                                                                                                                                                                                                                                        

Item 13.  Certain Relationships and Related
Transactions.

The Summus, Ltd. Asset Acquisition

On February 16, 2001, we acquired substantially all the
assets of Summus, Ltd., our largest shareholder at the time,
pursuant to an Asset Purchase Agreement with Summus, Ltd. and
certain shareholders of Summus, Ltd. In connection with this
transaction, we issued:



| |   |                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 20,197,797 shares of the Companys common stock (less
	3,604,445 shares of common stock to which the Company itself was
	entitled to receive as a shareholder of Summus, Ltd., such
	shares being cancelled along with the 8,217,781 shares of
	Company common stock held by Summus, Ltd. prior to the
	parties execution of the Asset Purchase Agreement.);
|
| |  | 6,000 shares of Series B preferred stock (each share
	convertible into 1,000 shares of common stock), of which 2,000
	shares were deposited with and are to be held for 12 months
	by an escrow agent as security for any indemnification
	obligations of Summus, Ltd. and its shareholders under the
	agreement; and                                        
|
| |  | warrants to purchase 500 shares of the Companys
	Series B convertible preferred stock, exercisable for a
	period of five years from the closing date (i.e.,
	February 16, 2001), at an exercise price, subject to
	adjustment, of $5.50 per share of common stock on an
	as-converted basis.                                                                

Additionally, since the Company was the legal acquiror while
Summus, Ltd. was the accounting acquiror, it was necessary to
issue new Company options to the existing Summus, Ltd. option
holders as part of the recapitalization in connection with the
asset acquisition. The number of options issued was determined
by multiplying the outstanding Summus, Ltd. options by the
conversion ratio used in the transaction of 21.5835 to 1.0,
which resulted in options exercisable, at an exercise price of
$3.50 per share, for approximately 1,396,909 shares.

As provided for in the agreement, Summus, Ltd. effected a pro
rata distribution of the shares of common stock to its
shareholders. There remain 1,814,765 shares held in the name of
Summus, Ltd., as well as the 4,000 shares of Series B
Convertible Preferred Stock. These shares are expected to be
distributed shortly. Further, the warrants are to be distributed
on a pro rata basis to the shareholders of Summus, Ltd. other
than the Company and Dr. Bjorn Jawerth. Both the Company
and Dr. Jawerth have waived their right to participate in
the distribution of the warrants. Upon distribution of the
remaining shares and the warrants, Summus, Ltd. is to be
dissolved.

Satisfaction of Indebtedness to Bradford Richdale
Affiliates

Effective as of June 25, 2001, we entered into an agreement
of settlement and compromise with HealthTec, Inc. and Brad
Richdale Direct, Inc., affiliates of Mr. Richdale. Under
the terms of that agreement:



| |   |                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we issued 250,000 shares of our common stock in satisfaction of
	our indebtedness to such entities in the aggregate amount of
	$435,301 (representing an effective value per share of $1.74);
|
| |  | we agreed to register the resale of such shares upon our filing
	of a registration statement under the Securities Act of 1933; and                                                           

66



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| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we agreed to provide a release by Summus, Ltd. of Summus,
	Ltd.s claim for additional shares of the Companys
	common stock under the terms of a stock purchase agreement,
	dated August 25, 1999, between Brad Richdale Direct and
	Summus, Ltd.
|
| |  | the Richdale affiliates agreed, for a two-year period from the
	date of the agreement, to vote the shares in favor of and for
	the election of Board nominees nominated by the Company.                                                           

Settlement of the William R. Dunavant Litigation and
Post-Litigation Disputes

In August 1999, we issued to Mr. William R. Dunavant
350,000 shares of our common stock (and made a cash payment of
$100,000 to Mr. Dunavant) in exchange for 250,000 shares of
common stock of Summus Technologies, Inc. held by Mr. Dunavant.
The agreement providing for this exchange of stock contemplated
the Companys filing, as expeditiously as possible (and in
any event within 60 days of the date of the agreement), a
registration statement with the SEC covering the resale of the
Companys shares issued to Mr. Dunavant. If such a
registration statement was not declared effective within
120 days of the date of the parties execution of the
agreement (i.e., by December 11, 1999) the Company was
obligated to issue an additional 25,000 shares of its common
stock to Mr. Dunavant 135 days after the date of the
parties execution of the agreement and an additional
25,000 shares for each 30-day period thereafter during which a
registration statement covering all of Mr. Dunavants
shares of the Companys common stock had not been declared
effective.

The Company failed to file a registration statement covering the
resale of Mr. Dunavants shares by December 11,
1999. In January 2000 Mr. Dunavant initiated
litigation against the Company in the Circuit Court of the
Eleventh Judicial Circuit, Miami-Dade County, Florida on
January 26, 2000. Mr. Dunavants complaint alleged
that we failed to register shares of our common stock issued to
him in breach of an agreement to do so. We entered into a
settlement agreement, dated May 4, 2000, with
Mr. Dunavant. By the terms of an amended and restated
settlement agreement, dated June 6, 2000 (which superseded
the May agreement in its entirety), we agreed, among other
things, to:



| |   |                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | register the 350,000 shares of our common stock then held by Mr.
	Dunavant;                                                                                                                                                                                                                         
|
| |  | issue to Mr. Dunavant, within five business days of the
	date of the agreement, 150,000 shares of our common stock, with
	registration rights;                                                                                                                                                      
|
| |  | issue to Mr. Dunavant 25,000 shares of our common stock
	each month for the six month period ending December 31,
	2000, and 50,000 shares a month thereafter, and pay $12,750 per
	month in cash, until the Company had an effective registration
	statement covering all of Mr.  Dunavants shares.

In addition to the foregoing, we agreed that if, on the
effective date of the registration statement covering
Mr. Dunavants shares, the closing price of our common
stock is less than $23 per share, we would issue to
Mr. Dunavant additional shares pursuant to a formula based
on the difference between $23 and the closing price of the
common stock.

We entered into a second amended and restated settlement
agreement, dated October 26, 2000, which was supplemented
in December 2000, which was to supersede the June 2000
agreement in its entirety. Under the terms of the second amended
and restated settlement agreement, we agreed to issue to Mr.
Dunavant:



| |   |                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | within five business days of the agreement, an additional number
	of shares of our common stock such that Mr. Dunavant would
	hold, in the aggregate, 1,000,000 shares of such stock;        
|
| |  | 25,000 shares of our common stock each month, such obligation to
	continue until the closing of the capital-raising transaction;                                                             
|
| |  | within five business days of the agreement, an additional
	1,000,000 shares of our common stock (with Mr. Dunavant
	agreeing not to sell any of these shares for a period of
	12 months); and
|
| |  | pay $25,000 in cash each month until a registration statement
	covering Mr.  Dunavants shares has been declared
	effective.                                                                 

67



---



The second amended and restated settlement agreement also
provided Mr. Dunavant with the right to require the
Company, on or before March 31, 2001, to file a
registration statement with the SEC covering 2,000,000 of his
shares. If such registration statement was not declared
effective by July 15, 2001, Mr. Dunavant had the right to
immediately commence arbitration proceedings against the Company.

As of May 31, 2000, we had issued an aggregate of 2,150,000
shares of our common stock to Mr. Dunavant and agreed to
register for resale all of his shares and any future issuances
of shares to Mr. Dunavant until a registration statement
covering all of his shares is declared effective by the SEC.

As of June 29, 2001, we entered into a settlement agreement
and a voting agreement with Mr. Dunavant and his counsel.
Under the terms of such agreements:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we issued an aggregate of 475,000 shares of our common stock to
	Mr. Dunavant and his counsel (300,000 shares to
	Mr. Dunavant; 175,000 shares to his counsel);                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Mr. Dunavant agreed to certain resale restrictions with
	respect to all but 350,000 shares of the shares of common stock
	held by him (an aggregate of 2,450,000 shares), specifically,
	to, in general, limit his public resale of such shares to 30,000
	shares per calendar month until February 15, 2002;                                                                                                                                                                                                                                                         
|
| |  | we agreed to prepare and proceed diligently to complete and file
	a registration statement with the SEC registering the resale of
	all the shares held by Mr. Dunavant, his spouse and his
	attorney, with Mr.  Dunavant and his counsel having a right
	to seek an immediate hearing for emergency injunctive relief if
	such registration statement is not filed before July 31,
	2001, unless counsel to the Company advises the Company that it
	is in the best interests of the Company and its shareholders to
	delay the filing of such registration statement;
|
| |  | Mr. Dunavant, his spouse and his counsel agreed, for a
	two-year period from the date of the agreements, to vote the
	shares held by them in favor of and for the election of Board
	nominees nominated by the Company and to vote such shares in a
	manner consistent with the recommendation of the Board with
	respect to certain extraordinary transactions (such as a tender
	offer, an exchange offer, merger or other business combination);
	and                                                                                                              
|
| |  | the Company, on the one hand, and Mr. Dunavant and his
	counsel, on the other, executed mutual general releases with
	respect to any and all claims against each other, except with
	respect to the obligations and liabilities under such agreements.                                                                                                                                                                                                                                                                                                                

Item 14.  Exhibits, Financial Statement
Schedules, and Reports on Form 8-K.



| |        |                                                                                                                                                                                                                                                                                                                      
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)(1) | Financial Statements and Financial Statement Schedules. See
	Index to Financial Statements on page F-1. Financial Statement
	Schedules have been omitted because of the absence of conditions
	under which they would be required or because the required
	information has been included in the financial statements.
|
| | (a)(3) | The following Exhibits are filed as part of this Report as
	required by Regulation S-K. The Exhibits designated by (*)
	are management contracts and compensation plans and arrangements
	required to be filed as Exhibits to this Report.                                                                           

|        |     |                     |  |                                                                                                                                                                                                                                                                   
|------- | --- | ------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |                    
|Number  |     | Exhibit Description
|        |     |                    
|        | 3.1 |                     |  | Restated Articles of Incorporation, filed
	February 28, 2000 (incorporated by reference to
	Exhibit 3.01 to our Quarterly Report on Form 10-Q
	filed for the quarter ended March 31, 2000)                                                                        
|        | 3.2 |                     |  | Second Amended and Restated Bylaws                                                                                                                                                                                                                                
|        | 3.3 |                     |  | Articles of Amendment and Statement of Rights and
	Preferences of the 8% Series A Convertible Preferred Stock,
	filed March 3, 2000 (incorporated by reference to
	Exhibit  3.03 to our Quarterly Report on Form 10-Q
	filed for the quarter ended March 31, 2000)
|        | 3.4 |                     |  | Articles of Correction filed June 23, 2000
	to Articles of Amendment, filed March 2, 2000                                                                                                                                                                         
|        | 3.5 |                     |  | Amendment to Articles of Incorporation and
	Statement of Rights and Preferences of the Series B
	Convertible Preferred Stock (incorporated by reference to
	Exhibit 3.01 to our Current Report on Form 8-K dated
	February 16, 2001)                              
|        | 4.1 |                     |  | Specimen Common Stock Certificate                                                                                                                                                                                                                                 

68



---



|        |       |                     |  |                                                                                                                                                                                                                                                                                
|------- | ----- | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                    
|Number  |       | Exhibit Description
|        |       |                    
|        | 9.1   |                     |  | Voting Trust Agreement, dated as of February 16, 2001,
	among Dr. Bjorn Jawerth, High Speed Net Solutions, Inc. and
	Stuart Diamond (incorporated by reference to Exhibit 10.07
	to our Current Report on Form 8-K dated February 16,
	2001)                                   
|        | 10.1  |                     |  | Acquisition Agreement and Plan of Merger, dated as of
	April  19, 2000, between J.S.J. Capital Corp. and High
	Speed Net Solutions, Inc. (incorporated by reference to
	Exhibit 1.1 to our Current Report on Form 8-K dated
	April 21, 2000)                                   
|        | 10.2  |                     |  | Share Acquisition Agreement, dated as of June 30, 2000,
	between High Speed Net Solutions, Inc. and Douglas May                                                                                                                                                                
|        | 10.3  |                     |  | License Agreement, effective July 10, 2000, among Douglas
	May & Co., Inc., High Speed Net Solutions, Inc. and Douglas
	May (incorporated by reference to Exhibit 10.42 to our
	Current Report on Form 8-K dated July 25, 2000)                                                
|        | 10.4  |                     |  | Escrow Agreement, effective July 10, 2000, among Douglas
	May & Co., Inc., High Speed Net Solutions, Inc. and Douglas
	May (incorporated by reference to Exhibit 10.43 to our
	Current Report on Form 8-K dated July 25, 2000)                                                 
|        | 10.5  |                     |  | Asset Purchase Agreement, dated October 30, 2000, among
	High Speed Net Solutions, Inc., Summus, Ltd. and the
	stockholders named therein (incorporated by reference to
	Exhibit 10.01 to our Current Report on Form 8-K dated
	February 16, 2001)                             
|        | 10.6  |                     |  | Amendment Number 1 to Asset Purchase Agreement, dated as of
	December 30, 2000, among High Speed Net Solutions, Inc.,
	Summus, Ltd. and the stockholders named therein (incorporated by
	reference to Exhibit 10.02 to our Current Report on
	Form 8-K dated February 16, 2001)
|        | 10.7  |                     |  | Amendment to Asset Purchase Agreement, dated as of January 
	30, 2001, among High Speed Net Solutions, Inc., Summus, Ltd. and
	the stockholders named therein (incorporated by reference to
	Exhibit 10.03 to our Current Report on Form  8-K dated
	February 16, 2001)        
|        | 10.8  |                     |  | Escrow Agreement, dated as of February 16, 2001, by and
	among High Speed Net Solutions, Inc., Summus, Ltd. and Branch
	Banking Trust Company (incorporated by reference to
	Exhibit 10.05 to our Current Report on Form 8-K dated
	February 16, 2001)                         
|        | 10.9  |                     |  | Agreement for Transfer of All Rights and Reservation of License
	in Software, dated September 4, 2000, between PlusStation,
	LLC, Niksa Radovic and Summus, Ltd.                                                                                                               
|        | 10.10 |                     |  | Software License Agreement, dated February 23, 1995,
	between Raytheon Company and Summus, Ltd.                                                                                                                                                                                
|        | 10.11 |                     |  | Technology License Agreement, dated August 17, 2000,
	between ADLabs, Inc. and Summus, Ltd.                                                                                                                                                                                    
|        | 10.12 |                     |  | Master Consulting Agreement, dated August 17, 2000, between
	ADLabs, Inc. and Summus, Ltd.                                                                                                                                                                                     
|        | 10.13 |                     |  | Contract #N00014-00-C-0023, dated January 4, 2000, between
	Summus, Ltd. and the Office of Naval Research                                                                                                                                                                      
|        | 10.14 |                     |  | Contract #N00014-01-C-0217, dated March 13, 2001, between
	Summus, Ltd. and the Office of Naval Research                                                                                                                                                                       
|        | 10.15 |                     |  | Rich Media Direct Services Agreement, dated June 1, 2000,
	between High Speed Net Solutions, Inc. and LearnKey Inc.                                                                                                                                                            
|        | 10.16 |                     |  | Systems Work Agreement, dated July 27, 2000, between
	Nexgenix, Inc. and High Speed Net Solutions, Inc.                                                                                                                                                                        
|        | 10.17 |                     |  | Outsourcing Agreement, dated July 31, 2000, between
	E.Piphany, Inc. and High Speed Net Solutions, Inc.                                                                                                                                                                        
|        | 10.18 |                     |  | Internet Streaming Service Agreement, dated September 18,
	2000, between High Speed Net Solutions, Inc. and All Video
	Network, Inc.                                                                                                                                           
|        | 10.19 |                     |  | Second Amended and Restated Settlement Agreement, dated as of
	October 26, 2000, between High Speed Net Solutions, Inc.
	and William R. Dunavant                                                                                                                               
|        | 10.20 |                     |  | Memo, dated December 5, 2000, supplementing the Second
	Amended and Restated Settlement Agreement                                                                                                                                                                              
|        | 10.21 |                     |  | Settlement Agreement and General Release of all Claims,
	effective April 25, 2001, by and among High Speed Net Solutions,
	Inc., RPC International L.C. and Ronald Cropper                                                                                                     

69



---



|        |        |                     |  |                                                                                                                                                                                                                                  
|------- | ------ | ------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                    
|Number  |        | Exhibit Description
|        |        |                    
|        | 10.22  |                     |  | Settlement Agreement, dated September 22, 1999, between
	High Speed Net Solutions, Inc. and Peter R. Rogina                                                                                                                      
|        | 10.23  |                     |  | Anti-Dilution Settlement Agreement, dated December 8, 2000,
	between High Speed Net Solutions, Inc. and Peter Rogina                                                                                                             
|        | 10.24  |                     |  | Release and Settlement Agreement, dated April 30, 2001,
	between Pin High Company, Inc. and Summus, Ltd.                                                                                                                         
|        | 10.25* |                     |  | Equity Compensation Plan, effective January 31, 2000
	(incorporated by reference to Exhibit 10.05 to our
	Quarterly Report on Form 10-Q filed for the quarter ended
	March 31, 2000)                                             
|        | 10.26* |                     |  | Amendment to Equity Compensation Plan, effective May 1, 2000                                                                                                                                                                     
|        | 10.27* |                     |  | Amendment to High Speed Net Solutions, Inc. Equity Compensation
	Plan, effective February 16, 2001 (incorporated by
	reference to Exhibit 10.09 to our Current Report on
	Form 8-K dated February 16, 2001)                      
|        | 10.28* |                     |  | Employment Offer Letter, dated January 20, 2000, with
	Andrew L. Fox (incorporated by reference to Exhibit 10.06
	to our Quarterly Report on Form 10-Q filed for the quarter
	ended March 31, 2000)                              
|        | 10.29* |                     |  | Employment Offer Letter, dated March 29, 2000, with Robert
	S. Lowrey                                                                                                                                                            
|        | 10.30* |                     |  | Executive Employment Agreement, dated as of February 16,
	2001, between High Speed Net Solutions, Inc. and Bjorn Jawerth
	(incorporated by reference to Exhibit 10.06 to our Current
	Report on Form 8-K dated February 16, 2001)
|        | 10.31  |                     |  | Lease Agreement, dated as of October 15, 1999, as modified
	on March 23, 2000 and June 9, 2000, between Phoenix
	Limited Partnership of Raleigh and High Speed Net Solutions, Inc.                                               
|        | 10.32  |                     |  | Lease Agreement, dated as of August 12, 1999, between
	Phoenix Limited Partnership of Raleigh and Summus, Ltd.                                                                                                                   
|        | 10.33  |                     |  | Lease Modification Agreement Number 1, dated as of
	December  22, 1999, between Phoenix Limited Partnership of
	Raleigh and Summus, Ltd.                                                                                         
|        | 10.34  |                     |  | Stock Purchase Agreement, dated September 2000, between Dial2Go,
	Inc. and High Speed Net Solutions, Inc.                                                                                                                        
|        | 10.35  |                     |  | Data Network Exchange Facility Services Agreement, dated as of
	September 19, 2000, between InFlow, Inc. and High Speed Net
	Solutions, Inc.                                                                                     
|        | 10.36  |                     |  | Addendum to Data Center Services Agreement, dated as of
	September 19, 2000, between InFlow, Inc. and High Speed Net
	Solutions, Inc.                                                                                            
|        | 10.37  |                     |  | Settlement Agreement, dated as of June 29, 2001, among High
	Speed Net Solutions, Inc., William R. Dunavant, Richard E.
	Brodsky, P.A. and Richard E. Brodsky                                                                    
|        | 10.38  |                     |  | Voting Agreement, dated as of June 29, 2001, among William
	R. Dunavant, Lucille Dunavant, Richard E. Brodsky, P.A., Richard
	E. Brodsky and High Speed Net Solutions, Inc.                                                      
|        | 10.39  |                     |  | Agreement of Settlement and Compromise, dated June 25,
	2001, among High Speed Net Solutions, Inc., HealthTec, Inc. and
	Brad Richdale Direct, Inc.                                                                              
|        | 16.1   |                     |  | Letter from Barry L. Friedman, P.C. regarding change in
	Certifying Accountant dated September 21, 2000
	(incorporated by reference to Exhibit 16.02 to our Current
	Report on Form 8-K/ A dated April 21, 2000)                 
|        | 21.1   |                     |  | Subsidiaries of High Speed Net Solutions, HealthTec, Inc. and
	Brad Richdale Direct, Inc.                                                                                                                                        

Reports on Form 8-K

During the fourth quarter of the year ended December 31,
2000, the Company filed with the SEC an amendment to its Current
Report on Form 8-K, filed May 8, 2000, pursuant to
Items 1, 2, 6 and 7 with respect to its acquisition of J.S.J.
Capital Corp. The amendment was filed October 19, 2000.

