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

                                   FORM 10-QSB

                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For quarterly period ended June 30, 2000          Commission File Number 0-23123


                            NETGAIN DEVELOPMENT, INC.
        (Exact name of small business issuer as specified in its charter)


          Colorado                                              84-0856436
(State or other jurisdiction of                                (IRS Employer
incorporation or organization)                               Identification No.)

              152 West 57th Street, 40th Floor, New York, NY 10019
                    (Address of principal executive offices)

 The registrant's current telephone number, including area code: (212) 765-2914

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

Indicate  the number of shares  outstanding  of each  class of the  Registrant's
Common Stock.

The  Registrant has only one class of Common Stock  outstanding.  As of July 31,
2000, there were 21,691,314 shares of the Registrant's Common Stock outstanding.

Transitional Small Business Disclosure Format (check one):  Yes [ ] No [X]
<PAGE>
                            NETGAIN DEVELOPMENT, INC.

                                      INDEX
                                                                            PAGE
                                                                            ----
PART I. FINANCIAL INFORMATION

     Item 1. Consolidated Financial Statements

             Consolidated Balance Sheets June 30, 2000 and
               December 31, 1999 ..........................................   3

             Consolidated Statements of Loss-- Three and Six
               Months ended June 30, ......................................   4

             Consolidated Statements of Cash Flows--Six Months
               ended June 30, 2000 ........................................   5

             Notes to Interim Consolidated Financial Statements ...........   6

     Item 2. Management's Discussion and Analysis of Financial
             Condition and Results of .....................................  10

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings.............................................  13

     Item 2. Changes in Securities.........................................  13

     Item 3. Subsequent Events.............................................  14

     Item 4. Defaults Upon Senior Securities...............................  14

     Item 5. Submission of Matters to a Vote of Security Holders...........  14

     Item 6. Other Information.............................................  14

     Item 7. Exhibits and Reports on Forms 8-K.............................  14

SIGNATURES.................................................................  15

                                       2
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             JUNE 30, 2000     DECEMBER 31,
                                                              (UNAUDITED)          1999
                                                              ------------     ------------
<S>                                                           <C>              <C>
                                         ASSETS
CURRENT ASSETS:
   Cash & cash equivalents                                    $    322,086     $  3,642,245
   Accounts receivable, net                                         88,632               --
   Receivable from a Partner Company                             1,000,000               --
   Inventory                                                       292,084               --
   Prepaid expenses                                                 42,222           18,000
   Due from related parties                                             --           33,000
                                                              ------------     ------------
          Total Current Assets                                   1,745,024        3,693,245

PROPERTY AND EQUIPMENT, NET                                        433,446               --
INVESTMENTS AT COST                                             11,970,000        7,620,000
GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Note 3)               6,546,377               --
OTHER ASSETS                                                       106,542          103,002
                                                              ------------     ------------
                                                              $ 20,801,389     $ 11,416,247
                                                              ============     ============

                       LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable                                           $    943,819     $     53,006
   Accrued expenses                                                188,855           46,174
   Due to related parties                                            8,635           16,101
                                                              ------------     ------------
          Total Current Liabilities                              1,141,309          115,281

LONG TERM DEBT                                                          --               --
COMMITMENTS & CONTINGENCIES                                             --               --

STOCKHOLDERS' EQUITY:
Preferred Stock-- $0.0001 par value; 10,000,000
  shares authorized;  designated Series A                                1                1
Common Stock-- $0.0001 par value; 100,000,000
  shares authorized; shares issued and                               2,158            1,717
Capital in excess of par -- Preferred                            3,277,247        3,277,247
Capital in excess of par -- Common                              23,080,292        9,534,634
Accumulated deficit                                             (6,146,462)        (959,477)
Stock subscriptions receivable                                      (7,156)          (7,156)
Treasury stock, at cost (420 shares of Preferred)                 (546,000)        (546,000)
                                                              ------------     ------------
Total Stockholders' Equity                                      19,660,080       11,300,966
                                                              ------------     ------------
                                                              $ 20,801,389     $ 11,416,247
                                                              ============     ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES
                    UNAUDITED CONSOLIDATED STATEMENTS OF LOSS

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED JUNE 30,      SIX MONTHS ENDED JUNE 30,
                                                      ---------------------------     ---------------------------
                                                          2000            1999            2000            1999
                                                      ------------    -----------     ------------    -----------
<S>                                                  <C>              <C>                <C>              <C>
Revenue, net                                          $    155,116    $        --     $    180,064    $        --

Cost of Sales                                              130,814                         130,814
                                                      ------------                    ------------
Gross Profit                                                24,302                          49,250
Selling, General & Administrative Expenses                 770,052         61,305        1,153,007         61,335
Amortization of Intangibles                                601,450             --          671,032             --
Public Relations Consultancy Fee (Note 4)                3,252,600                       3,423,600
Operating Loss                                          (4,599,800)       (61,305)      (5,198,389)       (61,335)