70



---



SIGNATURES

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



| |                               
| | ------------------------------
| | HIGH SPEED NET SOLUTIONS, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ ROBERT S. LOWREY

| |                        
| | -----------------------
| |                        
| | Robert S. Lowrey       
| | Chief Financial Officer

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

|                                         |  |                                                                       |  |             
|---------------------------------------- |  | --------------------------------------------------------------------- |  | ------------
|Signature                                |  | Title                                                                 |  | Date        
|                                         |  |                                                                       |  |             
|/s/ DR. BJORN JAWERTHDr. Bjorn Jawerth   |  | Principal Executive Officer; Co-Chief Executive
	Officer and Director |  | July 3, 2001
|/s/ RICHARD F. SEIFERTRichard F. Seifert |  | Co-Chief Executive Officer and Director                               |  | July 3, 2001
|/s/ ROBERT S. LOWREYRobert S. Lowrey     |  | Principal Accounting Officer; Chief Financial
	Officer                |  | July 3, 2001
|/s/ STUART DIAMONDStuart Diamond         |  | Chairman of the Board and Director                                    |  | July 3, 2001
|/s/ ANDREW L. FOXAndrew L. Fox           |  | Director                                                              |  | July 3, 2001
|/s/ HERMAN RUSHHerman Rush               |  | Director                                                              |  | July 3, 2001
|/s/ WENDI TUSHWendi Tush                 |  | Director                                                              |  | July 3, 2001

71



---



INDEX TO FINANCIAL STATEMENTS

|                                                                                                                 |  |      |      | 
|---------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                 |  | Page
|                                                                                                                 |  |     
|Financial Statements Of Summus, Ltd.                                                                             |  |      |      | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Independent Auditors Report of Ernst &
	Young LLP                                                               |  |      | F-3  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Independent Auditors Report of Bauknight
	Pietras & Stormer, P.A.                                               |  |      | F-4  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Balance Sheets at December 31, 2000 and 1999                                                                     |  |      | F-5  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Statements of Operations for the Years Ended
	December 31, 2000, 1999 and 1998                                   |  |      | F-6  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Statements of Shareholders Equity (Deficit)
	for the Years Ended December 31, 2000, 1999 and 1998               |  |      | F-7  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Statements of Cash Flows for the Years Ended
	December 31, 2000, 1999 and 1998                                   |  |      | F-8  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Notes to Financial Statements                                                                                    |  |      | F-9  | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Consolidated Financial Statements Of High
	Speed Net Solutions, Inc.                                             |  |      |      | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Independent Auditors Report                                                                                     |  |      | F-20 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Consolidated Balance Sheets at December 31,
	2000 and 1999                                                       |  |      | F-21 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Consolidated Statements of Operations for the
	Years Ended December 31, 2000, 1999 and 1998                      |  |      | F-22 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Consolidated Statements of Shareholders
	Equity (Deficit) for the Years Ended December 31, 2000,
	1999 and 1998 |  |      | F-23 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Consolidated Statements of Cash Flows for the
	Years Ended December 31, 2000, 1999 and 1998                      |  |      | F-25 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Notes to Consolidated Financial Statements                                                                       |  |      | F-26 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Financial Statements Of Douglas May & Co.,
	Inc.                                                                 |  |      |      | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Independent Auditors Report                                                                                     |  |      | F-45 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Balance Sheet at December 31, 1999                                                                               |  |      | F-46 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Statement of Income and Returned Earnings for the
	Year Ended December 31, 1999                                  |  |      | F-47 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Statement of Cash Flows for the Year Ended
	December 31, 1999                                                    |  |      | F-48 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Notes to Financial Statements                                                                                    |  |      | F-49 | 

F-1



---



Financial Statements

Summus, Ltd.

Years ended December 31, 2000 and 1999 with Report of
Independent Auditors

F-2



---



Report of Independent Auditors

The Board of Directors



We have audited the accompanying balance sheets of Summus, Ltd.
as of December 31, 1999 and 2000 and the related statements
of operations, shareholders equity (deficit), and cash
flows for each of the two years in the period ended
December 31, 2000. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits. The statements of operations,
shareholders equity (deficit), and cash flows for the year
ended December 31, 1998, were audited by other auditors
whose report dated March 24, 1999, expressed an unqualified
opinion on those statements.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Summus, Ltd. at December 31, 1999 and 2000 and the
results of its operations and its cash flows for the each of the
two years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the
United States.

As more fully described in Note 2, the accompanying 1999
financial statements have been restated to reflect a reduction
in capitalized software costs and deferred revenue, an increase
in the Companys investment in a related party, and
increases in certain expenses related to compensation, bonuses
and contract termination fees.

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
more fully described in Note 2, the Company has incurred
operating losses for each year during the three-year period
ended December 31, 2000, has experienced negative cash
flows from operations and has a significant deficiency in
working capital at December 31, 2000. These conditions
raise substantial doubt about the Companys ability to
continue as a going concern. Managements plans in regard
to these matters are also described in Note 2. The
financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and
classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

May 22, 2001



F-3



---



Bauknight Pietras & Stormer, P.A.

Certified Public Accountants





Columbia, South Carolina 







|                          |                    
|------------------------- | -------------------
|KENNETH H. BAUKNIGHT, CPA | 1517 GERVAIS STREET

|                          |               
|------------------------- | --------------
|RUSSELL L. BAUKNIGHT, CPA | COLUMBIA, SC 

|                       |       
|---------------------- | ------
|THOMAS D. PIETRAS, CPA | FAX: 



Report of Independent Auditors

The Board of Directors



We have audited the accompanying statements of operations,
changes in shareholders equity (deficit), and cash flows
of Summus, Ltd. for the year ended December 31, 1998. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above,
present fairly, in all material respects, the results of
operations and cash flows of Summus, Ltd. for the year ended
December 31, 1998, in conformity with accounting principles
generally accepted in the United States.

As disclosed in Note 14, and as a result of a business
combination completed in February 2001, the 1998 financial
statements have been restated to reflect the historical equity
of Summus, Ltd.

Bauknight Pietras & Stormer, P.A.

March 24, 1999



F-4



---



Summus, Ltd.

Balance Sheets

|                                                |                                                                                                                                                    |             |           |             |   |   |            |             |  
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | --------- | ----------- | - | - | ---------- | ----------- | -
|                                                |                                                                                                                                                    |            
|                                                |                                                                                                                                                    | December 31
|                                                |                                                                                                                                                    |            
|                                                |                                                                                                                                                    | 1999        |           | 2000       
|                                                |                                                                                                                                                    |             |           |            
|                                                |                                                                                                                                                    | (Restated)  |           |            
|                                               
|                                               
|                                               
|                                               
|Assets                                          |                                                                                                                                                    |             |           |             |   |   |            |            
|                                               
|                                               
|                                               
|                                               
|Current assets:                                 |                                                                                                                                                    |             |           |             |   |   |            |            
|                                               
|                                               
|                                               
|                                               
|                                                | Cash                                                                                                                                               |             | $         | 647,704     |   |   | $          | 208,495     |  
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts receivable (net of allowance of $11,800
	in 1999)                                                                                         |             |           | 59,314      |   |   |            | 32,744      |  
|                                               
|                                               
|                                               
|                                               
|                                                | Other current assets                                                                                                                               |             |           | 64,967      |   |   |            | 39,153      |  
|                                                |                                                                                                                                                    |             |           |             |   |   |            |            
|Total current assets                            |                                                                                                                                                    |             | 771,985   |             |   |   | 280,392    |            
|                                               
|                                               
|                                               
|                                               
|Equipment and furniture, net                    |                                                                                                                                                    |             | 610,787   |             |   |   | 991,202    |            
|                                               
|                                               
|                                               
|                                               
|Receivable from related party                   |                                                                                                                                                    |             | 154,000   |             |   |   | 134,677    |            
|                                               
|                                               
|                                               
|                                               
|Investment in equity investee                   |                                                                                                                                                    |             | 5,845,874 |             |   |   |           |            
|                                                |                                                                                                                                                    |             |           |             |   |   |            |            
|Total assets                                    |                                                                                                                                                    | $           | 7,382,646 |             |   | $ | 1,406,271  |            
|                                                |                                                                                                                                                    |             |           |             |   |   |            |            
|Liabilities and shareholders equity
	(deficit) |                                                                                                                                                    |             |           |             |   |   |            |            
|                                               
|                                               
|                                               
|                                               
|Current liabilities:                            |                                                                                                                                                    |             |           |             |   |   |            |            
|                                               
|                                               
|                                               
|                                               
|                                                | Accounts payable                                                                                                                                   |             | $         | 330,179     |   |   | $          | 1,282,157   |  
|                                               
|                                               
|                                               
|                                               
|                                                | Accrued salaries and related costs                                                                                                                 |             |           | 686,659     |   |   |            | 721,956     |  
|                                               
|                                               
|                                               
|                                               
|                                                | Current portion of notes payable                                                                                                                   |             |           | 119,268     |   |   |            | 229,215     |  
|                                               
|                                               
|                                               
|                                               
|                                                | Capital lease obligations, current portion                                                                                                         |             |           | 161,087     |   |   |            | 339,724     |  
|                                               
|                                               
|                                               
|                                               
|                                                | Loans payable to related party                                                                                                                     |             |           |            |   |   |            | 1,435,000   |  
|                                                |                                                                                                                                                    |             |           |             |   |   |            |            
|Total current liabilities                       |                                                                                                                                                    |             | 1,297,193 |             |   |   | 4,008,052  |            
|                                               
|                                               
|                                               
|                                               
|Capital lease obligations, less current portion |                                                                                                                                                    |             | 187,718   |             |   |   | 117,966    |            
|                                               
|                                               
|                                               
|                                               
|Notes payable, less current portion             |                                                                                                                                                    |             | 59,647    |             |   |   | 100,000    |            
|                                               
|                                               
|                                               
|                                               
|Deferred software royalty revenue               |                                                                                                                                                    |             | 2,492,396 |             |   |   | 1,834,065  |            
|                                               
|                                               
|                                               
|                                               
|Shareholders equity (deficit):                 |                                                                                                                                                    |             |           |             |   |   |            |            
|                                               
|                                               
|                                               
|                                               
|                                                | Preferred stock, Series B, $.001 par value,
	authorized 6,500 shares, 4,000 shares issued and outstanding                                          |             |           | 4           |   |   |            | 4           |  
|                                               
|                                               
|                                               
|                                               
|                                                | Common stock, $.001 par value, 10,000,000 shares
	authorized, 9,561,860 and 9,584,938 shares issued and
	outstanding at December 31, 1999 and 2000 |             |           | 9,562       |   |   |            | 9,585       |  
|                                               
|                                               
|                                               
|                                               
|                                                | Additional paid-in capital                                                                                                                         |             |           | 15,298,958  |   |   |            | 19,729,222  |  
|                                               
|                                               
|                                               
|                                               
|                                                | Deferred compensation                                                                                                                              |             |           |            |   |   |            | (978,510    | )
|                                               
|                                               
|                                               
|                                               
|                                                | Accumulated deficit                                                                                                                                |             |           | (11,962,832 | ) |   |            | (23,414,113 | )
|                                                |                                                                                                                                                    |             |           |             |   |   |            |            
|Total shareholders equity (deficit)            |                                                                                                                                                    |             | 3,345,692 |             |   |   | (4,653,812 | )          
|                                                |                                                                                                                                                    |             |           |             |   |   |            |            
|Total liabilities and shareholders equity      |                                                                                                                                                    | $           | 7,382,646 |             |   | $ | 1,406,271  |            
|                                                |                                                                                                                                                    |             |           |             |   |   |            |            

See accompanying notes.

F-5



---



Summus, Ltd.

Statements of Operations

|                                                         |                                          |                        |            |         |   |      |            |            |   |   |             |            |  
|-------------------------------------------------------- | ---------------------------------------- | ---------------------- | ---------- | ------- | - | ---- | ---------- | ---------- | - | - | ----------- | ---------- | -
|                                                         |                                          |                       
|                                                         |                                          | Year ended December 31
|                                                         |                                          |                       
|                                                         |                                          | 1998                   |            | 1999    |   | 2000
|                                                         |                                          |                        |            |         |   |     
|                                                         |                                          |                       
|                                                         |                                          | (Restated)            
|                                                        
|                                                        
|                                                        
|                                                        
|Revenues:                                                |                                          |                        |            |         |   |      |            |            |   |   |             |           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Contract services                        |                        | $          | 310,155 |   |      | $          | 407,986    |   |   | $           | 774,545    |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | License fees                             |                        |            | 246,483 |   |      |            | 107,230    |   |   |             | 294,113    |  
|                                                         |                                          |                        |            |         |   |      |            |            |   |   |             |           
|Total revenues                                           |                                          |                        | 556,638    |         |   |      | 515,216    |            |   |   | 1,068,658   |           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                        
|Cost of revenues                                         |                                          |                        | 271,701    |         |   |      | 281,254    |            |   |   | 398,326     |           
|                                                        
|                                                        
|                                                        
|                                                        
|Selling, general and administrative expenses             |                                          |                        | 2,720,152  |         |   |      | 3,797,067  | *          |   |   | 6,221,362   | *         
|                                                        
|                                                        
|                                                        
|                                                        
|Non-cash compensation charges                            |                                          |                        |           |         |   |      | 2,670,050  |            |   |   | 2,127,962   |           
|                                                        
|                                                        
|                                                        
|                                                        
|Research and development                                 |                                          |                        | 421,685    |         |   |      | 1,356,686  |            |   |   | 1,119,333   |           
|                                                         |                                          |                        |            |         |   |      |            |            |   |   |             |           
|Operating loss                                           |                                          |                        | (2,856,900 | )       |   |      | (7,589,841 | )          |   |   | (8,798,325  | )         
|                                                        
|                                                        
|                                                        
|                                                        
|Other income (expense):                                  |                                          |                        |            |         |   |      |            |            |   |   |             |           
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Gain on sale of stock of equity investee |                        |            |        |   |      |            | 2,314,390  |   |   |             | 3,680,065  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Participation in loss of equity investee |                        |            |        |   |      |            | (3,447,110 | ) |   |             | (6,356,932 | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Loss on disposal of assets               |                        |            | (9,869  | ) |      |            | (119,180   | ) |   |             |           |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Interest income (expense), net           |                        |            | (14,455 | ) |      |            | (5,239     | ) |   |             | 23,911     |  
|                                                         |                                          |                        |            |         |   |      |            |            |   |   |             |           
|Other expense, net                                       |                                          |                        | (24,324    | )       |   |      | (1,257,139 | )          |   |   | (2,652,956  | )         
|                                                         |                                          |                        |            |         |   |      |            |            |   |   |             |           
|                                                        
|Net loss                                                 |                                          | $                      | (2,881,224 | )       |   | $    | (8,846,980 | )          |   | $ | (11,451,281 | )         
|                                                         |                                          |                        |            |         |   |      |            |            |   |   |             |           
|Net loss per share (basic and diluted)                   |                                          | $                      | (.31       | )       |   | $    | (.94       | )          |   | $ | (1.20       | )         
|                                                         |                                          |                        |            |         |   |      |            |            |   |   |             |           
|Weighted average shares outstanding (basic and
	diluted) |                                          |                        | 9,189,165  |         |   |      | 9,428,075  |            |   |   | 9,546,768   |           
|                                                         |                                          |                        |            |         |   |      |            |            |   |   |             |           






|  |                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Selling general and administrative expenses in 1999 and 2000
	exclude $2.7  million and $2.1 million, respectively,
	of non-cash compensation charges.

See accompanying notes.

F-6



---



Summus, Ltd.

Statements of Shareholders Equity (Deficit)

|                                         |                                                                                    |                 |       |              |  |            |   |          |  |             |           |               |   |         |       |           |  |   |            |           |   |   |          |            |   |   |             |             |   |   |            |             |  
|---------------------------------------- | ---------------------------------------------------------------------------------- | --------------- | ----- | ------------ |  | ---------- | - | -------- |  | ----------- | --------- | ------------- | - | ------- | ----- | --------- |  | - | ---------- | --------- | - | - | -------- | ---------- | - | - | ----------- | ----------- | - | - | ---------- | ----------- | -
|                                         |                                                                                    |                 |       |              |  |            |   |          |  |             |           |               |   |        
|                                         |                                                                                    | Series B        |       |              |  |            |   |          |  |             |           | Total        
|                                         |                                                                                    | Preferred Stock |       | Common Stock |  | Additional |   |          |  |             |           | Shareholders
|                                         |                                                                                    |                 |       |              |  | Paid-In    |   | Deferred |  | Accumulated |           | Equity       
|                                         |                                                                                    | Shares          |       | Amount       |  | Shares     |   | Amount   |  | Capital     |           | Compensation  |   | Deficit |       | (Deficit)
|                                         |                                                                                    |                 |       |              |  |            |   |          |  |             |           |               |   |         |       |          
|Balance at December 31, 1997             |                                                                                    |                 | 4,000 |              |  | $          | 4 |          |  |             | 8,544,642 |               |   | $       | 8,545 |           |  | $ | (75,954    | )         |   | $ |         |            |   | $ | (234,628    | )           |   | $ | (302,033   | )          
|                                        
|                                        
|                                        
|                                        
|                                         | Sale of common stock                                                               |                 |       |             |  |            |   |         |  |             |           | 831,000       |   |         |       | 831       |  |   |            | 3,499,252 |   |   |          |           |   |   |             |            |   |   |            | 3,500,083   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Net loss for 1998                                                                  |                 |       |             |  |            |   |         |  |             |           |              |   |         |       |          |  |   |            |          |   |   |          |           |   |   |             | (2,881,224  | ) |   |            | (2,881,224  | )
|                                         |                                                                                    |                 |       |              |  |            |   |          |  |             |           |               |   |         |       |           |  |   |            |           |   |   |          |            |   |   |             |             |   |   |            |            
|Balance at December 31, 1998             |                                                                                    |                 | 4,000 |              |  |            | 4 |          |  |             | 9,375,642 |               |   |         | 9,376 |           |  |   | 3,423,298  |           |   |   |         |            |   |   | (3,115,852  | )           |   |   | 316,826    |            
|                                        
|                                        
|                                        
|                                        
|                                         | Repurchase of common stock                                                         |                 |       |             |  |            |   |         |  |             |           | (71           | ) |         |       |          |  |   |            | (298      | ) |   |          |           |   |   |             |            |   |   |            | (298        | )
|                                        
|                                        
|                                        
|                                        
|                                         | Common stock issued in exchange for investment in
	equity investee                 |                 |       |             |  |            |   |         |  |             |           | 132,888       |   |         |       | 133       |  |   |            | 7,902,134 |   |   |          |           |   |   |             |            |   |   |            | 7,902,267   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Issuance of common stock for services                                              |                 |       |             |  |            |   |         |  |             |           | 53,401        |   |         |       | 53        |  |   |            | 2,669,997 |   |   |          |           |   |   |             |            |   |   |            | 2,670,050   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Sales of stock by equity investee                                                  |                 |       |             |  |            |   |         |  |             |           |              |   |         |       |          |  |   |            | 1,303,827 |   |   |          |           |   |   |             |            |   |   |            | 1,303,827   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Net loss for 1999                                                                  |                 |       |             |  |            |   |         |  |             |           |              |   |         |       |          |  |   |            |          |   |   |          |           |   |   |             | (8,846,980  | ) |   |            | (8,846,980  | )
|                                         |                                                                                    |                 |       |              |  |            |   |          |  |             |           |               |   |         |       |           |  |   |            |           |   |   |          |            |   |   |             |             |   |   |            |            
|Balance at December 31, 1999
	(Restated) |                                                                                    |                 | 4,000 |              |  |            | 4 |          |  |             | 9,561,860 |               |   |         | 9,562 |           |  |   | 15,298,958 |           |   |   |         |            |   |   | (11,962,832 | )           |   |   | 3,345,692  |            
|                                        
|                                        
|                                        
|                                        
|                                         | Deferred compensation recognized in connection
	with the issuance of stock options |                 |       |             |  |            |   |         |  |             |           |              |   |         |       |          |  |   |            | 3,106,472 |   |   |          | (3,106,472 | ) |   |             |            |   |   |            |            |  
|                                        
|                                        
|                                        
|                                        
|                                         | Exercise of stock options                                                          |                 |       |             |  |            |   |         |  |             |           | 23,078        |   |         |       | 23        |  |   |            |          |   |   |          |           |   |   |             |            |   |   |            | 23          |  
|                                        
|                                        
|                                        
|                                        
|                                         | Amortization of deferred compensation                                              |                 |       |             |  |            |   |         |  |             |           |              |   |         |       |          |  |   |            |          |   |   |          | 2,127,962  |   |   |             |            |   |   |            | 2,127,962   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Sales of stock by equity investee                                                  |                 |       |             |  |            |   |         |  |             |           |              |   |         |       |          |  |   |            | 1,323,792 |   |   |          |           |   |   |             |            |   |   |            | 1,323,792   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Net loss for 2000                                                                  |                 |       |             |  |            |   |         |  |             |           |              |   |         |       |          |  |   |            |          |   |   |          |           |   |   |             | (11,451,281 | ) |   |            | (11,451,281 | )
|                                         |                                                                                    |                 |       |              |  |            |   |          |  |             |           |               |   |         |       |           |  |   |            |           |   |   |          |            |   |   |             |             |   |   |            |            
|Balance at December 31, 2000             |                                                                                    |                 | 4,000 |              |  | $          | 4 |          |  |             | 9,584,938 |               |   | $       | 9,585 |           |  | $ | 19,729,222 |           |   | $ | (978,510 | )          |   | $ | (23,414,113 | )           |   | $ | (4,653,812 | )          
|                                         |                                                                                    |                 |       |              |  |            |   |          |  |             |           |               |   |         |       |           |  |   |            |           |   |   |          |            |   |   |             |             |   |   |            |            

See accompanying notes.

F-7



---



Summus, Ltd.

Statements of Cash Flows

|                                                                                        |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |   |            |          |  
|--------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------- | ---- | ------- | -------- | ---------- | - | ---------- | -------- | ----------- | - | ---------- | -------- | -
|                                                                                        |                                                                              |                                             
|                                                                                        |                                                                              | Year ended December 31                      
|                                                                                        |                                                                              |                                             
|                                                                                        |                                                                              | 1998                                         |                                    | 1999 |         | 2000    
|                                                                                        |                                                                              |                                              |                                    |      |         |         
|                                                                                        |                                                                              |                                             
|                                                                                        |                                                                              | (Restated)                                  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Operating activities                                                                    |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Net loss                                                                                |                                                                              | $                                            | (2,881,224                         | )    |         | $        | (8,846,980 | ) |            | $        | (11,451,281 | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        | Adjustments to reconcile net loss to net cash
	used in operating activities: |                                              |                                    |      |         |          |            |   |            |          |             |   |           
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              | Depreciation and amortization                |                                    |      | 244,495 |          |            |   | 45,651     |          |             |   | 274,708    |         
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              | Loss on disposal of assets                   |                                    |      | 9,869   |          |            |   | 119,230    |          |             |   |           |         
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              | Gain on sale of stock of equity investee     |                                    |      |        |          |            |   | (2,314,390 | )        |             |   | (3,680,065 | )       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              | Non-cash compensation charges                |                                    |      |        |          |            |   | 2,670,050  |          |             |   | 2,127,962  |         
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              | Participation in loss equity investee        |                                    |      |        |          |            |   | 3,447,110  |          |             |   | 6,356,932  |         
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              | Changes in operating assets and liabilities: |                                    |      |         |          |            |   |            |          |             |   |            |         
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              |                                              | Accounts receivable                |      |         | (110,033 | )          |   |            | (34,827  | )           |   |            | 26,570   |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              |                                              | Receivable from related party      |      |         |         |            |   |            | (154,000 | )           |   |            | 19,323   |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              |                                              | Accounts payable                   |      |         | (12,046  | )          |   |            | 127,729  |             |   |            | 951,999  |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              |                                              | Accrued salaries and related costs |      |         |          |            |   |            | 595,609  |             |   |            | 35,297   |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              |                                              | Deferred software royalty revenue  |      |         | (31,018  | )          |   |            |         |             |   |            | (658,331 | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                        |                                                                              |                                              | Other current assets               |      |         | (15,015  | )          |   |            | (49,952  | )           |   |            | 25,814   |  
|                                                                                        |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|Net cash used in operating activities                                                   |                                                                              |                                              | (2,794,972                         | )    |         |          | (4,394,770 | ) |            |          | (5,971,072  | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Investing activities                                                                    |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Proceeds from deferred revenue collected                                                |                                                                              |                                              |                                   |      |         |          | 2,250,000  |   |            |          |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Proceeds from sale of stock of equity investee                                          |                                                                              |                                              |                                   |      |         |          | 2,977,500  |   |            |          | 4,492,799   |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Purchases of property and equipment                                                     |                                                                              |                                              | (205,100                           | )    |         |          | (318,289   | ) |            |          | (132,233    | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Increase in capitalized software development costs                                      |                                                                              |                                              | (307,490                           | )    |         |          |           |   |            |          |            |  
|                                                                                        |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|Net cash provided by (used in) investing
	activities                                    |                                                                              |                                              | (512,590                           | )    |         |          | 4,909,211  |   |            |          | 4,360,566   |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Financing activities                                                                    |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Proceeds from exercise of stock options                                                 |                                                                              |                                              |                                   |      |         |          |           |   |            |          | 23          |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Proceeds from sale of common stock                                                      |                                                                              |                                              | 3,500,083                          |      |         |          |           |   |            |          |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Increase in notes payable                                                               |                                                                              |                                              |                                   |      |         |          | 268,075    |   |            |          |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Principal payments on notes payable                                                     |                                                                              |                                              |                                   |      |         |          |           |   |            |          | (49,700     | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Proceeds from short-term borrowings                                                     |                                                                              |                                              | 25,000                             |      |         |          |           |   |            |          |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Principal payments on short-term borrowings                                             |                                                                              |                                              | (76,000                            | )    |         |          | (233,458   | ) |            |          |            |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Principal payments on capital lease obligations                                         |                                                                              |                                              | (16,302                            | )    |         |          | (38,392    | ) |            |          | (214,026    | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Proceeds from loans payable to related party                                            |                                                                              |                                              |                                   |      |         |          |           |   |            |          | 1,435,000   |  
|                                                                                        |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|Net cash provided by (used in) financing
	activities                                    |                                                                              |                                              | 3,432,781                          |      |         |          | (3,775     | ) |            |          | 1,171,297   |  
|                                                                                        |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|(Decrease) increase in cash                                                             |                                                                              |                                              | 125,219                            |      |         |          | 510,666    |   |            |          | (439,209    | )
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Cash and cash equivalents at beginning of year                                          |                                                                              |                                              | 11,819                             |      |         |          | 137,038    |   |            |          | 647,704     |  
|                                                                                        |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|Cash and cash equivalents at end of year                                                |                                                                              | $                                            | 137,038                            |      |         | $        | 647,704    |   |            | $        | 208,495     |  
|                                                                                        |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|Supplemental disclosures of cash flow
	information                                      |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Cash paid for interest                                                                  |                                                                              | $                                            | 14,455                             |      |         | $        | 21,792     |   |            | $        |            |  
|                                                                                        |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|Supplemental schedule of noncash activity                                               |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|Assets acquired under capital leases                                                    |                                                                              | $                                            | 44,965                             |      |         | $        | 351,241    |   |            | $        | 322,890     |  
|                                                                                        |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  
|Acquisition of common stock of equity investee in
	exchange for prepaid royalty payment |                                                                              | $                                            |                                   |      |         | $        | 750,000    |   |            | $        |            |  
|                                                                                        |                                                                              |                                              |                                    |      |         |          |            |   |            |          |             |  

See accompanying notes.

F-8



---



Summus, Ltd.

Notes to Financial Statements

December 31, 2000

1.  Business and Organization and Basis of
Presentation

Summus, Ltd. (Summus or the Company)
develops proprietary software products for image and video
compression for license to third party software developers. The
Company also performs related research and development under
various contracts with the U.S. government and others.

During 1998, shareholders of the Company formed Summus
Technologies, Inc. (Technologies). Technologies was
formed for the purpose of marketing Summus, Ltd.s
products. In August 1999, Summus Ltd. and Summus
Technologies, Inc. merged, resulting in Summus, Ltd. being
the surviving entity.

The acquisition of Summus Technologies, Inc. has been accounted
for in a manner similar to a pooling of interests since it was
acquired from an entity under common control. Approximately
999,500 shares of common stock of Summus, Ltd. were
issued to the shareholders of Technologies in exchange for the
net assets of Technologies.

The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course
of business. As shown in the financial statements for the year
ended December 31, 2000, the Company has incurred a net
loss of $11.5 million, has experienced negative cash flows
from operations and has a significant deficiency in working
capital at December 31, 2000. The Companys
continuation as a going concern is dependent on its ability to
generate sufficient cash flow to meet its obligations on a
timely basis, to obtain additional financing and ultimately to
attain profitability. The Company is actively promoting and
expanding its product line and pursuing additional financing
from third parties. Management expects it will be able to
attract additional capital to continue to fund operations and
also expects that increased revenues will reduce its operating
losses in future periods. However, there can be no assurance
that managements plan will be executed as anticipated.

The financial statements presented herein do not include any
adjustments relating to the recoverability of assets and
classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.

On February 16, 2001, the Company sold all of its assets to
High Speed Net Solutions, Inc. (High Speed) in a
transaction accounted for as a reverse purchase in which the
Company will be treated as the accounting acquirer (See
Note 14).

2.  Restatement

The accompanying financial statements as of and for the year
ended December 31, 1999 have been restated to reflect a
reduction in capitalized software costs and deferred revenue of
$507,604 and a related reversal of previously recorded
amortization of capitalized software costs of $216,644,
resulting in a net reduction of $290,960. These adjustments were
recorded to reflect the accounting treatment specified by AICPA
Statement of Position 97-2 whereby capitalized software costs
are offset against deferred revenue recorded in connection with
a funded software development arrangement, such as the
arrangement the Company had with its equity investee. The
deferred revenue balance was also restated to increase the
balance initially recorded for stock received for deferred
revenue by $180,468, with a corresponding increase to the
Companys investment in equity investee. The restated value
of the shares received by the Company was determined by applying
a revised discount to the traded value of the stock received
based on actual stock sales transactions in proximity to this
transaction and represents the same per share value used by High
Speed to record the transaction.

The accompanying financial statements as of and for the year
ended December 31, 1999 have also been restated to reflect
an increase of $1,303,827 in the value of the Companys
investment in its equity investee resulting from sales of stock
by the equity investee during 1999.

F-9



---



Summus, Ltd


Notes to Financial Statements (continued)



2.  Restatement (continued)


Additionally, the accompanying financial statements as of and
for the year ended December 31, 1999 have been restated to
reflect the accrual of $595,609 of salaries and bonuses related
to 1999 that were initially expensed in 2000 when paid but which
related to 1999 compensation and should have been accrued at
December 31, 1999, as well as $268,075 of expense
representing a termination fee of a development contract in 1999
which was previously recorded as part of a stock repurchase by
the Company.

The following table summarizes the effect of the restatement
adjustments on the Companys balance sheet and statement of
operations as of and for the year ended December 31, 1999:

|                                                   |  |               |           |  
|-------------------------------------------------- |  | ------------- | --------- | -
|                                                   |  | Balance Sheet
|                                                   |  |              
|Total assets as previously reported                |  | $             | 6,189,311 |  
|                                                  
|                                                  
|                                                  
|                                                  
|Reduction in capitalized software costs            |  |               | (290,960  | )
|                                                  
|                                                  
|                                                  
|                                                  
|Increase in value of investment in equity investee |  |               | 1,484,295 |  
|                                                   |  |               |           |  
|Total assets as restated                           |  | $             | 7,382,646 |  
|                                                   |  |               |           |  

|                                                        |  |               |            |  
|------------------------------------------------------- |  | ------------- | ---------- | -
|                                                        |  | Statement    
|                                                        |  | of Operations
|                                                        |  |              
|Net loss as previously reported                         |  | $             | (8,199,940 | )
|                                                       
|                                                       
|                                                       
|                                                       
|Reversal of amortization of capitalized software
	costs |  |               | 216,644    |  
|                                                       
|                                                       
|                                                       
|                                                       
|Salary and bonus expense                                |  |               | (595,609   | )
|                                                       
|                                                       
|                                                       
|                                                       
|Contract termination fee                                |  |               | (268,075   | )
|                                                        |  |               |            |  
|Net loss as restated                                    |  | $             | (8,846,980 | )
|                                                        |  |               |            |  

3.  Summary of Significant Accounting Policies

Estimates

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

Revenue Recognition and
Related Costs

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

The Company follows the provisions of AICPA Statement of
Position 97-2, Software Revenue Recognition, as
amended by AICPA Statement of Position 98-9
Modification of SOP No. 97-2 Software Revenue
Recognition with Respect to Certain Transactions. Revenues
from software license fees and hardware sales are generally
recognized upon delivery provided that a contract has been
executed, the vendor fee is fixed or determinable, no
significant vendor obligations or uncertainties surrounding
customer acceptance remain, and collection of the resulting
receivable is deemed probable.

Deferred revenue is recorded for amounts received for which the
Company has not yet completed its contractual obligations.
Deferred revenue related to funded software development
arrangements is used to offset capitalized software costs
related to the development arrangement in accordance with the
provisions of AICPA Statement of Position 97-2.

F-10



---



Summus, Ltd


Notes to Financial Statements (continued)



3.  Summary of Significant Accounting Policies
(continued)


Costs of revenues primarily represent costs of providing
contract services. The costs of license fee revenue is not
separately maintained and has historically been insignificant.

Equipment and
Furniture

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

Investment in Equity
Investee

The Company accounts for its investment in High Speed using the
equity method of accounting. During 1999, the Company acquired a
majority of the outstanding stock of High Speed. Soon
thereafter, the Company began to sell a portion of the shares it
had acquired to independent third parties for cash such that by
December 31, 1999, the ownership percentage in High Speed
was reduced to approximately 44%. Since the Companys
controlling interest in High Speed was temporary, the Company
accounted for its investment using the equity method rather than
consolidating. The Company sold additional shares of its High
Speed stock in 2000 such that its ownership percentage at
December 31, 2000 was approximately 33%.

Concentrations of Credit
Risk and Financial Instruments

During 1999 and 2000, revenue from the U.S. Government and
related entities represented 76% and 60% of total revenue,
respectively.

The Companys financial instruments that are exposed to
concentrations of credit risk consist primarily of its trade
accounts receivable. Collateral is generally not required.
Management provides an estimated allowance for doubtful accounts
based on its assessment of the likelihood of future collections.
No allowance has been recorded as of December 31, 2000, as
all amounts were subsequently collected.

The carrying amount of cash, accounts receivable, accounts
payable and debt approximate fair value for these financial
instruments.

Software Development
Costs

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

The Company amortizes capitalized software development costs on
a product-by-product basis at the greater of the amount computed
using (a) the ratio of current gross revenues for a product
to the total of current and anticipated future gross revenues or
(b) the straight-line method over the estimated remaining
economic life of the products, generally three years.
Amortization begins when the product is available for general
release to customers. The Company capitalized $307,490, $136,837
and $658,332 during 1998, 1999 and 2000, respectively, of costs
incurred related to product development that met these criteria
for capitalization. During 1998, the Company recorded $50,871 of
amortization expense, which was included in cost of revenues in
the accompanying statement of operations. During 1999 and 2000,
the Company did not record amortization expense due to the fact
that all capitalized software development costs were offset by
proceeds from the Companys equity investee in connection
with a funded software development arrangement.

F-11



---



Summus, Ltd


Notes to Financial Statements (continued)



3.  Summary of Significant Accounting Policies
(continued)


The Company offset the entire balance of its capitalized
software costs with these proceeds, resulting in a zero balance
of capitalized software as of December 31, 1999
and 2000.

Income Taxes

The Company uses the liability method to account for income
taxes. Under this method, deferred income taxes are determined
based on differences between the financial statement and tax
basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to
reverse. Valuation allowances are established if and when
necessary to reduce deferred tax assets to the amounts expected
to be realized.

Stock-Based
Compensation

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

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

New Accounting
Pronouncements

In June 1998, the Financial Accounting Standards Board issued
Statement No. 133 Accounting for Derivative
Instruments and Hedging Activities
(SFAS 133), which is required to be adopted in
years beginning after June 15, 2000. Because the Company
has not historically used derivative instruments, management
does not anticipate that the adoption of this statement will
have a significant effect on its operations, financial position
or cash flows.

In December 1999, the Securities and Exchange Commission
released Staff Accounting Bulletin No. 101
(SAB No. 101), Revenue Recognition in
Financial Statements, which provides guidance on the
recognition, presentation, and disclosure of revenue in
financial statements. SAB No. 101 provides guidance on a
variety of revenue recognition issues, including gross versus
net income statement presentation. The Company adopted the
provisions of SAB No. 101 during 2000.

4.  Equipment and Furniture

Equipment and furniture consists of the following at
December 31:

|                                               |  |      |         |      |  |   |           |  
|---------------------------------------------- |  | ---- | ------- | ---- |  | - | --------- | -
|                                               |  | 1999 |         | 2000
|                                               |  |      |         |     
|Computer equipment financed by capital leases  |  | $    | 596,400 |      |  | $ | 802,020   |  
|                                              
|                                              
|                                              
|                                              
|Computer software                              |  |      | 45,623  |      |  |   | 261,396   |  
|                                              
|                                              
|                                              
|                                              
|Furniture and office equipment                 |  |      | 23,379  |      |  |   | 227,985   |  
|                                               |  |      |         |      |  |   |           |  
|                                               |  |      | 665,402 |      |  |   | 1,291,401 |  
|                                              
|                                              
|                                              
|                                              
|Less accumulated depreciation and amortization |  |      | (54,615 | )    |  |   | (300,199  | )
|                                               |  |      |         |      |  |   |           |  
|                                               |  | $    | 610,787 |      |  | $ | 991,202   |  
|                                               |  |      |         |      |  |   |           |  

F-12



---



Summus, Ltd


Notes to Financial Statements (continued)



4.  Equipment and Furniture (continued)


Depreciation and amortization expense totaled $244,495, $45,651
and $274,708 for the years ended December 31, 1998, 1999
and 2000, respectively.

5.  Leases

The Company leases equipment and office space under long-term
capital and operating lease agreements. Rental expense amounted
to $95,000 and $180,000, and $424,000 for the years ended
December 31, 1998, 1999 and 2000, respectively.

Minimum future lease payments at December 31, 2000 are as
follows:

|                                        |  |         |          |           |  |   |           | 
|--------------------------------------- |  | ------- | -------- | --------- |  | - | --------- | 
|                                        |  | Capital |          | Operating
|                                        |  | Leases  |          | Leases   
|                                        |  |         |          |          
|2001                                    |  | $       | 357,107  |           |  | $ | 264,588   | 
|                                       
|                                       
|                                       
|                                       
|2002                                    |  |         | 111,737  |           |  |   | 295,754   | 
|                                       
|                                       
|                                       
|                                       
|2003                                    |  |         | 11,033   |           |  |   | 301,622   | 
|                                       
|                                       
|                                       
|                                       
|2004                                    |  |         |         |           |  |   | 307,678   | 
|                                       
|                                       
|                                       
|                                       
|2005 and thereafter                     |  |         |         |           |  |   | 260,690   | 
|                                        |  |         |          |           |  |   |           | 
|Total minimum lease payments            |  |         | 479,877  |           |  | $ | 1,430,332 | 
|                                        |  |         |          |           |  |   |           | 
|Less amounts representing interest      |  |         | (22,187  | )         |  |   |           | 
|                                        |  |         |          |           |  |   |           | 
|Present value of minimum lease payments |  |         | 457,690  |           |  |   |           | 
|                                       
|                                       
|                                       
|                                       
|Less current portion                    |  |         | (339,724 | )         |  |   |           | 
|                                        |  |         |          |           |  |   |           | 
|                                        |  | $       | 117,966  |           |  |   |           | 
|                                        |  |         |          |           |  |   |           | 

6.  Income Taxes

No provision for income taxes has been recorded during the years
presented due to the Companys significant operating losses
in each year.

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Companys deferred tax assets are as follows:

|                             |  |             |            |      |  |   |            |  
|---------------------------- |  | ----------- | ---------- | ---- |  | - | ---------- | -
|                             |  |            
|                             |  | December 31
|                             |  |            
|                             |  | 1999        |            | 2000
|                             |  |             |            |     
|Deferred revenue             |  | $           | 4,500,000  |      |  | $ | 700,000    |  
|                            
|                            
|                            
|                            
|Accrued expenses and revenue |  |             | 1,000,000  |      |  |   | 800,000    |  
|                            
|                            
|                            
|                            
|NOL carryforward             |  |             | 1,100,000  |      |  |   | 2,400,000  |  
|                            
|                            
|                            
|                            
|Investments                  |  |             | 700,000    |      |  |   | 1,600,000  |  
|                             |  |             |            |      |  |   |            |  
|Total deferred tax assets    |  |             | 7,300,000  |      |  |   | 5,500,000  |  
|                            
|                            
|                            
|                            
|Valuation allowance          |  |             | (7,300,000 | )    |  |   | (5,500,000 | )
|                             |  |             |            |      |  |   |            |  
|Net deferred taxes           |  | $           |           |      |  | $ |           |  
|                             |  |             |            |      |  |   |            |  

Management has determined that a 100% valuation allowance for
existing deferred tax assets is appropriate given the
uncertainty regarding the ultimate realization of any such
assets.

At December 31, 2000, the Company had federal and state net
operating loss carryforwards of approximately $6,200,000 for
income tax purposes. The tax benefit of these carryforwards is
reflected in the

F-13



---



Summus, Ltd


Notes to Financial Statements (continued)



6.  Income Taxes (continued)


above table of deferred tax assets. If not used, these
carryforwards begin to expire in 2018 for federal tax purposes
and in 2013 for state tax purposes. U.S. tax rules impose
limitations on the use of net operating losses following certain
changes in ownership. If such a change occurs, the limitation
could reduce the amount of these benefits that would be
available to offset future taxable income each year, starting
with the year of ownership change.

7.  Related Party Transactions

In February 1999, the Company entered into a Marketing License
Agreement with High Speed. In March 2000, the Company entered
into a Master Agreement with High Speed (see Note 10).

During 1999, the Company provided cash advances to High Speed,
its equity investee. The balance outstanding related to these
advances as of December 31, 1999 and 2000 was $154,000 and
$134,677, respectively.

During 2000, High Speed made loans to the Company totaling
$1,435,000. These loans accrued interest at 8% and were payable
within 60 days of issuance. These loans were canceled upon
the closing of the business combination between the companies on
February 16, 2001 (see Note 14).

Deferred compensation to an officer and significant shareholder
of the Company was $91,050 and $81,050 at December 31, 1999
and 2000, respectively.

8.  Notes Payable

During 1999, the Company entered into an agreement with a
shareholder to repurchase 71.428 shares of its common stock from
that shareholder for an aggregate value of $268,373, of which
$268,075 represented a termination fee for a development
contract and $298 represented the fair value of the shares
repurchased. In connection with this agreement, the Company
entered into a promissory note with the shareholder whereby the
Company agreed to pay approximately $10,000 per month over a
27-month period to fund this transaction. During 2000, the
Company did not make all required monthly installments and thus
defaulted on the promissory note. Consequently, the note is
accruing interest at 18% per annum and the total amount has been
classified as a current liability. The outstanding balance as of
December 31, 1999 and 2000 is $178,915 and $129,215,
respectively.

On September 4, 2000, the Company entered into an agreement
to obtain the rights to certain software technology. In exchange
for these rights, the Company agreed to pay $200,000 in eight
equal installments of $25,000 beginning in 2001 and continuing
over the next two years. The outstanding principal balance of
this note as of December 30, 2000 was $200,000.

9.  Investment in Equity Investee

During 1999, the Company acquired 1,500,000 shares of common
stock of High Speed as partial payment for royalties due in
connection with a Marketing License Agreement between the
companies. The shares were not registered with the Securities
and Exchange Commission and were, thus, restricted
securities within the meaning of Rule 144 under the
Securities Act of 1933. Subsequently, the Company acquired an
additional 9,542,360 shares of High Speed common stock (such
shares also being restricted securities) from a significant
shareholder of High Speed in exchange for the issuance of
132,888 shares of the Companys common stock. This resulted
in the Company obtaining a majority ownership interest in High
Speed at that time. As of December 31, 1999 and 2000, the
Companys ownership percentage decreased to approximately
44% and 33%, respectively, as a portion of the shares initially
acquired were sold. The Company accounted for this investment
using the equity method of accounting. The initial carrying
amount was recorded at the estimated

F-14



---



Summus, Ltd


Notes to Financial Statements (continued)



9.  Investment in Equity Investee (continued)


fair value of the stock received taking into account the fact
that the stock was not registered and thus was not freely
tradable. The Company adjusted the carrying amount of its
investment in High Speed for its share of High Speeds
losses subsequent to the date of investment. Additionally,
during 1999 and 2000, the Companys investment in High
Speed was increased based on sales of additional shares of High
Speed stock to third parties by High Speed and was decreased
based on the Company recording its share of High Speeds
losses. Based on these transactions, the carrying value of the
Companys investment was reduced to zero at
December 31, 2000. At December 31, 2000, the Company
owned 8,217,781 shares of High Speed which represented
approximately a 33% ownership percentage. On February 16,
2001, the Company sold all of its assets to High Speed in a
transaction accounted for as a reverse purchase in which the
Company will be treated as the accounting acquirer (see
Note 14).

The condensed results of operations and financial position of
High Speed at December 31, 1999 and 2000 are summarized
below:

|                                     |  |             |            |      |  |   |             |  
|------------------------------------ |  | ----------- | ---------- | ---- |  | - | ----------- | -
|                                     |  |            
|                                     |  | December 31
|                                     |  |            
|                                     |  | 1999        |            | 2000
|                                     |  |             |            |     
|Total assets                         |  | $           | 4,275,064  |      |  | $ | 4,497,607   |  
|                                     |  |             |            |      |  |   |             |  
|Total liabilities                    |  | $           | 1,489,691  |      |  | $ | 4,849,259   |  
|                                     |  |             |            |      |  |   |             |  
|Total stockholders equity (deficit) |  | $           | 2,785,373  |      |  | $ | (351,652    | )
|                                     |  |             |            |      |  |   |             |  
|Net loss                             |  | $           | (9,684,529 | )    |  | $ | (12,441,655 | )
|                                     |  |             |            |      |  |   |             |  

10.  Deferred Software Royalty Revenue

In February 1999, the Company entered into a Marketing License
Agreement (MLA) with High Speed. As consideration
for this agreement, the Company received prepaid software
royalty payments. The amount of prepaid royalties received
consisted of cash payments of $2,250,000 and the receipt of
1,500,000 shares of High Speed common stock valued at $750,000
for total aggregate consideration of $3,000,000. The value
assigned to the 1,500,000 common shares was based on a
discounted value of High Speeds common stock taking into
the consideration the restricted nature of these shares. This
amount was classified as deferred revenue in the Companys
balance sheet.

In February 2000, the Company and High Speed entered into a
Master Agreement, which included a Software License Agreement
(SLA), a Software Maintenance Agreement
(SMA) and a Revenue Sharing Agreement
(RSA) (collectively with the Master Agreement, the
New Agreements). The New Agreements entirely
replaced and superseded the MLA entered into in February 1999.
The New Agreements provided for various payment terms by and
between the Company and High Speed.

The MLA and the New Agreements represented funded software
development arrangements between the companies and as such, the
$3 million proceeds from the MLA and New Agreements were
credited against all costs related to the software (i.e., the
software covered by the MLA and the New Agreements) which had
been capitalized by the Company. The Company applied $507,604
and $658,332 of its deferred revenue balance against its
capitalized software development costs during 1999 and 2000,
respectively.

11.  Profit Sharing Plan

The Company has established a 401(k) profit sharing plan for the
benefit of employees who have attained the age of 21 years.
The Companys contribution to the plan is discretionary and
is not limited to profits. For

F-15



---



Summus, Ltd


Notes to Financial Statements (continued)



11.  Profit Sharing Plan (continued)


the years ended December 31, 1998, 1999, and 2000, the
Company contributed approximately $21,000, $26,000, and $42,303
to the Plan, respectively.

12.  Stock Options

During 2000, Summus established a stock option plan (the
Plan) to provide for the issuance of stock options
to employees and directors. Options granted in connection with
initial employment with the Company vest upon issuance. Options
granted in connection with ongoing annual grants vest 20%
immediately, then 5% each three-month period thereafter over the
next 4 years. Each stock option generally has a term of
10 years.

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

During 2000, all of the stock options were granted with an
exercise price of $0.19 per share. This exercise price was below
the estimated fair value of the underlying common stock of the
Company. Deferred compensation has been recorded for the
difference in value between exercise price and the estimated
fair value of the underlying common stock and is being
recognized over the vesting period of the stock options. As of
December 31, 2000, 999,349 options were exercisable.

A summary of the Companys stock option activity is as
follows:

|                                |           |             |           |           |   |   |      |      | 
|------------------------------- | --------- | ----------- | --------- | --------- | - | - | ---- | ---- | 
|                                |           | Outstanding |           | Exercise 
|                                |           | Options     |           | Price    
|                                |           |             |           |          
|Outstanding  December 31, 1999 |           |             |          |           |   | $ |     |     
|                               
|                               
|                               
|                               
|                                | Granted   |             |           | 1,613,838 |   |   |      | 0.19 | 
|                               
|                               
|                               
|                               
|                                | Exercised |             |           | (447,205  | ) |   |      | 0.19 | 
|                                |           |             |           |           |   |   |      |     
|Outstanding  December 31, 2000 |           |             | 1,166,633 |           |   | $ | 0.19 |     
|                                |           |             |           |           |   |   |      |     

In accordance with SFAS 123, the fair value of each option grant
was determined by using the minimum value method with the
following weighted average assumptions for the twelve month
period ended December 31, 2000: dividend yield of 0%; risk
free interest rate of 6.20% and expected option lives of
5 years. The weighted average fair value at the date of
grant was $39.00 per option. Had compensation expense for
the Companys stock options been determined based on the
fair value at the date of grant consistent with the provisions
of SFAS 123, the Companys net loss and net loss per
share would have been $14.6 million and $1.52 for the
twelve months ended December 31, 2000.

13.  Change in Par Value

In 1999, the Companys shareholders approved a change in
the par value of the Companys common stock retroactively
from $1 per share to $.0001 per share. Relevant amounts in the
financial statements have been restated to reflect
the change.

14.  Subsequent Event

On February 16, 2001, the Company sold all of its assets to
High Speed under the terms of an Asset Purchase Agreement, as
amended, in a business combination (the combination)
accounted for as a reverse purchase in which the Company will be
treated as the accounting acquirer. Prior to the closing of the
combination, the Company was the largest shareholder of High
Speed, owning 8,217,781 shares or 33.2% of

F-16



---



Summus, Ltd


Notes to Financial Statements (continued)



14.  Subsequent Event (continued)


High Speeds outstanding common stock (27.6% on a fully
diluted basis). Immediately after the closing, the
Companys ownership increased to 20,593,262 shares (55.5%)
of High Speeds common stock on an as-converted basis,
(approximately 53.1% on a fully-diluted basis). The terms of the
Asset Purchase Agreement contemplated that the Company would
liquidate shortly after the closing of the transaction, having
first disbursed the shares of High Speed common stock and other
securities issued in the transaction to the Companys
stockholders. On March 13, 2001, the Company distributed
certain of the shares of the Companys common stock
received in the transaction to the Companys stockholders
in accordance with their pro rata interests in the Company. The
accompanying financial statements have been restated to reflect
the historical equity of the Company retroactively restated to
reflect the number of shares received in the combination.

The consideration given by High Speed to acquire the assets of
Summus is described below:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | High Speed issued to the Company a total of 20,197,797 shares of
	its common stock and 6,000 shares of High Speeds
	Series B Preferred Stock. As a stockholder of the Company,
	High Speed was entitled to receive 3,604,445 of the total number
	of shares of common stock issued in the transaction. However,
	these shares were cancelled under the terms of the Asset
	Purchase Agreement, resulting in a net issuance of 16,593,352
	shares of High Speed common stock. In addition, the Asset
	Purchase Agreement provided that the 8,217,781 shares of High
	Speed common stock owned by the Company prior to the
	parties execution of the Asset Purchase Agreement were to
	be canceled. Certain of the shares held by the Company after the
	execution of these transactions were subsequently disbursed by
	the Company to its shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | High Speed issued to the Company 6,000 shares of newly created
	Series B Preferred Stock, of which 2,000 shares were
	deposited with an escrow agent as security for any
	indemnification obligations of the Company and its shareholders
	under the Asset Purchase Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | High Speed has authorized the issuance of up to 6,500 shares of
	Series B Preferred Stock. The rights of the Series B
	Preferred Stock are as follows: each share of Series B
	Preferred Stock will be automatically converted into 1,000
	shares of common stock, subject to adjustment for stock
	dividends, stock splits and the like, after High Speeds
	charter is amended to increase the number of authorized shares
	of common stock to at least 60 million shares. Until then,
	the Series B Preferred Stock will not be convertible. Each
	share of Series B Preferred Stock will be entitled to
	receive dividends and participate in distributions upon
	liquidation pro rata with the common stock on an as-converted
	basis, and will vote equally with the common stock on an
	as-converted basis. These rights apply even if there is
	insufficient authorized common stock to permit conversion of the
	Series B Preferred Stock. There are no other preferences or
	privileges associated with the Series B Preferred Stock.
	Under the terms of the Asset Purchase Agreement, High Speed is
	required to seek shareholder approval to amend its charter to
	increase the number of authorized shares of common stock so that
	there will be sufficient shares of common stock available and
	reserved for issuance upon conversion of the Series B
	Preferred Stock.

High Speed issued to the Company warrants to purchase a total of
500 shares of its Series B Preferred Stock, exercisable for
a period of 5 years from February 16, 2001. The
exercise price of the warrants is $5,500.00 per share of
Series B Preferred Stock ($5.50 per share of High Speed
common stock on an as-converted basis), and was calculated based
on the closing market price of the High Speed common stock on
February 16, 2001, on an as converted basis (High Speed
common stock currently trades in a public market on the Pink
Sheets®).

F-17



---



Summus, Ltd


Notes to Financial Statements (continued)



14.  Subsequent Event (continued)


In addition to the items described above, the terms of the Asset
Purchase Agreement included to the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | High Speed assumed approximately $2.8 million of
	liabilities of the Company to third parties. All amounts owed by
	and between HSNS and the Company have been cancelled upon the
	closing of the Combination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | HSNS entered into a three-year employment agreement with the
	Companys largest shareholder, Dr. Jawerth. Under this
	employment agreement, in exchange for Dr. Jawerths
	covenant not to compete with HSNS for a period of 18 months
	after February 16, 2001, HSNS issued options to
	Dr. Jawerth to purchase 166,667 shares of common stock at
	$0.50 per share and 333,333 shares of common stock at $3.75 per
	share. Also, HSNS agreed to assist Dr. Jawerth in the
	private sale of $2,500,000 worth of HSNS common stock owned by
	him. HSNS will issue options to Dr. Jawerth to purchase
	three times the number of shares of common stock he sells in the
	private sale. The options will be exercisable during the second
	through the fifth year after the options are issued.
	Additionally, during the three-year term of the employment
	agreement, Dr. Jawerth will receive a base salary of
	$350,000 (which is subject to an annual increase of at least
	10%) plus other benefits including severance benefits and also
	including potential bonuses.

F-18



---



Consolidated Financial Statements

High Speed Net Solutions, Inc.

Years ended December 31, 2000 and 1999 with Report of
Independent Auditors

F-19



---



Report of Independent Auditors

The Board of Directors and Shareholders



We have audited the accompanying consolidated balance sheets of
High Speed Net Solutions, Inc. as of December 31, 1999 and
2000, and the related consolidated statements of operations,
stockholders equity (deficit) and cash flows for each of
the three years in the period ended December 31, 2000.
These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of High Speed Net Solutions, Inc. at
December 31, 1999 and 2000 and the consolidated results of
its operations and its cash flows, for each of the three years
in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States.

As more fully described in Note 2, the accompanying 1999
financial statements have been restated to reflect an increase
in the recorded value of the Companys investment in a
related party resulting from a capital contribution, a reduction
in the recorded value of prepaid royalties, a reduction in the
recorded value of the Companys investment in a related
party resulting from an exchange of restricted equity
securities, and a reduction in the expense associated with stock
options granted to non-employees.

The accompanying financial statements have been prepared
assuming that High Speed Net Solutions, Inc. will continue as a
going concern. As more fully described in Note 1, the
Company has incurred operating losses since inception and will
require additional capital in 2001 to continue operations. These
conditions raise substantial doubt about the Companys
ability to continue as a going concern. Managements plans
in regard to these matters are also described in Note 1.
The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

May 22, 2001,





Raleigh, North Carolina

F-20



---



High Speed Net Solutions, Inc.

Consolidated Balance Sheets

|                                                                               |                                                                                                                                                      |             |           |             |   |   |           |             |  
|------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | --------- | ----------- | - | - | --------- | ----------- | -
|                                                                               |                                                                                                                                                      |            
|                                                                               |                                                                                                                                                      | December 31
|                                                                               |                                                                                                                                                      |            
|                                                                               |                                                                                                                                                      | 1999        |           | 2000       
|                                                                               |                                                                                                                                                      |             |           |            
|                                                                               |                                                                                                                                                      | (Restated)  |           |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Assets                                                                         |                                                                                                                                                      |             |           |             |   |   |           |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Current assets:                                                                |                                                                                                                                                      |             |           |             |   |   |           |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Cash and cash equivalents                                                                                                                            |             | $         | 248,740     |   |   | $         | 326,622     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Restricted cash                                                                                                                                      |             |           |            |   |   |           | 300,000     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Accounts receivable                                                                                                                                  |             |           |            |   |   |           | 167,459     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Other current assets                                                                                                                                 |             |           |            |   |   |           | 26,674      |  
|                                                                               |                                                                                                                                                      |             |           |             |   |   |           |            
|Total current assets                                                           |                                                                                                                                                      |             | 248,740   |             |   |   | 820,755   |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Equipment, software and furniture, net                                         |                                                                                                                                                      |             | 3,720     |             |   |   | 385,915   |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Investment in common stock of related party                                    |                                                                                                                                                      |             | 1,855,937 |             |   |   | 1,855,937 |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Prepaid software royalties                                                     |                                                                                                                                                      |             | 2,166,667 |             |   |   |          |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Loans due from related party                                                   |                                                                                                                                                      |             |          |             |   |   | 1,435,000 |            
|                                                                               |                                                                                                                                                      |             |           |             |   |   |           |            
|Total assets                                                                   |                                                                                                                                                      | $           | 4,275,064 |             |   | $ | 4,497,607 |            
|                                                                               |                                                                                                                                                      |             |           |             |   |   |           |            
|Liabilities, redeemable common stock and
	stockholders equity (deficit)       |                                                                                                                                                      |             |           |             |   |   |           |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Current liabilities:                                                           |                                                                                                                                                      |             |           |             |   |   |           |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Payables to related parties                                                                                                                          |             | $         | 589,815     |   |   | $         | 570,492     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Accounts payable and accrued expenses                                                                                                                |             |           | 99,876      |   |   |           | 2,528,765   |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Loss contingency accrual                                                                                                                             |             |           | 800,000     |   |   |           | 544,960     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Preferred stock dividends payable                                                                                                                    |             |           |            |   |   |           | 133,333     |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Capital lease obligations, current portion                                                                                                           |             |           |            |   |   |           | 94,936      |  
|                                                                               |                                                                                                                                                      |             |           |             |   |   |           |            
|Total current liabilities                                                      |                                                                                                                                                      |             | 1,489,691 |             |   |   | 3,872,486 |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Capital lease obligation, less current portion                                 |                                                                                                                                                      |             |          |             |   |   | 100,773   |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Redeemable common stock                                                        |                                                                                                                                                      |             |          |             |   |   | 876,000   |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Stockholders equity (deficit):                                                |                                                                                                                                                      |             |           |             |   |   |           |            
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Preferred Stock, $0.001 par value; 5,000,000
	shares authorized,
	2,000 shares issued and outstanding (liquidation preference
	of
	$1,000 per share) |             |           |            |   |   |           | 2,000,000   |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Common stock, $.001 par value, authorized
	50,000,000 shares; issued and outstanding 21,112,149 and
	24,422,927 shares, respectively                 |             |           | 21,112      |   |   |           | 24,423      |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Additional paid-in capital                                                                                                                           |             |           | 14,386,105  |   |   |           | 22,115,657  |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Accumulated deficit                                                                                                                                  |             |           | (11,394,225 | ) |   |           | (24,264,113 | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Treasury stock, at cost (38,500 shares)                                                                                                              |             |           | (227,619    | ) |   |           | (227,619    | )
|                                                                               |                                                                                                                                                      |             |           |             |   |   |           |            
|Total stockholders equity (deficit)                                           |                                                                                                                                                      |             | 2,785,373 |             |   |   | (351,652  | )          
|                                                                               |                                                                                                                                                      |             |           |             |   |   |           |            
|Total liabilities, redeemable common stock and
	stockholders equity (deficit) |                                                                                                                                                      | $           | 4,275,064 |             |   | $ | 4,497,607 |            
|                                                                               |                                                                                                                                                      |             |           |             |   |   |           |            

See accompanying notes.

F-21



---



High Speed Net Solutions, Inc.

Consolidated Statements of Operations

|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |             |  
|-------------------------------------------- | -------------------------------------------------------------------- | ---------------------- | ---------- | ---------- | - | ---- | ---------- | ---------- | - | - | ----------- | ----------- | -
|                                             |                                                                      |                       
|                                             |                                                                      | Year ended December 31
|                                             |                                                                      |                       
|                                             |                                                                      | 1998                   |            | 1999       |   | 2000
|                                             |                                                                      |                        |            |            |   |     
|                                             |                                                                      |                       
|                                             |                                                                      | (Restated)            
|                                            
|                                            
|                                            
|                                            
|Revenue                                      |                                                                      | $                      |           |            |   | $    |           |            |   | $ | 599,054     |            
|                                            
|                                            
|                                            
|                                            
|Costs of revenue                             |                                                                      |                        |           |            |   |      |           |            |   |   | 476,280     |            
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Gross profit                                 |                                                                      |                        |           |            |   |      |           |            |   |   | 122,774     |            
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative expenses |                                                                      |                        | 374,841    |            |   |      | 2,582,447  | *          |   |   | 6,864,159   | *          
|                                            
|                                            
|                                            
|                                            
|Non-cash compensation                        |                                                                      |                        |           |            |   |      | 2,813,000  |            |   |   | 333,750     |            
|                                            
|                                            
|                                            
|                                            
|Interest expense                             |                                                                      |                        |           |            |   |      | 2,655,749  |            |   |   | 15,192      |            
|                                            
|                                            
|                                            
|                                            
|Amortization expense                         |                                                                      |                        |           |            |   |      | 833,333    |            |   |   | 116,200     |            
|                                            
|                                            
|                                            
|                                            
|Impairment charges                           |                                                                      |                        |           |            |   |      |           |            |   |   | 3,953,182   |            
|                                            
|                                            
|                                            
|                                            
|Loss contingency charges                     |                                                                      |                        |           |            |   |      | 800,000    |            |   |   | 1,281,946   |            
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Loss from continuing operations              |                                                                      |                        | (374,841   | )          |   |      | (9,684,529 | )          |   |   | (12,441,655 | )          
|                                            
|                                            
|                                            
|                                            
|Loss from discontinued operations            |                                                                      |                        | (1,334,855 | )          |   |      |           |            |   |   |            |            
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Net loss                                     |                                                                      | $                      | (1,709,696 | )          |   | $    | (9,684,529 | )          |   | $ | (12,441,655 | )          
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Net loss applicable to common shareholders:  |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|                                            
|                                            
|                                            
|                                            
|                                             | Net loss                                                             |                        | $          | (1,709,696 | ) |      | $          | (9,684,529 | ) |   | $           | (12,441,655 | )
|                                            
|                                            
|                                            
|                                            
|                                             | Beneficial conversion feature of preferred stock                     |                        |            |           |   |      |            |           |   |   |             | (294,900    | )
|                                            
|                                            
|                                            
|                                            
|                                             | Preferred stock dividends                                            |                        |            |           |   |      |            |           |   |   |             | (133,333    | )
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Net loss applicable to common shareholders   |                                                                      | $                      | (1,709,696 | )          |   | $    | (9,684,529 | )          |   | $ | (12,869,888 | )          
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Per share amounts (basic and diluted):       |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|                                            
|                                            
|                                            
|                                            
|                                             | Loss applicable to common shareholders from
	continuing operations   |                        | $          | (0.03      | ) |      | $          | (0.51      | ) |   | $           | (0.60       | )
|                                            
|                                            
|                                            
|                                            
|                                             | Loss applicable to common shareholders from
	discontinued operations |                        | $          | (0.11      | ) |      | $          |           |   |   | $           |            |  
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Net loss                                     |                                                                      | $                      | (0.14      | )          |   | $    | (0.51      | )          |   | $ | (0.60       | )          
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            
|Weighted average common shares outstanding   |                                                                      |                        | 11,868,867 |            |   |      | 19,080,492 |            |   |   | 21,619,618  |            
|                                             |                                                                      |                        |            |            |   |      |            |            |   |   |             |            






|  |                                                                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Selling, general and administrative expenses in 1999 and 2000
	exclude $2.8  million and $0.3 million, respectively,
	of non-cash compensation charges.

See accompanying notes.

F-22



---



High Speed Net Solutions, Inc.

Consolidated Statement of Stockholders Equity
(Deficit)

|                                                                                                 |  |                 |   |              |  |            |   |             |  |          |            |               |  |       |        |           |  |   |           |   |  |   |            |   |  |   |          |   |  |   |            |  
|------------------------------------------------------------------------------------------------ |  | --------------- | - | ------------ |  | ---------- | - | ----------- |  | -------- | ---------- | ------------- |  | ----- | ------ | --------- |  | - | --------- | - |  | - | ---------- | - |  | - | -------- | - |  | - | ---------- | -
|                                                                                                 |  |                 |   |              |  |            |   |             |  |          |            | Total        
|                                                                                                 |  | Preferred Stock |   | Common Stock |  | Additional |   |             |  |          |            | Stockholders
|                                                                                                 |  |                 |   |              |  | Paid-in    |   | Accumulated |  | Treasury |            | Equity       
|                                                                                                 |  | Shares          |   | Amount       |  | Shares     |   | Amount      |  | Capital  |            | Deficit       |  | Stock |        | (Deficit)
|                                                                                                 |  |                 |   |              |  |            |   |             |  |          |            |               |  |       |        |          
|Balance January 2, 1998 (inception)
	reflecting the MWI and JSJ recapitalizations of the Company |  |                 |  |              |  | $          |  |             |  |          | 10,325,000 |               |  | $     | 10,325 |           |  | $ | (10,325   | ) |  | $ |           |   |  | $ |         |   |  | $ |           |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Founders shares issued for no consideration                                                      |  |                 |  |              |  |            |  |             |  |          | 100        |               |  |       |       |           |  |   |          |   |  |   |           |   |  |   |         |   |  |   |           |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Shareholders capital contributions                                                              |  |                 |  |              |  |            |  |             |  |          |           |               |  |       |       |           |  |   | 1,091,648 |   |  |   |           |   |  |   |         |   |  |   | 1,091,648  |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Common stock sold for cash                                                                       |  |                 |  |              |  |            |  |             |  |          | 3,766,600  |               |  |       | 3,767  |           |  |   | 313,233   |   |  |   |           |   |  |   |         |   |  |   | 317,000    |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Common stock issued for payment of debt to a
	shareholder                                        |  |                 |  |              |  |            |  |             |  |          | 1,550,000  |               |  |       | 1,550  |           |  |   | 148,270   |   |  |   |           |   |  |   |         |   |  |   | 149,820    |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Treasury stock acquired for cash                                                                 |  |                 |  |              |  |            |  |             |  |          |           |               |  |       |       |           |  |   |          |   |  |   |           |   |  |   | (227,619 | ) |  |   | (227,619   | )
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Common stock issued for licensing rights                                                         |  |                 |  |              |  |            |  |             |  |          | 775,000    |               |  |       | 775    |           |  |   | 76,725    |   |  |   |           |   |  |   |         |   |  |   | 77,500     |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Common stock issued for employee compensation and
	to non-employees                              |  |                 |  |              |  |            |  |             |  |          | 765,000    |               |  |       | 765    |           |  |   | 75,735    |   |  |   |           |   |  |   |         |   |  |   | 76,500     |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Cancellation of compensatory and other stock                                                     |  |                 |  |              |  |            |  |             |  |          | (530,000   | )             |  |       | (530   | )         |  |   | (52,470   | ) |  |   |           |   |  |   |         |   |  |   | (53,000    | )
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Net loss for 1998                                                                                |  |                 |  |              |  |            |  |             |  |          |           |               |  |       |       |           |  |   |          |   |  |   | (1,709,696 | ) |  |   |         |   |  |   | (1,709,696 | )
|                                                                                                 |  |                 |   |              |  |            |   |             |  |          |            |               |  |       |        |           |  |   |           |   |  |   |            |   |  |   |          |   |  |   |            |  
|Balance at December 31, 1998                                                                     |  |                 |  |              |  |            |  |             |  |          | 16,651,700 |               |  |       | 16,652 |           |  |   | 1,642,816 |   |  |   | (1,709,696 | ) |  |   | (227,619 | ) |  |   | (277,847   | )
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Compensation and other expense related to grants
	of stock options                               |  |                 |  |              |  |            |  |             |  |          |           |               |  |       |       |           |  |   | 3,397,250 |   |  |   |           |   |  |   |         |   |  |   | 3,397,250  |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Common stock sold for cash                                                                       |  |                 |  |              |  |            |  |             |  |          | 338,188    |               |  |       | 338    |           |  |   | 347,162   |   |  |   |           |   |  |   |         |   |  |   | 347,500    |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Common stock issued for investment in a related
	party                                           |  |                 |  |              |  |            |  |             |  |          | 795,001    |               |  |       | 795    |           |  |   | 643,156   |   |  |   |           |   |  |   |         |   |  |   | 643,951    |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Capital contribution received for investment in
	related party                                   |  |                 |  |              |  |            |  |             |  |          |           |               |  |       |       |           |  |   | 1,109,986 |   |  |   |           |   |  |   |         |   |  |   | 1,109,986  |  
|                                                                                                
|                                                                                                
|                                                                                                
|                                                                                                
|Common stock issued for services                                                                 |  |                 |  |              |  |            |  |             |  |          | 85,500     |               |  |       | 85     |           |  |   | 130,729   |   |  |   |           |   |  |   |         |   |  |   | 130,814    |  

F-23



---



High Speed Net Solutions, Inc.

Consolidated Statement of Stockholders Equity (Deficit)
(continued)

|                                                                                                                 |  |                 |       |              |  |            |           |             |  |          |            |               |  |       |        |           |  |   |            |   |  |   |             |   |  |   |          |   |  |   |             |  
|---------------------------------------------------------------------------------------------------------------- |  | --------------- | ----- | ------------ |  | ---------- | --------- | ----------- |  | -------- | ---------- | ------------- |  | ----- | ------ | --------- |  | - | ---------- | - |  | - | ----------- | - |  | - | -------- | - |  | - | ----------- | -
|                                                                                                                 |  |                 |       |              |  |            |           |             |  |          |            | Total        
|                                                                                                                 |  | Preferred Stock |       | Common Stock |  | Additional |           |             |  |          |            | Stockholders
|                                                                                                                 |  |                 |       |              |  | Paid-in    |           | Accumulated |  | Treasury |            | Equity       
|                                                                                                                 |  | Shares          |       | Amount       |  | Shares     |           | Amount      |  | Capital  |            | Deficit       |  | Stock |        | (Deficit)
|                                                                                                                 |  |                 |       |              |  |            |           |             |  |          |            |               |  |       |        |          
|Common stock issued for prepaid royalties                                                                        |  |                 |      |              |  |            |           |             |  |          | 1,500,000  |               |  |       | 1,500  |           |  |   | 748,500    |   |  |   |            |   |  |   |         |   |  |   | 750,000     |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Beneficial conversion feature related to
	convertible debentures                                                 |  |                 |      |              |  |            |          |             |  |          |           |               |  |       |       |           |  |   | 2,655,749  |   |  |   |            |   |  |   |         |   |  |   | 2,655,749   |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Common stock issued in exchange for convertible
	debentures                                                      |  |                 |      |              |  |            |          |             |  |          | 4,852,860  |               |  |       | 4,853  |           |  |   | 2,650,896  |   |  |   |            |   |  |   |         |   |  |   | 2,655,749   |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Common stock canceled in connection with the
	merger between High Speed Net Solutions and Marketers
	World, Inc. |  |                 |      |              |  |            |          |             |  |          | (5,161,100 | )             |  |       | (5,161 | )         |  |   | 5,161      |   |  |   |            |   |  |   |         |   |  |   |            |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Cancellation of compensatory stock                                                                               |  |                 |      |              |  |            |          |             |  |          | (25,000    | )             |  |       | (25    | )         |  |   | (38,225    | ) |  |   |            |   |  |   |         |   |  |   | (38,250     | )
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Stock option exercises                                                                                           |  |                 |      |              |  |            |          |             |  |          | 1,825,000  |               |  |       | 1,825  |           |  |   | (1,825     | ) |  |   |            |   |  |   |         |   |  |   |            |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Common stock sold to a related party                                                                             |  |                 |      |              |  |            |          |             |  |          | 250,000    |               |  |       | 250    |           |  |   | 1,094,750  |   |  |   |            |   |  |   |         |   |  |   | 1,095,000   |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Net loss for 1999                                                                                                |  |                 |      |              |  |            |          |             |  |          |           |               |  |       |       |           |  |   |           |   |  |   | (9,684,529  | ) |  |   |         |   |  |   | (9,684,529  | )
|                                                                                                                 |  |                 |       |              |  |            |           |             |  |          |            |               |  |       |        |           |  |   |            |   |  |   |             |   |  |   |          |   |  |   |             |  
|Balance at December 31, 1999 (restated)                                                                          |  |                 |      |              |  |            |          |             |  |          | 21,112,149 |               |  |       | 21,112 |           |  |   | 14,386,105 |   |  |   | (11,394,225 | ) |  |   | (227,619 | ) |  |   | 2,785,373   |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Preferred stock sold for cash, net of issuance
	costs                                                            |  |                 | 2,000 |              |  |            | 2,000,000 |             |  |          |           |               |  |       |       |           |  |   | (149,048   | ) |  |   |            |   |  |   |         |   |  |   | 1,850,952   |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Beneficial conversion feature of preferred stock                                                                 |  |                 |      |              |  |            |          |             |  |          |           |               |  |       |       |           |  |   | 294,900    |   |  |   | (294,900    | ) |  |   |         |   |  |   |            |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Common stock and options issued for services                                                                     |  |                 |      |              |  |            |          |             |  |          | 7,500      |               |  |       | 8      |           |  |   | 884,028    |   |  |   |            |   |  |   |         |   |  |   | 884,036     |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Issuance of common stock in partial settlement of
	loss contingency                                              |  |                 |      |              |  |            |          |             |  |          | 1,700,000  |               |  |       | 1,700  |           |  |   | 1,408,611  |   |  |   |            |   |  |   |         |   |  |   | 1,410,311   |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Common stock issued to acquire equipment                                                                         |  |                 |      |              |  |            |          |             |  |          | 8,988      |               |  |       | 9      |           |  |   | 15,102     |   |  |   |            |   |  |   |         |   |  |   | 15,111      |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Common stock issued to acquire Douglas May &
	Co.                                                                |  |                 |      |              |  |            |          |             |  |          | 50,000     |               |  |       | 50     |           |  |   | 499,950    |   |  |   |            |   |  |   |         |   |  |   | 500,000     |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Common stock sold for cash                                                                                       |  |                 |      |              |  |            |          |             |  |          | 1,544,290  |               |  |       | 1,544  |           |  |   | 4,776,009  |   |  |   |            |   |  |   |         |   |  |   | 4,777,553   |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Preferred stock dividends                                                                                        |  |                 |      |              |  |            |          |             |  |          |           |               |  |       |       |           |  |   |           |   |  |   | (133,333    | ) |  |   |         |   |  |   | (133,333    | )
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Net loss for 2000                                                                                                |  |                 |      |              |  |            |          |             |  |          |           |               |  |       |       |           |  |   |           |   |  |   | (12,441,655 | ) |  |   |         |   |  |   | (12,441,655 | )
|                                                                                                                 |  |                 |       |              |  |            |           |             |  |          |            |               |  |       |        |           |  |   |            |   |  |   |             |   |  |   |          |   |  |   |             |  
|Balance at December 31, 2000                                                                                     |  |                 | 2,000 |              |  | $          | 2,000,000 |             |  |          | 24,422,927 |               |  | $     | 24,423 |           |  | $ | 22,115,657 |   |  | $ | (24,264,113 | ) |  | $ | (227,619 | ) |  | $ | (351,652    | )
|                                                                                                                 |  |                 |       |              |  |            |           |             |  |          |            |               |  |       |        |           |  |   |            |   |  |   |             |   |  |   |          |   |  |   |             |  

F-24



---



High Speed Net Solutions, Inc.

Consolidated Statements of Cash Flows

|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |           |           |  
|--------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------- | ---------- | ------ | ------ | ---- | ---------- | --------- | ------- | - | ----------- | --------- | --------- | -
|                                                                                                    |                                                                                 |                                      
|                                                                                                    |                                                                                 | Year ended December 31               
|                                                                                                    |                                                                                 |                                      
|                                                                                                    |                                                                                 | 1998                                  |            | 1999   |        | 2000
|                                                                                                    |                                                                                 |                                       |            |        |        |     
|                                                                                                    |                                                                                 |                                      
|                                                                                                    |                                                                                 | (Restated)                           
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Operating activities                                                                                |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Loss from continuing operations                                                                     |                                                                                 | $                                     | (374,841   | )      |        | $    | (9,684,529 | )         |         | $ | (12,441,655 | )        
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Adjustments to reconcile loss from continuing
	operations to net cash used in operating activities: |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Loss on disposal of equipment                                                   |                                       |            | 36,858 |        |      |            |          |         |   |             |          |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Impairment charge                                                               |                                       |            |       |        |      |            |          |         |   |             | 3,953,182 |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Non cash compensation                                                           |                                       |            |       |        |      |            | 2,813,000 |         |   |             | 333,750   |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Stock issued for partial settlement of loss
	contingency                        |                                       |            |       |        |      |            |          |         |   |             | 1,410,311 |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Depreciation and amortization                                                   |                                       |            | 21,900 |        |      |            | 833,665   |         |   |             | 282,494   |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Common stock issued to non-employees                                            |                                       |            | 23,500 |        |      |            | 1,521,814 |         |   |             | 550,286   |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Interest expense relating to beneficial
	conversion feature of convertible debt |                                       |            |       |        |      |            | 2,655,749 |         |   |             |          |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    | Changes in operating assets and liabilities, net
	of acquisitions:              |                                       |            |        |        |      |            |           |         |   |             |           |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    |                                                                                 | Accounts receivable                   |            |        | (7,559 | )    |            |           | 7,559   |   |             |           | 261,716   |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    |                                                                                 | Prepaid royalties                     |            |        |       |      |            |           | (60,000 | ) |             |           |          |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    |                                                                                 | Increase in other current assets      |            |        |       |      |            |           |        |   |             |           | (23,329   | )
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    |                                                                                 | Accounts payable and accrued expenses |            |        | 8,457  |      |            |           | 91,419  |   |             |           | 2,105,990 |  
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                    |                                                                                 | Loss contingency accrual              |            |        |       |      |            |           | 800,000 |   |             |           | (255,040  | )
|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|Net cash used in operating activities from
	continuing operations                                   |                                                                                 |                                       | (291,685   | )      |        |      | (1,021,323 | )         |         |   | (3,822,295  | )        
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Net cash used in discontinued operations                                                            |                                                                                 |                                       | (1,265,965 | )      |        |      |           |           |         |   |            |          
|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|Net cash used in operating activities                                                               |                                                                                 |                                       | (1,557,650 | )      |        |      | (1,021,323 | )         |         |   | (3,822,295  | )        
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Investing activities                                                                                |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Capital expenditures, net of acquisitions                                                           |                                                                                 |                                       | (50,148    | )      |        |      | (4,052     | )         |         |   | (1,032,528  | )        
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Cash invested in common stock of related party                                                      |                                                                                 |                                       |           |        |        |      | (102,000   | )         |         |   |            |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Cash received in acquisition                                                                        |                                                                                 |                                       |           |        |        |      |           |           |         |   | 63,971      |          
|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|Net cash used in investing activities                                                               |                                                                                 |                                       | (50,148    | )      |        |      | (106,052   | )         |         |   | (968,557    | )        
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Financing activities                                                                                |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Funds loaned to related party                                                                       |                                                                                 |                                       |           |        |        |      |           |           |         |   | (1,435,000  | )        
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Net proceeds from sale of common stock                                                              |                                                                                 |                                       | 317,000    |        |        |      | 597,500    |           |         |   | 4,777,553   |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Payments on capital leases                                                                          |                                                                                 |                                       |           |        |        |      |           |           |         |   | (5,448      | )        
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Increase in restricted cash                                                                         |                                                                                 |                                       |           |        |        |      |           |           |         |   | (300,000    | )        
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Net proceeds from sale of preferred stock                                                           |                                                                                 |                                       |           |        |        |      |           |           |         |   | 1,850,952   |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Shareholder capital contributions                                                                   |                                                                                 |                                       | 1,091,648  |        |        |      |           |           |         |   |            |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Advances from stockholders                                                                          |                                                                                 |                                       | 445,378    |        |        |      | 210,852    |           |         |   |            |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Repayments to stockholders                                                                          |                                                                                 |                                       |           |        |        |      | (9,486     | )         |         |   | (19,323     | )        
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Proceeds from issuance of convertible debentures                                                    |                                                                                 |                                       |           |        |        |      | 558,640    |           |         |   |            |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Purchase of treasury stock                                                                          |                                                                                 |                                       | (227,619   | )      |        |      |           |           |         |   |            |          
|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|Net cash provided by financing activities                                                           |                                                                                 |                                       | 1,626,407  |        |        |      | 1,357,506  |           |         |   | 4,868,734   |          
|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|Net increase in cash and cash equivalents                                                           |                                                                                 |                                       | 18,609     |        |        |      | 230,131    |           |         |   | 77,882      |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Cash and cash equivalents at beginning of year                                                      |                                                                                 |                                       |           |        |        |      | 18,609     |           |         |   | 248,740     |          
|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|Cash and cash equivalents at end of year                                                            |                                                                                 | $                                     | 18,609     |        |        | $    | 248,740    |           |         | $ | 326,622     |          
|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|Supplemental disclosures of cash flow
	information                                                  |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Cash paid for interest                                                                              |                                                                                 | $                                     |           |        |        | $    |           |           |         | $ | 15,192      |          
|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|Noncash investing and financing activities                                                          |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|                                                                                                   
|                                                                                                   
|                                                                                                   
|                                                                                                   
|Debentures issued for shareholder advances on
	behalf of Company                                    |                                                                                 | $                                     |           |        |        | $    | 2,097,109  |           |         | $ |            |          
|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          
|Assets acquired under capital leases                                                                |                                                                                 | $                                     |           |        |        | $    |           |           |         | $ | 201,157     |          
|                                                                                                    |                                                                                 |                                       |            |        |        |      |            |           |         |   |             |          

See accompanying notes.

F-25



---



High Speed Net Solutions, Inc.

Notes to Consolidated Financial Statements

December 31, 2000

1.  Business and Organization and Basis of
Presentation

In 1984, High Speed Net Solutions, Inc. (the Company
or HSNS) was incorporated under the name EMN
Enterprises, Inc. The Company was inactive from the time of its
incorporation in 1984 until it acquired all of the assets of
Marketers World, Inc. (MWI) on August 24, 1998.
In September 1998, in conjunction with the MWI asset
acquisition, the Company changed its name to ZZAP.NET, Inc. and
in January 1999 changed its name to High Speed Net Solutions,
Inc. Prior to the asset acquisition, HSNS was a non-operating
shell corporation and MWI was a private operating company. In
legal form, the asset acquisition was effected by HSNS issuing
its shares in exchange for the net assets of MWI. Total
outstanding shares of HSNS common stock subsequent to the
transaction were 10,275,000. At the time of the transaction,
HSNS had no assets or liabilities, and accordingly, the
transaction was accounted for as a recapitalization of HSNS, and
the outstanding shares are recorded accordingly.

MWI was incorporated in January 1998 and its planned principal
operations were to lease computer systems to businesses. For the
period prior to August 24, 1998 the historical amounts are
those of MWI. During 1998, the Company was not able to execute
its planned activities in connection with the asset acquisition,
other than the sale of pilot products and services, and
consequently ceased all operating activities in December 1998.
MWI was subsequently legally dissolved in September 1999.
Accordingly, the operating results of the MWI business have been
presented as discontinued operations for the year ended
December 31, 1998. Revenues of MWI during the year ended
December 31, 1998 were approximately $1,335,300, and the
loss totaled $1,334,855. As of December 31, 1998, the
Company had completed its disposal of the discontinued
operations of the MWI business. There were no remaining assets
or liabilities related to such business at December 31,
1998. Results for the year ended December 31, 1999
represent solely the activity of HSNS, which primarily related
to raising capital and establishing strategic relationships.

On April 24, 2000, the Company acquired 100% of the issued
and outstanding shares of common stock of JSJ Capital Corp., a
non-operating shell Company, a Nevada Corporation
(JSJ), in exchange for 50,000 shares of common stock
of the Company. The shares were issued in a transaction exempt
from registration under the Securities Act of 1933 and, as such,
were restricted securities as defined in
Rule 144 under the Securities Act of 1933. JSJ was then
merged into HSNS, with HSNS being the surviving corporation. The
acquisition was accounted for as an issuance of HSNS common
stock in exchange for the net monetary assets of JSJ,
accompanied by a recapitalization.

The 50,000 shares issued by the Company in connection with the
acquisition of JSJ are considered a nominal issuance to effect
the acquisition. All share and per share data presented herein
have been restated to reflect the issuance of these shares. The
pro forma impact of the JSJ acquisition is a $400,000 charge to
retained earnings on the Companys balance sheet,
representing cash legal fees paid in excess of the net assets
acquired. This charge was recognized in earnings upon
consummation of the acquisition.

In August 1999, Summus Ltd. acquired a majority of the
outstanding common stock of the Company. Subsequently, Summus,
Ltd. sold certain of the shares it acquired and at
December 31, 1999, Summus, Ltd. owned 44.5% of the
Companys outstanding common stock. This ownership
percentage was 33.6% at December 31, 2000.

On July 10, 2000, HSNS acquired all of the issued and
outstanding common stock of Douglas May & Co., Inc.
(May) in a business combination accounted for as a
purchase (see Note 4). HSNS had been a development stage
company since its inception and ceased being a development stage
company in the third quarter of 2000 upon its acquisition of
Douglas May & Co., Inc. The Company provides media
creation services through Douglas May & Co. Inc., a
wholly owned and fully operational subsidiary, which include
creative design assistance and commercial content development,
development of audio and video images and animation, as well as
web site design and construction (see Note 4).

F-26



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



1.  Business and Organization and Basis of
Presentation (continued)


On February 16, 2001, HSNS acquired all of the assets of
Summus, Ltd. in a business combination to be accounted for as a
reverse purchase (see Note 14).

The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course
of business. As shown in the financial statements for the year
ended December 31, 2000, the Company incurred a net loss of
$12,441,655 and had negative cash flows from operations. These
factors, among others, indicate the Company may be unable to
continue as a going concern for a reasonable period of time. The
financial statements presented herein do not include any
adjustments relating to the recoverability of assets and
classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.

The Companys continuation as a going concern is dependent
on its ability to generate sufficient cash flow to meet its
obligations on a timely basis, to obtain additional financing or
refinancing as required, and ultimately to attain profitability.
Effective February 16, 2001, the Company acquired all the
assets of Summus, Ltd. (see Note 14) in a transaction that
will be accounted for as a reverse acquisition
whereby Summus, Ltd. is considered the acquiror for accounting
purposes. Following the asset acquisition, the Company will
actively seek to expand business opportunities and pursue
additional financing from third parties. Management anticipates
that it will be able to attract additional capital to continue
to fund operations. However, there can be no assurance that
managements plans will be executed as anticipated.

2.  Restatement

The accompanying financial statements as of and for the year
ended December 31, 1999 have been restated to reflect a
reduction in the recorded value of prepaid software royalties of
$2,361,458. Of this amount, $1,528,125 reflects a reduction in
the value of 1.5 million shares of HSNS restricted common
stock issued as the final installment under the Marketing
License Agreement with Summus, Ltd. (see Note 6). The
restated value of these shares was determined by applying a
discount to the traded value of the Companys unrestricted
common stock at the time of issuance based on the discount
associated with private sales of shares of such stock (such
shares being restricted securities as defined in
Rule 144 under the Securities Act) for cash to third
parties within close proximity of the time of the final payment
under the Marketing License Agreement. Initially, the value of
these shares was based on the traded value of the Companys
common stock at the time of issuance. The recorded value of the
prepaid software royalties has also been reduced by $833,333 to
reflect amortization of the prepaid balance for 1999.

Additionally, the accompanying financial statements have been
restated to reflect both an increase and a decrease to the
Companys investment in the common stock of a related
party. The increase reflects a capital contribution to the
Company in the form of common stock of the related party made by
a shareholder during 1999 valued at $1,109,986 which was
previously not recorded. The decrease to the investment in the
common stock of related party account reflects a reduction in
the valuation of the stock of the related party obtained in
exchange for High Speed stock determined by applying an
appropriate discount to the traded value of the High Speed stock
to reflect the restricted nature of the shares issued. This
change reduced the investment in common stock of related party
account by $1,148,176.

Also, the accompanying financial statements have been restated
to reflect a reduction in the expense associated with the
granting of stock options primarily to non-employees. Initially,
the fair value of these grants to non-employees was calculated
using the traded value of the Companys stock as an input
to the valuation model. The Company determined that it should
have used the fair value of its restricted stock rather than the
traded value of its freely tradable shares of stock as the
appropriate input to the valuation model. The effect of these
changes related to stock option grants was to reduce the amount
of expense previously recorded in 1999 by $1,320,350.

F-27



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



2.  Restatement (continued)


The following table summarizes the effect of the restatement
adjustments on the Companys balance sheet and statement of
operations as of and for the year ended December 31, 1999.

|                                                          |  |               |            |  
|--------------------------------------------------------- |  | ------------- | ---------- | -
|                                                          |  | Balance Sheet
|                                                          |  |              
|Total assets as previously reported                       |  | $             | 6,674,712  |  
|                                                         
|                                                         
|                                                         
|                                                         
|Reduction in prepaid royalties                            |  |               | (2,361,458 | )
|                                                         
|                                                         
|                                                         
|                                                         
|Reduction in investment in common stock of
	related party |  |               | (1,148,176 | )
|                                                         
|                                                         
|                                                         
|                                                         
|Increase in investment in common stock of related
	party  |  |               | 1,109,986  |  
|                                                          |  |               |            |  
|Total assets as restated                                  |  | $             | 4,275,064  |  
|                                                          |  |               |            |  

|                                                                                 |  |               |             |  
|-------------------------------------------------------------------------------- |  | ------------- | ----------- | -
|                                                                                 |  | Statement    
|                                                                                 |  | of Operations
|                                                                                 |  |              
|Net loss as previously reported                                                  |  | $             | (10,171,546 | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Amortization of prepaid royalties                                                |  |               | (833,333    | )
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Reduction in amount of expense recorded in
	connection with
	stock option grants |  |               | 1,320,350   |  
|                                                                                 |  |               |             |  
|Net loss as restated                                                             |  | $             | (9,684,529  | )
|                                                                                 |  |               |             |  
|Net loss per share as previously reported                                        |  | $             | (.53        | )
|                                                                                 |  |               |             |  
|Net loss per share as restated                                                   |  | $             | (.51        | )
|                                                                                 |  |               |             |  

3.  Significant Accounting Policies

Principles of
Consolidation

The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Douglas
May & Co., Inc. Significant intercompany accounts and
transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.

Cash and Cash
Equivalents

Cash and cash equivalents consist of unrestricted cash accounts
and highly liquid investments with an original maturity of three
months or less when purchased.

Restricted Cash

Restricted cash at December 31, 2000 of $300,000 represents
funds held in escrow related to the Companys obligation to
repurchase 45,572 shares of its common stock issued in
connection with the acquisition of Douglas May & Co.,
Inc. (see Note 4.) These shares were repurchased and
retired by the Company in January 2001 using the funds from the
escrow account.

F-28



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



3.  Significant Accounting Policies (continued)


Equipment, Software and
Furniture

Equipment, software and furniture are stated at cost.
Depreciation, as recorded by MWI, was computed using the
straight-line method over the estimated useful lives of the
assets beginning when assets were placed in service.
Depreciation expense amounted to $13,290 for the year ended
December 31, 1998. Based on the Companys
discontinuance of the MWI business operations in 1998, along
with no future alternative use, the net book value of the
equipment and furniture acquired in connection with the MWI
asset acquisition at December 31, 1998, totaling $36,858,
was written off and is included as part of the loss from
discontinued operations.

Depreciation expense in 1999 and 2000 was $332 and $166,294,
respectively. Depreciation expense was calculated on a
straight-line basis over the estimated useful lives of the
assets ranging from three to five years.

Stock-Based
Compensation

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

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

The Company accounts for stock-based amounts issued to
non-employees of the Company at fair value in accordance with
the provisions of SFAS No. 123.

Income Taxes

Income taxes are accounted for using the liability method in
accordance with Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes
(see Note 12).

Loss Per Share

Loss per share has been calculated in accordance with Statement
of Financial Accounting Standards No. 128,
Earnings per Share. The Company has potential
common stock equivalents related to its outstanding stock
options, preferred stock and common stock warrants. These
potential common stock equivalents were not included as
outstanding for loss per share purposes for all periods
presented because the effect would have been antidilutive.

Investment in Common Stock
of Related Party

Investment in common stock of related party represents the
Companys 16.7% and 13.5% ownership interest in Summus,
Ltd. at December 31, 1999 and 2000, respectively (see
Note 10). The Company accounted for its investment in
Summus, Ltd. using the cost method. Under this method, the
investment is recorded at its historical cost. Although the
market value of this investment is not readily determinable,
management believes its fair value is not less than its carrying
amount. On February 16, 2001, the Company acquired all of
the assets of Summus, Ltd. in a business combination accounted
for a reverse purchase (see Note 14).

F-29



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



3.  Significant Accounting Policies (continued)


Valuation of Long-Lived
Assets

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

Financial Instruments

The carrying amount of cash and cash equivalents, accounts
receivable and accounts payable approximates fair value for
these financial instruments.

Financial instruments that potentially subject the Company to
concentrations of credit risk consist of cash and cash
equivalents and trade accounts receivable. The Company maintains
cash and cash equivalents with financial institutions. The
Company periodically performs evaluations of the credit
standings of those financial institutions. The Companys
customer base consists of companies operating in the United
States. The Companys exposure to credit risk with respect
to its trade accounts receivable is limited to the carrying
amount of the receivables. The Company does not require
collateral on these financial instruments.

Revenue Recognition

Revenue from media creation services, which includes creative
design assistance and commercial content development, is
recognized at the time the services are rendered based on the
terms of the individual contracts.

New Accounting
Pronouncements

In June 1998, The Financial Accounting Standards Board issued
Statement No. 133 Accounting for Derivative
Instruments and Hedging Activities
(SFAS 133), which is required to be adopted in
years beginning after June 15, 2000. Because the Company
has not historically used derivative instruments, management
does not anticipate that the adoption of this statement will
have a significant effect on its operations, financial position
or cash flows.

In December 1999, the Securities and Exchange Commission
released Staff Accounting Bulletin No. 101 (SAB
No. 101), Revenue Recognition in Financial
Statements, which provides guidance on the
recognition, presentation, and disclosure of revenue in
financial statements. SAB No. 101 provides guidance on a
variety of revenue recognition issues, including gross versus
net income statement presentation. The Company adopted the
provisions of SAB No. 101 during 2000.

Advertising

The cost of advertising is expensed when incurred. The Company
incurred $128,000 in advertising costs in 1998. No advertising
costs were incurred in 1999 or 2000.

4.  Business Combinations

On July 10, 2000, the Company acquired all of the issued
and outstanding capital stock of May by issuing
183,070 shares of its common stock to Douglas May, the sole
shareholder of May, in a business combination accounted for as a
purchase. These shares were valued at $1,376,000.

Under the terms of the acquisition agreement, the 183,070 shares
of common stock were issued in three allotments. The first
allotment corresponded to $500,000 of value. At closing, the
Company issued 50,000

F-30



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



4.  Business Combinations (continued)


shares of common stock, the number of such shares being subject
to adjustment if the Over the Counter Bulletin Board trading
price of the common stock on the first anniversary of the
closing date of the transaction is less than $10.00 per
share. Under such circumstances, the Company is obligated to
issue additional shares of common stock that, when added to the
50,000 shares, and multiplied by the per share trading price on
the first anniversary of the closing date, shall equal $500,000
in value.

The issuance of the 50,000 shares has been recorded at the
guaranteed amount of $10.00 per share on the
date of issuance, July 10, 2000. Payment or issuance of any
additional shares under the terms of the agreement will not
change the recorded cost of the acquisition of May.

The second allotment of shares of common stock
(87,498 shares) issued at closing corresponded to $576,000
of value. The Company committed to file a registration statement
with the SEC to register the resale of these shares. If the
shares were not freely tradable on or before January 1,
2001, Mr. May has the right to cause the Company to
repurchase these shares from him by making six cash installment
payments totaling $576,000. Mr. May has not yet elected to
have the Company repurchase these shares.

The third allotment of shares of common stock
(45,572 shares) issued at closing corresponded to $300,000
of value. The Company committed to file a registration statement
with the SEC to register the resale of these shares. If the
shares were not freely tradable on or before the expiration of
90 days from the closing date, Mr. May had the right
to cause the Company to repurchase these shares from him by
releasing funds, in the amount of $300,000, which the
acquisition agreement provided be placed into an escrow account,
the funds being from certain accounts receivable of May that
were collected subsequent to the acquisition date. In January
2001, based on the election of Mr. May, the Company
repurchased and retired these shares for $300,000 using the
funds from the escrow account. These shares will be treated as
outstanding for loss per share purposes in accordance with the
guidance set forth in SFAS No. 128. All shares issued that
are subject to repurchase by the Company have been presented on
the Companys balance sheet as redeemable stock outside of
stockholders equity.

The results of operations of May are included in the
Companys operations from the date of acquisition. The
Company recorded goodwill in the amount of $1,174,437 related to
this acquisition.

During 2000 the May business produced negative operating cash
flows. Because of the decision made in the fourth quarter of
2000 to not further pursue the planned service bureau business
due (see Note 6), management determined there was no basis
upon which to project positive future cash flows from the May
business since the basis for making the acquisition was
originally related to expected synergies and expected future
prospects by incorporating the May business into the planned
service bureau business. Thus, in accordance with the provisions
of SFAS 121, the Company concluded that the unamortized portion
of the goodwill recorded in connection with the May business had
become fully impaired and should be written off. Thus, the
company recorded an impairment charge of $1,058,177 in the
fourth quarter of 2000 to recognize the unamortized balance of
goodwill written-off. The Company is in the process of seeking
to divest the operations of May.

F-31



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



4.  Business Combinations (continued)


The following unaudited pro forma summary information presents
consolidated results of operations for the Company as if the
acquisition of May had been consummated on January 1, 1999.
The pro forma information does not necessarily reflect the
actual results that would have been achieved, nor is it
necessarily indicative of future consolidated results for the
Company.

|                                                 |  |                        |           |      |  |   |            |  
|------------------------------------------------ |  | ---------------------- | --------- | ---- |  | - | ---------- | -
|                                                 |  |                       
|                                                 |  | Year ended December 31
|                                                 |  |                       
|                                                 |  | 1999                   |           | 2000
|                                                 |  |                        |           |     
|Revenue                                          |  | $                      | 880,432   |      |  | $ | 1,673,260  |  
|                                                
|                                                
|                                                
|                                                
|Net loss                                         |  |                        | 9,899,011 |      |  |   | 12,311,544 |  
|                                                
|                                                
|                                                
|                                                
|Loss per share applicable to common shareholders |  | $                      | (0.51     | )    |  | $ | (0.59      | )

5.  Equipment, Software and Furniture

Equipment, software and furniture consists of the following:

|                                               |  |      |       |      |  |   |          |  
|---------------------------------------------- |  | ---- | ----- | ---- |  | - | -------- | -
|                                               |  | 1999 |       | 2000
|                                               |  |      |       |     
|Furniture and fixtures                         |  | $    | 4,052 |      |  | $ | 258,220  |  
|                                              
|                                              
|                                              
|                                              
|Equipment under capital lease                  |  |      |      |      |  |   | 201,157  |  
|                                              
|                                              
|                                              
|                                              
|Computer equipment and software                |  |      |      |      |  |   | 93,104   |  
|                                               |  |      |       |      |  |   |          |  
|                                               |  |      | 4,052 |      |  |   | 552,481  |  
|                                              
|                                              
|                                              
|                                              
|Less accumulated depreciation and amortization |  |      | (332  | )    |  |   | (166,566 | )
|                                               |  |      |       |      |  |   |          |  
|                                               |  | $    | 3,720 |      |  | $ | 385,915  |  
|                                               |  |      |       |      |  |   |          |  

6.  Prepaid Software Royalties

In February 1999, the Company entered into a Marketing and
License Agreement (MLA) with Summus, Ltd., a related
party (see Notes 1 and 9). Under this agreement, the
Company became obligated to pay Summus, Ltd. an upfront fee of
$3,000,000, payable in four installments of $750,000 each. The
first three installments consisted of cash payments in the
aggregate amount of $2,250,000. Of this amount, $2,190,000 was
made by a stockholder on behalf of the Company. The final
installment was satisfied by the Companys issuance of
1.5 million shares of its restricted common stock.

The Company determined the value of the 1.5 million shares
issued in lieu of the final cash payment due under the MLA by
applying a discount to the traded value of the Companys
common stock at the time of issuance based on the discount
associated with private sales of shares of its common stock
(such shares being restricted securities as defined
in Rule 144 under the Securities Act of 1933) within close
proximity of the time of the issuance of such shares.

Under the terms of the MLA, HSNS had the right to resell
stand-alone software products specified in the MLA. Since the
specified products were completed and ready for resale, the
Company capitalized the $3.0 million value of the upfront
fees under the MLA as prepaid software royalties (essentially
license fees) in accordance with the provisions of Statement of
Financial Accounting Standards No. 86, Accounting for
the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed, as each of the four software products
specifically referred to in the MLA had reached
technological feasibility within the meaning of
Paragraphs 4 and 38 of that statement.

The Company reduced the recorded value of the prepaid royalties
by $833,333 to reflect amortization of the prepaid software
royalties in 1999 in accordance with the provisions of SFAS
No. 86. The amount

F-32



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



6.  Prepaid Software Royalties (continued)


amortized was derived by applying the straight-line method over
a three-year estimated economic life of the products licensed
under the MLA.

In August 1999, Summus, Ltd. acquired a majority of the
outstanding shares of HSNS (this percentage was subsequently
reduced to 44% by December 31, 1999 as Summus, Ltd. sold a
portion of the shares it acquired to third parties). In
connection with this transaction, HSNSs existing
management team was replaced with new management. Over the next
several months, the new management team determined to revise
HSNSs business plan. Rather than function as a reseller of
Summus, Ltd. software products, management determined that HSNS
should function as a service bureau or application service
provider, utilizing Summus Ltd.s wavelet technology for
delivery of multimedia services over the Internet. As a result
of this change in business plan, HSNS entered into negotiations
with Summus, Ltd., beginning in December 1999, to modify the
companies contractual relationship under the MLA. These
negotiations resulted in the execution of several agreements
(i.e. a master agreement, software license agreement, software
maintenance agreement, revenue sharing agreement and software
escrow agreement) in mid-February 2000, which superseded in its
entirety the MLA.

Under the new agreements, the Company did not become obligated
to make any additional payments, in cash or other consideration,
to Summus, Ltd. for the software products to be provided
thereunder. In fact, the Company received approximately
$2.2 million in credits toward future fees due and payable
to Summus, Ltd. Therefore, the Company determined that, in the
absence of information that would have caused management to
conclude that the net realizable value of any of the products
licensed under the MLA had been adversely affected by the
Companys change in business plan or that the unamortized
capitalized costs exceeded the net realizable value of such
products, no impairment-related write off under SFAS No. 86
was appropriate as of December 31, 1999. As of that date,
the Company fully expected to generate future revenues, in its
contemplated service bureau business, through the use of the
Summus, Ltd. software products covered by the several agreements
(the agreements) then being negotiated, sufficient
to recover the carrying value of the prepayments under the MLA.

The software license agreement provided HSNS with rights to the
use of Summus, Ltd.s MaxxSystem suite of products in its
planned service bureau business. The agreement did not permit
HSNS to resell any of the software products constituting
MaxxSystem. As such, the Company determined that the MaxxSystem
suite of software products constituted internal use
software subject to Statement of Position 98-1,
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use.

The agreements were executed in mid-February 2000. However, the
terms of such agreement had been substantially negotiated and
agreed to at the time the Companys financial statements as
of and for the year ended December 31, 1999 were issued.
SOP 98-1 requires an evaluation of capitalized software
costs for impairment in accordance with FASB Statement
No. 121. Statement No. 121 requires an estimate of
future cash flows to determine if an asset that is in use is
impaired. The change in the Companys business plan was
driven primarily by the view that delivery of multimedia over
the Internet through the use of the MaxxSystem suite of software
products offered greater future cash flows than the resale of
the software products licensed under the MLA. In view of these
considerations, the Company determined that an
impairment-related write off of the prepaid royalties was not
appropriate as of December 31, 1999 under SOP 98-1 and
SFAS 121.

During 2000, the Company observed a combination of market
conditions and potential government regulatory actions that
caused it to modify its short-term and long-term plans for
revenue generation as a service provider of rich media content
over the Internet. Market resistance developed to the delivery
of Internet services via .exe file types following
the delivery of certain of such files with viruses. Indeed, this
prompted many companies to configure firewalls to block all
files with an.exe extension. This limited the market for e-mail
distribution using the MaxxNote (i.e., the video e-mail) module
of MaxxSystem. At about

F-33



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



6.  Prepaid Software Royalties (continued)


the same time, the Federal Trade Commission initiated an
investigation of the use of information gathered by
permission-based marketing through e-mails and banner ads.

Management determined in 2000 that it was unlikely that funding
would be available to develop and rollout the service bureau
business model as previously planned. Under FASB 121, when
it is no longer probable that computer software will be placed
in service, the software should be reported at the lower of its
carrying amount or fair value. Therefore, during the fourth
quarter of 2000, management determined that all of the assets
associated with the Companys service bureau business were
impaired. Accordingly, an impairment charge of $2.9 million
was recorded consisting of the net carrying value of the
capitalized amounts associated with MaxxSystem of approximately
$2.2 million and other capitalized costs incurred in the
development of the service bureau business of approximately
$0.7 million.

7.  Licensing Rights

In September 1998, the Company issued 775,000 shares of its
common stock, valued at $77,500, for all of the issued and
outstanding common stock of Brad Richdale Direct, Inc.
(BRD). The primary purpose of this transaction was
to obtain licensing and marketing rights held by BRD for certain
products to be developed by Summus, Ltd. Since BRD had nominal
assets and operations, this transaction was accounted for as an
acquisition of licensing rights, rather than as a business
combination. The value of this transaction was based on recent
transactions in the Companys common stock near the date of
the transaction. The products to be delivered by Summus, Ltd.
under these licensing rights were to be used in the planned
operations of MWI. Since these products were not completed by
the end of 1998 and the Company had determined to discontinue
MWIs operations, the Company abandoned its rights to these
yet-to-be delivered products. Accordingly, the net book value of
these assets $68,890 was written off at December 31, 1998
and is included as part of the loss on discontinued operations.

8.  Convertible Debentures

During 1999, the Company issued convertible debentures (the
debentures) in the principal amount of $2,655,749 to
a stockholder, entities affiliated with the stockholder and
third parties. These debentures were issued in exchange for both
cash of $558,640 and in partial satisfaction of payments made by
a stockholder on behalf of the Company in the aggregate amount
of $2,097,109 (see Note 6). The remaining amounts owed
to the stockholder are included in Payables to Related Parties
in the Companys balance sheet. The debentures were
convertible at the date of issuance into the Companys
common stock at conversion prices ranging from $0.25 to
$1.33 per share (all of which were
substantially in-the-money at the date of issuance).

Since the conversion price of the debentures was below the fair
market value of the common stock, the Company recorded a
$2,655,749 beneficial conversion feature as debt discount and
additional paid-in-capital on the date the debentures were
issued. The resulting interest expense was immediately
recognized because the debentures were convertible upon issuance.

Shortly after the issuance of the debentures, the debenture
holders exercised the conversion feature and converted all
outstanding debentures into 4,852,860 shares of the
Companys common stock. As of December 31, 1999, all
debentures had been converted.

9.  Related Party Transactions

As of December 31, 2000 Summus, Ltd. held a 33.6% ownership
interest in the Company. On February 16, 2001, HSNS
acquired all of the assets of Summus, Ltd. in a business
combination accounted for as a reverse acquisition
(see Note 14).

F-34



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



9.  Related Party Transactions (continued)


During 2000, in connection with negotiations of the Asset
Purchase Agreement with Summus, Ltd., the Company advanced
certain funds to Summus, Ltd. to assist Summus in funding its
operating expenses. These advances, which were evidenced by a
promissory note in favor of the Company, totaled $1,435,000 as
of December 31, 2000. This balance accrued interest
compounded monthly at 8%, was collateralized by Summus,
Ltd.s investment in the Companys stock and was
payable within 60 days. In connection with the
Companys acquisition of all the assets of Summus, Ltd. in
February 2001, the entire balance of this note plus accrued
interest was canceled.

During 1999, Summus, Ltd. funded certain expenses of the
Company. The balance outstanding related to these advances as of
December 31, 2000 and 1999 was $134,677 and $154,000,
respectively.

Payables to Related Parties also includes an unpaid balance of
$435,815 for advances made to the Company by a former majority
shareholder during 1998 and 1999. These amounts are unsecured
and are payable on demand. These amounts have subsequently been
satisfied in full (see Note 14).

10.  Stockholders Equity

On June 20, 1998, the Company amended its articles of
incorporation to increase the number of authorized shares of its
common stock, par value $.001 per share, to 50,000,000
and to effect a 200-for-1 stock split, thereby increasing its
issued and outstanding shares to 1,000,000. The Company also has
5,000,000 authorized shares of preferred stock, par value
$.001 per share.

Preferred stock

On February 28, 2000, the Company issued 2,000 shares of
its Series A Convertible Preferred Stock, par value $.001
per share (the Series A Preferred Stock), at a
price of $1,000 per share. Proceeds, net of issuance costs of
$149,048, were $1,850,952. The holders of the Series A
Preferred Stock are entitled to receive cumulative cash
dividends at a rate of 8% per annum of the initial liquidation
preference of $1,000 per share (the Liquidation
Preference). Dividends are cumulative from the date of
issuance and are payable, when, as and if declared by the Board
of Directors on June 30 and September 30 of each year
commencing on September 30, 2000. As of December 31,
2000 cumulative dividends accrued were $133,333. The holders of
the Series A Preferred Stock are not entitled to vote on
matters submitted to the Companys shareholders for voting.
However, approval of holders of a majority of the Series A
Preferred Stock is required prior to the issuance of a new
series of preferred stock that ranks senior to the Series A
Preferred Stock.

Each share of the Series A Preferred Stock is convertible
at the option of the holder, at any time after the date of
issuance, into shares of common stock equal to the Liquidation
Preference divided by an initial conversion price of $14.24. The
conversion price is subject to adjustment as defined in the
Companys articles of incorporation. Since the
Series A Preferred Stock was convertible at the date of
issuance and since the conversion price was below the fair value
of the common stock at the time of issuance, the Company
recorded a beneficial conversion feature in the amount of
$294,900. The beneficial conversion feature has been added to
the historical net loss for the year ended December 31,
2000, for purposes of computing the net loss applicable to
common shareholders.

Common stock

During the year ended December 31, 1998, the Company issued
465,000 shares of its common stock to employees and consultants
for services rendered. It also issued 100,000 shares to a
non-employee shareholder in connection with potential business
combinations. These shares were valued at $46,500 based on the
estimated fair value of the common stock, as determined by a
sale of the Companys common stock near the

F-35



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



10.  Stockholders Equity (continued)


time of such issuances. At the time of such issuances, the
Companys common stock was not publicly traded. During the
year ended December 31, 1999, the Company issued 85,500
shares of common stock to consultants for services rendered.
These shares were valued at $130,814 based on the fair value of
the common stock at the time of such issuances.

During 1998, the Company acquired 38,500 shares of its common
stock for $227,619 in cash and currently holds these shares as
treasury stock.

In August 1999, the Company issued 795,001 shares of its common
stock valued at $643,951, along with a cash payment of $102,000,
to acquire 402,000 shares of common stock of Summus
Technologies, Inc. The value assigned to the shares issued by
the Company was recorded at a discount from the traded value of
the Companys common stock. An additional 598,182 shares of
Summus Technologies, Inc. stock valued at $1,109,986 was
contributed to HSNS by a significant shareholder, bringing the
Companys total holdings of Summus Technologies, Inc. stock
to 1,000,182 shares or 19%. The value assigned to the shares
received by the Company was recorded based on the derived value
of the per share amounts purchased from the other Summus
Technologies shareholders. Subsequently, Summus Technologies,
Inc. and Summus, Ltd. merged with Summus, Ltd. being the
surviving entity. The Companys ownership in Summus, Ltd.
after the merger was 16.7% and as of December 31, 2000 was
13.5%. On February 16, 2001, the Company acquired all of
the assets of Summus, Ltd. in a business combination accounted
for as a reverse purchase of HSNS by Summus, Ltd.
(see Note 14).

In August 1999, former management of the Company entered into an
agreement to sell common stock to family members of a Director.
The agreement provided for the Company to sell 250,000 shares of
its common stock for $1.00 per share. Since the stock price was
below the fair market value of the underlying stock on the date
of the agreement, $845,000 of expense related to this
transaction has been charged to non-cash compensation in the
statement of operations in 1999. The business purpose of this
transaction was to provide financing to the company at a
critical time.

During 2000, the Company issued 1,544,290 shares of its
unregistered common stock and issued warrants to purchase an
additional 1,997,564 shares of common stock for gross cash
proceeds of $4,777,553. The warrants have exercise prices
ranging from $4.00 to $4.625 per share, a term of five years,
and cannot be exercised within five months from the date of
issuance.

Stock Options

The Companys Board of Directors authorized an amendment of
the Companys Equity Compensation Plan
(the Plan) in February 2001 to increase the
aggregate number of shares of its common stock available for
issuance of stock awards under the Plan to 6,500,000. The Plan
provides for the issuance of stock options to employees,
directors, advisors and consultants of and to the Company.
Options granted generally have a ten-year term and vest over
three years from the date of grant. Certain of the stock options
granted under the Plan have been pursuant to various stock
option agreements. Each stock option agreement contains specific
terms.

During 1999, the Company granted to certain employees and
directors options exercisable for 1,050,000 shares of common
stock that had exercise prices below the fair value of the
underlying common stock. Non-cash compensation expense of
$2,006,250 has been recognized based upon the difference between
the exercise price and the traded value of the common stock on
the date of grant. In addition, the Company granted options to
purchase 1,140,000 shares of the Companys common stock to
non-employees. Non-cash expense of $1,391,000 related to these
options was recognized based upon the fair value of these
options on the date of grant. Each of these option grants vested
immediately upon issuance and options to acquire 1,825,000

F-36



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



10.  Stockholders Equity (continued)


shares of common stock were exercised during 1999. Unexercised
options expire between 5 and 10 years from date of grant.

During 2000, the Company granted options to purchase 50,000
shares of the Companys common stock to non-employees.
Non-cash expense of $468,171 related to these options was
recognized based on the fair value of these options in
accordance with SFAS No. 123.

In addition, the Company granted options to purchase 15,000
shares of the Companys common stock to a Director that had
an exercise price below the fair value of the underlying common
stock. Non-cash compensation expense of $333,750 has been
recognized based on the difference between the exercise price
and the traded value of the common stock on the date of grant.

A summary of the Companys stock option activity is as
follows:

|                                |           |        |           |                  |   |   |      |      | 
|------------------------------- | --------- | ------ | --------- | ---------------- | - | - | ---- | ---- | 
|                                |           |        |           | Weighted Average
|                                |           | Shares |           | Exercise Price  
|                                |           |        |           |                 
|Outstanding  December 31, 1998 |           |        |          |                  |   | $ |     |     
|                               
|                               
|                               
|                               
|                                | Granted   |        |           | 2,455,000        |   |   |      | 1.26 | 
|                               
|                               
|                               
|                               
|                                | Exercised |        |           | (1,825,000       | ) |   |      | 0.01 | 
|                                |           |        |           |                  |   |   |      |     
|Outstanding  December 31, 1999 |           |        | 630,000   |                  |   |   | 4.54 |     
|                               
|                               
|                               
|                               
|                                | Granted   |        |           | 830,800          |   |   |      | 6.41 | 
|                               
|                               
|                               
|                               
|                                | Exercised |        |           |                 |   |   |      |     | 
|                                |           |        |           |                  |   |   |      |     
|Outstanding  December 31, 2000 |           |        | 1,460,800 |                  |   | $ | 5.52 |     
|                                |           |        |           |                  |   |   |      |     

The following table summarizes information about stock options
outstanding at December 31, 2000:

|                    |              |             |  |                  |           |                  |  |  |           |  |  |   |       | 
|------------------- | ------------ | ----------- |  | ---------------- | --------- | ---------------- |  |  | --------- |  |  | - | ----- | 
|                   
|Options Outstanding
|                   
|Range of            |              | Number      |  | Weighted Average |           | Weighted Average
|Exercise Prices     |              | Outstanding |  | Contractual Life |           | Exercise Price  
|                    |              |             |  |                  |           |                 
|$                   | .01  .25    |             |  |                  | 282,300   |                  |  |  | 4 years   |  |  | $ | .02   | 
|                    | 2.50  7.50  |             |  |                  | 938,500   |                  |  |  | 6.9 years |  |  |   | 5.19  | 
|                    | 9.65  18.90 |             |  |                  | 240,000   |                  |  |  | 7 years   |  |  |   | 13.28 | 
|                    |              |             |  |                  |           |                  |  |  |           |  |  |   |       | 
|                    |              |             |  |                  | 1,460,800 |                  |  |  | 6.4 years |  |  | $ | 5.52  | 
|                    |              |             |  |                  |           |                  |  |  |           |  |  |   |       | 

|                |             |                     |  |                  |         |  |  |   |      | 
|--------------- | ----------- | ------------------- |  | ---------------- | ------- |  |  | - | ---- | 
|                |             |                    
|                |             | Options Exercisable
|                |             |                    
|Range of        |             | Number              |  | Weighted Average
|Exercise Prices |             | Exercisable         |  | Exercise Price  
|                |             |                     |  |                 
|$               | .01         |                     |  |                  | 282,000 |  |  | $ | .02  | 
|                | 2.50  7.50 |                     |  |                  | 180,000 |  |  |   | 4.00 | 
|                |             |                     |  |                  |         |  |  |   |      | 
|                |             |                     |  |                  | 462,000 |  |  | $ | 1.57 | 
|                |             |                     |  |                  |         |  |  |   |      | 

In accordance with SFAS 123, the fair value of each option grant
was determined by using the Black-Scholes option pricing model
with the following weighted average assumptions for the twelve
month period ended December 31, 2000: dividend yield of 0%;
volatility of 2.054; risk free interest rate of 6.20% and
expected option lives of 5 years. The weighted average fair
value at the date of grant was $6.36 per option. Had the
compensation expense for the Companys stock options been
determined based on the fair value at the date of grant
consistent with the provisions of SFAS 123, the Companys
net loss and net loss per share would have been $(15.4) million
and $(0.71) for the twelve months ended December 31, 2000.

F-37



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



10.  Stockholders Equity (continued)


During August 1999, the Company negotiated, on an individual
basis, with each of the holders of the shares issued in
connection with the Companys acquisition of the Marketers
World assets, and as a result of such negotiations an aggregate
of 5,161,100 shares of the Companys common stock issued in
connection with the transaction were surrendered for
cancellation. This followed the Companys decision to cease
all operations associated with the MWI business in 1998. Since
no value was ascribed to the initial shares issued in connection
with the MWI asset acquisition, no value was ascribed to the
subsequent cancellation. Also during 1999, the Company canceled
555,000 shares of its common stock, 530,000 of which were
originally issued in 1998 and 25,000 issued in 1999. In August
1999, the Company canceled 300,000 shares issued in September
1998 in connection with the contemplated acquisitions of
HealthTec, Inc. and National Direct Corporation, transactions
that were not ultimately consummated. An additional 230,000
shares were canceled upon the Companys determination not
to pursue certain other acquisitions. In August 1999, the
Company canceled 25,000 shares originally issued to
Mr. Richdale and his spouse in consideration for his
assistance in the Companys acquisition of shares of Summus
Technologies, Inc.s stock.

Common Stock Reserved for
Future Issuance

The Company has reserved shares of its authorized 50,000,000
shares of common stock for future issuance as follows:

|                                                  |  |  |           | 
|------------------------------------------------- |  |  | --------- | 
|                                                 
|                                                 
|                                                 
|                                                 
|Convertible preferred stock and related dividends |  |  | 149,812   | 
|                                                 
|                                                 
|                                                 
|                                                 
|Outstanding common stock warrants                 |  |  | 1,997,564 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Outstanding stock options                         |  |  | 1,460,800 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Possible future issuance under stock option plans |  |  | 5,039,200 | 
|                                                  |  |  |           | 
|Total                                             |  |  | 8,647,376 | 
|                                                  |  |  |           | 

11.  Leases

During 1999, the Company established it headquarters in Raleigh,
North Carolina and entered into a noncancelable operating lease
for office space and also entered into certain capital leases
for office equipment. The Company also leases office space and
certain office equipment in Dallas, Texas relating to the
operations of its subsidiary, Douglas May & Co., Inc. Rent
expense incurred during the years ended December 31, 1999
and 2000 was approximately $11,000 and $124,000, respectively.

The following is a schedule of future minimum lease payments for
capital and operating leases:

|                                        |  |         |         |           |  |   |         | 
|--------------------------------------- |  | ------- | ------- | --------- |  | - | ------- | 
|                                        |  | Capital |         | Operating
|                                        |  | Leases  |         | Leases   
|                                        |  |         |         |          
|2001                                    |  | $       | 115,332 |           |  | $ | 108,452 | 
|                                       
|                                       
|                                       
|                                       
|2002                                    |  |         | 92,265  |           |  |   | 78,468  | 
|                                       
|                                       
|                                       
|                                       
|2003                                    |  |         | 15,378  |           |  |   | 81,252  | 
|                                       
|                                       
|                                       
|                                       
|2004                                    |  |         |        |           |  |   | 36,240  | 
|                                       
|                                       
|                                       
|                                       
|2005                                    |  |         |        |           |  |   | 37,200  | 
|                                        |  |         |         |           |  |   |         | 
|Total minimum lease payments            |  |         | 222,975 |           |  | $ | 341,612 | 
|                                        |  |         |         |           |  |   |         | 
|Less amounts representing interest      |  |         | 27,266  |           |  |   |         | 
|                                        |  |         |         |           |  |   |         | 
|Present value of minimum lease payments |  |         | 195,709 |           |  |   |         | 
|                                       
|                                       
|                                       
|                                       
|Less current portion                    |  |         | 94,936  |           |  |   |         | 
|                                        |  |         |         |           |  |   |         | 
|                                        |  | $       | 100,773 |           |  |   |         | 
|                                        |  |         |         |           |  |   |         | 

F-38



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



11.  Leases (continued)


Amortization of capital leases is included in depreciation and
amortization expense.

During 1998, MWI leased its office facility and certain office
equipment under noncancelable operating leases, all which were
terminated in 1998. Total rent expense incurred in 1998 by MWI
was approximately $40,000.

12.  Income Taxes

No provision for income taxes has been recorded during the years
presented due to the Companys significant operating losses
in each year.

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Companys deferred tax assets are as follows:

|                                       |                          |             |            |           |  |   |            |           | 
|-------------------------------------- | ------------------------ | ----------- | ---------- | --------- |  | - | ---------- | --------- | 
|                                       |                          |            
|                                       |                          | December 31
|                                       |                          |            
|                                       |                          | 1999        |            | 2000     
|                                       |                          |             |            |          
|Deferred tax assets:                   |                          |             |            |           |  |   |            |          
|                                      
|                                      
|                                      
|                                      
|                                       | Start-up expenses        |             | $          | 1,386,000 |  |   | $          | 1,386,000 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Royalty amortization     |             |            | 333,000   |  |   |            |          | 
|                                      
|                                      
|                                      
|                                      
|                                       | Loss contingency accrual |             |            | 320,000   |  |   |            | 199,000   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Depreciation             |             |            |          |  |   |            | 4,000     | 
|                                      
|                                      
|                                      
|                                      
|                                       | NOL carryforward         |             |            |          |  |   |            | 6,161,000 | 
|                                       |                          |             |            |           |  |   |            |          
|Total deferred tax assets              |                          |             | 2,039,000  |           |  |   | 7,750,000  |          
|                                      
|                                      
|                                      
|                                      
|Deferred tax asset valuation allowance |                          |             | (2,039,000 | )         |  |   | (7,750,000 | )        
|                                       |                          |             |            |           |  |   |            |          
|Net deferred taxes                     |                          | $           |           |           |  | $ |           |          
|                                       |                          |             |            |           |  |   |            |          

Management has determined that a 100% valuation allowance for
existing deferred tax assets is appropriate given the
uncertainty regarding the ultimate realization of any such
assets.

At December 31, 2000, the Company had federal and state net
operating loss carryforwards of approximately $15,400,000 for
income tax purposes. The tax benefit of these carryforwards is
reflected in the above table of deferred tax assets. If not
used, these carryforwards begin to expire in 2020 for federal
tax purposes and in 2015 for state tax purposes. U.S. tax rules
impose limitations on the use of net operating losses following
certain changes in ownership. If such a change occurs, the
limitation could reduce the amount of these benefits that would
be available to offset future taxable income each year, starting
with the year of ownership change.

13.  Loss Contingency

In January 2000, William R. Dunavant
(Dunavant), a former shareholder of Summus
Technologies, Inc. who received 350,000 shares of
HSNS common stock and $100,000 in cash in exchange for his
shares of Summus Technologies, Inc. stock, filed a lawsuit
against the Company. Former management of HSNS had entered into
an agreement with Dunavant which obligated the Company to
register the 350,000 shares of HSNS common stock under the
Securities Act of 1933 (the Securities Act) within a
specified time period. The Companys failure to register
such shares resulted in a lawsuit against the Company seeking
damages of $13,300,000.

In June 2000, HSNS entered into a settlement agreement with
Dunavant to resolve the lawsuit. This settlement agreement was
amended on October 26, 2000 and then again on
December 5, 2000. Under the

F-39



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



13.  Loss Contingency (continued)


terms of the settlement agreement, as amended, the Company has
issued to Dunavant 1,700,000 shares of its restricted
common stock in 2000. The value of these shares, totaling
$1.4 million, was based on a discount applied to the traded
value of the Companys common stock on the date of
issuance. The number of common shares held by Dunavant at
December 31, 2000, totaled 2,050,000. Additionally, the
Company is obligated to issue 25,000 shares of restricted
common stock per month and pay $25,000 in cash per month to
Dunavant until a registration statement on Form S-1,
covering the resale of Dunavants shares, is declared
effective by the SEC, which will result in the HSNS shares owned
by Dunavant becoming freely tradable. The loss contingency
accrual as of December 31, 2000, represents
managements best estimate of the monthly obligations
subsequent to December 31, 2000 that the Company will incur
under the terms of the agreement with Dunavant through
completion of the registration process. The estimated value of
the monthly share allotment was determined by applying an
appropriate discount to the traded value of the Companys
common stock as of December 31, 2000. In June 2001, the
Company executed another settlement with Dunavant (see
Note 14).

On March 30, 2001, Analysts International Corporation
(AIC) filed a civil summons and complaint in General
Court of Justice, District Court Division, County of Wake, North
Carolina, against High Speed Net Solutions, Inc. The complaint
alleges that we breached certain contracts with AIC, dated
December 9, 1999, February 11, 2000, April 25,
2000, May 9, 2000, and May 23, 2000, under which AIC
provided us with computer programming services. AIC has
requested that the court enter judgment in its favor for
$358,426, plus pre-judgment interest from September 26,
2000 on certain invoices at the rate of 18% per annum,
post-judgment interest at the rate of 8% per annum, reasonable
costs of AIC and other relief the court deems equitable. The
Company and AIG are negotiating to resolve the matter. The
principal amount of $358,426 is included in accounts payable at
December 31, 2000.

On April 25, 2001, Cale Yarborough, a Company shareholder,
filed a summons and complaint against High Speed Net Solutions,
Inc., David Gordon, Bear Steams Securities Corp., MidSouth
Capital, Inc., and Interwest Stock Transfer Co. in the United
States District Court, District of South Carolina, Florence
Division, alleging, among other things, (i) breach of an
agreement Mr. Yarborough entered into with David Gordon
under which Mr. Gordon was to provide an opinion letter as
to Mr. Yarboroughs ability to resell shares of our
common stock in accordance with Rule 144 promulgated under
the Securities Act of 1933, (ii) violation of
Rule 144, (iii) professional negligence and breach of
fiduciary duty, and (iv) violation of federal and state
securities laws. All of the causes of action in the complaint
stem from the alleged failure to properly advise
Mr. Yarborough as to when the shares of our common stock
could properly be resold under Rule 144. On May 17,
2001, the complaint was dismissed without prejudice. As such, it
is subject to being reopened upon the showing of good cause
within the 60-day period following the issuance of the dismissal
order. It is the Companys understanding that
Mr. Yarborough and Mr. Gordon are in the process of
reaching a settlement of this matter.

On March 15, 2001, ENELF, LLC filed a civil lawsuit in the
United States District Court for Eastern District of Texas
alleging patent infringement by Microsoft Corporation, Texas
Instruments, Incorporated Aware, Inc. and Summus, Ltd. ENELF
alleged that MaxxNote, MaxxShow and PhotoID SDK infringed upon
ENELFs U.S. Patent Number 4,599,567 entitled
Signal Representation Generator. ENELF sought to
enjoin Summus from making, selling, offering for sale, using, or
importing its wavelet-based video and image processing
technology. In addition, ENELF sought an unspecified amount of
monetary damages. The Company have filed an answer denying
ENELFs allegations, and seeking a declaratory judgment of
non-infringement, invalidity, and unenforceability, and intend
to vigorously defend against this lawsuit.

F-40



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)

14.  Subsequent Events

On February 16, 2001, HSNS, acquired all of the assets of
Summus, Ltd. in a business combination (the
Combination) accounted for as a reverse purchase in
which Summus, Ltd. will be treated as the acquirer for
accounting purposes. Prior to the closing of the Combination,
Summus, Ltd. was the largest shareholder of HSNS. It owned
8,217,781 shares (33.2%) of the Companys common
stock, approximately 27.6% on a fully diluted basis. Immediately
after the closing, Summus, Ltd.s ownership interest in the
Company increased to 20,593,262 shares (55.5%) of the common
stock on an as-converted basis, approximately (53.1%) on a
fully-diluted basis. Under the terms of the Asset Purchase
Agreement, Summus, Ltd. is to liquidate and disburse its
holdings of HSNS securities to the Summus, Ltd. stockholders,
resulting in Dr. Bjorn Jawerth becoming, individually, the
largest shareholder of the Company. On March 13, 2001,
Summus, Ltd. distributed certain of the shares of the
Companys common stock received to the shareholders of
Summus, Ltd. in accordance with their pro rata interests.

Prior to the asset acquisition, Summus, Ltd. was a technology
company located in Raleigh, North Carolina that provided
contract engineering, research and development in applications
related to image and video compression and communication, and
provided commercial technology in digital media through various
methods, including generating software development kits for
resale, licensing technology, and developing commercial software
products. Its intellectual property included capabilities in
encoding, manipulating, compressing, managing and distributing
digital content. Its core technology for compression, partially
derived from a field of mathematics known as wavelets, used the
brand name of Dynamic Wavelet. Under this brand, Summus.
Ltd. developed and supplied low-complexity, low bandwidth
wavelet technology for compression applications.

The consideration given by HSNS to acquire the assets of Summus,
Ltd. is described below:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | HSNS issued to Summus, Ltd. shareholders a total of 20,197,797
	shares of HSNS common stock and 6,000 shares of Series B
	Preferred Stock. As a stockholder of Summus, Ltd., HSNS was
	entitled to receive 3,604,445 of the total number of shares of
	common stock issued in the transaction. However, these shares
	were cancelled under the terms of the Asset Purchase Agreement,
	resulting in a net issuance of 16,593,352 shares of HSNS common
	stock. In addition, the Asset Purchase Agreement provided that
	the 8,217,781 shares of HSNS common stock owned by Summus, Ltd.
	prior to the parties execution of the agreement were to
	be canceled.                                                                                                                                                                                                                                                                       
|
| |  | HSNS issued to Summus, Ltd. 6,000 shares of newly created
	Series B Preferred Stock, of which 2,000 shares were
	deposited with an escrow agent as security for any
	indemnification obligations of Summus, Ltd. and its shareholders
	under the Asset Purchase Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | HSNS has authorized the issuance of up to 6,500 shares of
	Series B Preferred Stock. The rights of the Series B
	Preferred Stock are as follows: each share of Series B
	Preferred Stock will be automatically converted into 1,000
	shares of common stock, subject to adjustment for stock
	dividends, stock splits and the like, after HSNS charter
	is amended to increase the number of authorized shares of common
	stock to at least 60 million shares. Until then, the
	Series B Preferred Stock will not be convertible. Each
	share of Series B Preferred Stock will be entitled to
	receive dividends and participate in distributions upon
	liquidation pro rata with the common stock on an as-converted
	basis, and will vote equally with the common stock on an
	as-converted basis. These rights apply even if there is
	insufficient authorized common stock to permit conversion of the
	Series B Preferred Stock.



| |                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There are no other preferences or privileges associated with the
	Series B Preferred Stock. Under the terms of the Asset
	Purchase Agreement, HSNS is required to seek shareholder
	approval to amend its charter to increase the number of
	authorized shares of common stock so that there will be
	sufficient

F-41



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



14.  Subsequent Events (continued)




| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | shares of common stock available and reserved for issuance upon
	conversion of the Series B Preferred Stock.



| |   |                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | HSNS issued to Summus, Ltd. warrants to purchase a total of 500
	shares of its Series B Preferred Stock, exercisable for a
	period of 5 years from February 16, 2001. The exercise
	price of the warrants is $5,500.00 per share of Series B
	Preferred Stock ($5.50 per share of our common stock on an
	as-converted basis).

In addition to the items described above, the companies have
also agreed to the following items pursuant to the Asset
Purchase Agreement.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | HSNS assumed approximately $3.1 million of liabilities of
	Summus, Ltd. to third parties. All amounts owed by and between
	HSNS and Summus, Ltd. have been cancelled upon the closing of
	the asset acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | All outstanding HSNS options at February 16, 2001 have been
	treated as replacement options since the transaction was
	accounted for as a reverse acquisition with Summus as the
	accounting requirer. Accordingly, these options have been valued
	as part of the merger consideration.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | HSNS entered into a three-year employment agreement with
	Dr. Jawerth. Under this employment agreement, in exchange
	for Dr. Jawerths covenant not to compete with HSNS
	for a period of 18 months after February  16, 2001,
	HSNS issued options to Dr. Jawerth to purchase 166,667
	shares of common stock at $0.50 per share and 333,333 shares of
	common stock at $3.75 per share. Also, HSNS agreed to
	assist Dr.  Jawerth in the private sale of $2,500,000 worth
	of HSNS common stock owned by him. HSNS will issue options to
	Dr. Jawerth to purchase three times the number of shares of
	common stock he sells in the private sale. The options will be
	exercisable during the second through the fifth year after the
	options are issued. Additionally, during the twelve-year term of
	the employment agreement, Dr. Jawerth will receive a base
	salary of $350,000 (which is subject to an annual increase of at
	least 10%) plus other benefits including severance benefits.

In June 2001, the Company entered into a settlement agreement
whereby it issued 250,000 shares of its restricted common stock
in full satisfaction of a $435,815 payable to related parties.
As a part of the settlement agreement, the Company agreed to
include these restricted common shares in its next registration
statement with the SEC covering the resale of the shares. Also,
as a part of the settlement agreement, the Company obtained the
voting rights of these shares over the next two-year period.

On June 29, 2001, the Company entered into a revised
settlement agreement with William R. Dunavant related to
the lawsuit Mr. Dunavant had filed against the Company (see
Note 13). Under the terms of the revised agreement, the
Company and Mr. Dunavant have agreed to the following terms
in full settlement of Mr. Dunavants claims against
the Company:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company issued an additional 475,000 shares of common stock
	to Mr. Dunavant and his counsel;                                                                                                                                                                                                                                                                                                                         
|
| |  | Mr. Dunavant agreed to certain resale restrictions with
	respect to all but 350,000 shares of common stock held by him
	(an aggregate of 2,450,000 shares), specifically, to limit his
	public resale of such shares to 30,000 shares per calendar
	month until February 15, 2002;                                                                                                                                        
|
| |  | we agreed to prepare and proceed diligently to complete and file
	a registration statement with the SEC registering the resale of
	all of the shares held by Mr. Dunavant, his spouse and his
	attorney, with Mr.  Dunavant and his counsel having a right
	to seek an immediate hearing for emergency injunctive relief if
	such registration statement is not filed before July 31,
	2001, unless counsel to the Company

F-42



---



High Speed Net Solutions, Inc.


Notes to Consolidated Financial Statements (continued)



14.  Subsequent Events (continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | advises the Company that it is in the best interests of the
	Company and its shareholders to delay the filing of such
	registration statement;                                                                                                                                                                                                                                                                                               
|
| |  | Mr. Dunavant, his spouse and his counsel agreed, for a
	two-year period from the date of the agreements, to vote the
	shares held by them in favor of and for the election of Board
	nominees by the Company and to vote such shares in a manner
	consistent with the recommendation of the Board with respect to
	certain extraordinary transactions (such as a tender offer, an
	exchange offer, merger or other business combination); and
|
| |  | the Company, on the one hand, and Mr. Dunavant and his
	counsel, on the other, executed mutual general releases with
	respect to any and all claims against each other, except with
	respect to the obligations and liabilities under such agreements.                                                                                                                                                                                       

The Companys loss contingency accrual at December 31,
2000 has been updated to reflect the terms of this revised
settlement with Mr. Dunavant.

F-43



---



Financial Statements

Douglas May & Co., Inc.

Years ended December 31, 1999 with Report of
Independent Auditors

F-44



---



Report of Independent Auditor

The Board of Directors and Shareholder



I have audited the accompanying balance sheet of Douglas May
& Co., Inc. as of December 31, 1999 and the related
statements of income and retained earnings and cash flows for
the year then ended. These financial statements are the
responsibility of the Companys management. My
responsibility is to express an opinion on these financial
statements based on my audit.

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

In my opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Douglas May & Co., Inc. at December 31, 1999
and the result of its operations and cash flows for the year
then ended, in conformity with accounting principles generally
accepted in the United States.

May 31, 2000





F-45



---



Douglas May & Co., Inc.

Balance Sheet

|                                           |                                                                                                      |              |         |         |  
|------------------------------------------ | ---------------------------------------------------------------------------------------------------- | ------------ | ------- | ------- | -
|                                           |                                                                                                      | December 31,
|                                           |                                                                                                      | 1999        
|                                           |                                                                                                      |             
|Assets                                     |                                                                                                      |              |         |        
|                                          
|                                          
|                                          
|                                          
|Current assets:                            |                                                                                                      |              |         |        
|                                          
|                                          
|                                          
|                                          
|                                           | Cash                                                                                                 |              | $       | 72,496  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Advances to shareholder                                                                              |              |         | 51,859  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts receivable                                                                                  |              |         | 54,105  |  
|                                           |                                                                                                      |              |         |        
|Total current assets                       |                                                                                                      |              | 178,460 |        
|                                          
|                                          
|                                          
|                                          
|Property and equipment:                    |                                                                                                      |              |         |        
|                                          
|                                          
|                                          
|                                          
|                                           | Furniture, fixtures and equipment                                                                    |              |         | 82,025  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Less accumulated depreciation                                                                        |              |         | (59,653 | )
|                                           |                                                                                                      |              |         |        
|                                           |                                                                                                      |              | 22,372  |        
|                                          
|                                          
|                                          
|                                          
|Deposits                                   |                                                                                                      |              | 2,345   |        
|                                           |                                                                                                      |              |         |        
|Total assets                               |                                                                                                      | $            | 230,177 |        
|                                           |                                                                                                      |              |         |        
|Liabilities and shareholders equity       |                                                                                                      |              |         |        
|                                          
|                                          
|                                          
|                                          
|Current liabilities:                       |                                                                                                      |              |         |        
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                                                     |              | $       | 30,093  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Line of credit                                                                                       |              |         | 73,500  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred tax liabilities                                                                             |              |         | 22,000  |  
|                                           |                                                                                                      |              |         |        
|Total current liabilities                  |                                                                                                      |              | 125,593 |        
|                                          
|                                          
|                                          
|                                          
|Shareholders equity:                      |                                                                                                      |              |         |        
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock, $.05 par value; 1,000 shares
	authorized,
	issued and outstanding at December 31, 1999 |              |         | 50      |  
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid-in capital                                                                           |              |         | 46,447  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Retained earnings                                                                                    |              |         | 31,087  |  
|                                           |                                                                                                      |              |         |        
|Total shareholders equity                 |                                                                                                      |              | 77,584  |        
|                                           |                                                                                                      |              |         |        
|Total liabilities and shareholders equity |                                                                                                      | $            | 203,177 |        
|                                           |                                                                                                      |              |         |        

See accompanying notes.

F-46



---



Douglas May & Co., Inc.

Statement of Income and Retained Earnings

|                                       |  |              |         | 
|-------------------------------------- |  | ------------ | ------- | 
|                                       |  | Year ended  
|                                       |  | December 31,
|                                       |  | 1999        
|                                       |  |             
|Revenue                                |  | $            | 880,432 | 
|                                      
|                                      
|                                      
|                                      
|Cost of revenues                       |  |              | 567,937 | 
|                                       |  |              |         | 
|Gross profit                           |  |              | 312,495 | 
|                                      
|                                      
|                                      
|                                      
|General and administrative expenses    |  |              | 304,082 | 
|                                      
|                                      
|                                      
|                                      
|Interest expense                       |  |              | 4,903   | 
|                                       |  |              |         | 
|Income before taxes                    |  |              | 3,510   | 
|                                      
|                                      
|                                      
|                                      
|Income tax expense                     |  |              | 1,092   | 
|                                       |  |              |         | 
|Net income                             |  |              | 2,418   | 
|                                      
|                                      
|                                      
|                                      
|Retained earnings at beginning of year |  |              | 28,669  | 
|                                       |  |              |         | 
|Retained earnings at end of year       |  | $            | 31,087  | 
|                                       |  |              |         | 

See accompanying notes.

F-47



---



Douglas May & Co., Inc.

Statement of Cash Flows

|                                                                                   |                                              |                     |        |       |        |  
|---------------------------------------------------------------------------------- | -------------------------------------------- | ------------------- | ------ | ----- | ------ | -
|                                                                                   |                                              | Year ended         
|                                                                                   |                                              | December 31,       
|                                                                                   |                                              | 1999               
|                                                                                   |                                              |                    
|Operating activities                                                               |                                              |                     |        |      
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Net income                                                                         |                                              | $                   | 2,418  |      
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Adjustments to reconcile net income to net cash
	provided by operating activities: |                                              |                     |        |      
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Depreciation                                 |                     |        | 7,214 |       
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Changes in operating assets and liabilities: |                     |        |       |       
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   |                                              | Accounts receivable |        |       | 32,367 |  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   |                                              | Accounts payable    |        |       | (2,701 | )
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   |                                              | Deferred taxes      |        |       | 1,092  |  
|                                                                                   |                                              |                     |        |      
|Net cash provided by operating activities                                          |                                              |                     | 40,390 |      
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Investing activities                                                               |                                              |                     |        |      
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Purchases of property and equipment                                                |                                              |                     | (7,017 | )    
|                                                                                   |                                              |                     |        |      
|Net cash used in investing activities                                              |                                              |                     | (7,017 | )    
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Financing activities                                                               |                                              |                     |        |      
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Increase in advances to shareholder                                                |                                              |                     | (599   | )    
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Net proceeds from line of credit                                                   |                                              |                     | 23,500 |      
|                                                                                   |                                              |                     |        |      
|Net cash provided by financing activities                                          |                                              |                     | 22,901 |      
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Net increase in cash                                                               |                                              |                     | 56,274 |      
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Cash at beginning of year                                                          |                                              |                     | 16,222 |      
|                                                                                   |                                              |                     |        |      
|Cash at end of year                                                                |                                              | $                   | 72,496 |      
|                                                                                   |                                              |                     |        |      
|Supplemental disclosures of cash flows
	information                                |                                              |                     |        |      
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Cash paid for interest                                                             |                                              | $                   | 4,903  |      
|                                                                                   |                                              |                     |        |      

See accompanying notes.

F-48



---



Douglas May & Co., Inc.

Notes to Financial Statements

December 31, 1999

1.  Business and Organization

Douglas May & Co., Inc. (May or the
Company) provides media creation services that
include creative design assistance and commercial content
development, development of audio and video images, as well as
web site design and construction. May was incorporated in 1992
and is headquartered in Dallas Texas.

2.  Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with
general accepted accounting principals requires management to
make estimate and assumptions that effect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.

Property and equipment

Property and equipment are stated at cost. Depreciation was
calculated using the straight-line basis over the estimate
useful lives of the assets.

Income Taxes

Income taxes are accounted for using the liability method in
accordance with Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes.

Financial Instruments

The carrying amount of cash, accounts receivable and accounts
payable approximates fair value for these financial instruments.
Financial instruments that potentially subject the Company to
concentrations of credit risk consist of cash and accounts
receivable. The Company maintains its cash with financial
institutions and periodically performs evaluations of the credit
standings of those financial institutions. The Companys
customer base consists of companies operating in the United
States. The Companys exposure to credit risk with respect
to its trade accounts receivable is limited to the carrying
amount of the receivables. The Company does not require
collateral on these financial instruments.

Revenue Recognition

Revenue is recognized at the time the services are rendered
based on the terms of the individual contracts.

3.  Leases

The Company leases office space under a noncancelable operating
lease. The lease is for 65 months. Total rent expense under
the lease for the 1999 was $33,360.

F-49



---



Douglas May & Co., Inc.


Notes to Financial Statements (continued)



3.  Leases (continued)


The following is a schedule of future minimum lease payments as
of December 31:

|     |  |   |         | 
|---- |  | - | ------- | 
|    
|    
|    
|    
|2000 |  | $ | 40,032  | 
|    
|    
|    
|    
|2001 |  |   | 40,032  | 
|    
|    
|    
|    
|2002 |  |   | 43,772  | 
|    
|    
|    
|    
|2003 |  |   | 46,384  | 
|    
|    
|    
|    
|2004 |  |   | 46,572  | 
|    
|    
|    
|    
|2005 |  |   | 3,881   | 
|     |  |   |         | 
|     |  | $ | 220,673 | 
|     |  |   |         | 

4.  Line of Credit

The Company maintains a line of credit with a bank that matures
on January 9, 2000. Interest is payable monthly at prime
plus 2%. The line of credit is collateralized by all accounts
receivable and property and equipment and is guaranteed by the
sole shareholder of the Company. The outstanding balance at
December 31, 1999 was $73,500.

5.  Income Taxes

The Company accounts for income taxes under FASB Statement
No. 109, Accounting for Income Taxes
(FASB 109). Deferred income tax assets and
liabilities are determined based upon differences between
financial reporting and tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

The components of the income tax provision (benefit) are
as follows:

|         |  |   |        |  
|-------- |  | - | ------ | -
|        
|        
|        
|        
|Current  |  | $ | 1,092  |  
|        
|        
|        
|        
|Deferred |  |   | (1,300 | )
|         |  |   |        |  
|Total    |  | $ | (208   | )
|         |  |   |        |  

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Companys net deferred income taxes are as follows:

|                         |  |   |         |  
|------------------------ |  | - | ------- | -
|                        
|                        
|                        
|                        
|Deferred tax liabilities |  | $ | (22,000 | )
|                        
|                        
|                        
|                        
|Cash to accrual          |  |   |        |  
|                         |  |   |         |  
|                         |  |   | (22,000 | )
|                         |  |   |         |  
|Total net deferred taxes |  | $ | (22,000 | )
|                         |  |   |         |  

7.  Subsequent Event

On July 10, 2000, High Speed Net Solutions, Inc.
(High Speed) acquired all of the issued and
outstanding common stock of the Company through the issuance of
183,070 shares of High Speed common stock valued
at $1,376,000.

F-50