Interest Income                                              1,233             --           11,404             --
                                                      ------------    -----------     ------------    -----------
Net Loss                                              $ (4,598,567)   $   (61,305)    $ (5,186,985)   $   (61,335)
                                                      ============    ===========     ============    ===========
Basic Loss per Common Share                           $       (.24)   $     (0.01)    $       (.28)   $     (0.01)
                                                      ============    ===========     ============    ===========
Weighted Average Number of Common Shares Outstanding    19,564,927      9,521,507       18,484,146      9,521,507
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
                                                                SIX MONTHS ENDED JUNE 30,
                                                               ---------------------------
                                                                  2000             1999
                                                               -----------     -----------
<S>                                                            <C>             <C>
CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES:
  Net Loss                                                     $(5,186,985)    $   (61,335)
  Non cash items:
   Depreciation and amortization                                   697,267              --
   Public relations consultancy fee paid with
    common stock (Note 4)                                        3,423,600              --
  Changes in operating assets & liabilities,
    excluding effects from acquisitions of a
    subsidiary
  (Increase) decrease in:
    Accounts receivable                                            (74,359)             --
    Inventory                                                      114,201
    Prepaid expenses                                                (3,910)        (25,000)
    Due from related parties                                           534          50,000
    Other                                                           (3,540)        494,647
  (Decrease) increase in:
    Accounts payable and accrued expenses                         (611,518)         50,105
                                                               -----------     -----------
Net cash flows (used in) from operating activities              (1,644,710)        508,417
                                                               -----------     -----------
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES:
  Investments in Partner Companies                              (4,350,000)     (2,250,000)
  Investment in subsidiary                                        (835,000)
  Purchase of property and equipment                               (19,172)             --
  Receivable from a Partner Company                             (1,000,000)             --
  Cash acquired in acquisition of a subsidiary                   3,056,223              --
                                                               -----------     -----------
Net cash used in investing activities                           (3,147,949)     (2,250,000)
                                                               -----------     -----------
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES:
  Repayment of long term debt                                      (50,000)             --
  Proceeds from issuance of common stock                         1,522,500       3,493,623
                                                               -----------     -----------
Net cash flows from financing activities                         1,472,500       3,493,623
                                                               -----------     -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS            (3,320,159)      1,752,040
Cash and cash equivalents, beginning of period                   3,642,245              48
                                                               -----------     -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD                       $   322,086     $ 1,752,088
                                                               ===========     ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - DESCRIPTION OF BUSINESS

     NetGain  Development,  Inc., a Colorado  corporation (the  "Company"),  was
incorporated in 1981 for the purposes of gas exploration.  From 1981 until 1993,
the Company acted as an agent for oil and gas leaseholders.  From 1993 until May
21,  1999,  the Company was  inactive.  On May 21, 1999, a change of control and
corporate objectives occurred.  In connection with the change of control, all of
the officers  and  directors  resigned and new  management  and  directors  were
appointed.  The new  corporate  objective  is to become a major  technology  and
internet  company  (i) by  operating  our own  subsidiaries,  (ii) to a  limited
extent,  by taking  minority  positions in  companies  and (iii) by acting as an
incubator providing consulting services.

     The consolidated  financial statements include the accounts of the Company,
its  wholly  owned   subsidiaries,   CoolAudio.com,   Inc.   ("CoolAudio")   and
forsalebyowner.com  Corp.  ("FSBO") for the three- and six- month  periods ended
June 30, 2000, each of which was consolidated since its date of acquisition.

     Although  the Company  refers to the  companies in which it has acquired an
equity  ownership  interest  as  its  "Partner  Companies"  and  that  it  has a
partnership  with  these  companies,  it  does  not  act as an  agent  or  legal
representative for any of its Partner  Companies,  it does not have authority to
legally  bind any of its  Partner  Companies  and it does not have the  types of
liabilities  in relation to its Partner  Companies  that a general  partner of a
partnership would have.

NOTE 2 - BASIS OF PRESENTATION

     The accompanying financial statements have been prepared in accordance with
generally accepted accounting  principles for interim financial  information and
with the  instructions to Form 10-QSB and Regulation S-B.  Accordingly,  they do
not include all of the information and footnotes  required by generally accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management,  the  accompanying  consolidated  financial  statements  reflect all
adjustments,  consisting only of normal recurring  adjustments,  necessary for a
fair presentation of the Company's financial position, results of operations and
cash  flows at the  dates  and for the  periods  indicated.  While  the  Company
believes that the disclosures presented are adequate to make the information not
misleading,   these  consolidated   financial   statements  should  be  read  in
conjunction with the audited financial statements and related notes for the year
ended  December 31, 1999 which are contained in the Company's 1999 Annual Report
on Form 10-KSB as filed with the Securities and Exchange Commission. The results
for the  three-and  six-month  periods  ended June 30, 2000 are not  necessarily
indicative of the results that may be expected for the full calendar year ending
December 31, 2000.  Certain  prior year  amounts in the  consolidated  financial
statements  have  been  reclassified  in  accordance  with  generally   accepted
accounting principles to conform with the current year presentation.

                                       6
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - ACQUISITIONS AND INVESTMENTS IN PARTNER COMPANIES

     Effective  March  30,  2000,  the  Company  completed  its  acquisition  of
CoolAudio, a  business-to-business  e-tailing enabler and e-retailer of "best in
class" home  entertainment  products from around the world.  The acquisition was
completed through an Agreement and Plan of Merger between NetGain, CoolAudio and
a wholly  owned  subsidiary  of the Company  pursuant to which each  outstanding
share of CoolAudio was converted into .08 of a share of the Company. As a result
of the acquisition, CoolAudio.com has become a wholly owned operating subsidiary
of  the  Company.   The  total  purchase  price  for  CoolAudio  was  valued  at
approximately  $8.6  million  consisting  of 1,795,593  shares of the  Company's
common  stock valued at  approximately  $7.3 million and options and warrants to
purchase  shares of the  Company's  common  stock valued at  approximately  $1.3
million.  The value of the Company's  shares  included in the purchase price was
recorded  net of a 35% market  value  discount  to reflect the  restrictions  on
transferability.  The  Company  has  accounted  for this  transaction  under the
purchase  method of accounting.  The aggregate  purchase price exceeded the fair
value of the net assets acquired by approximately $6.4 million.  The Company has
allocate this to goodwill and other  intangible  assets which is being amortized
over a three (3) year period.

     CoolAudio  was acquired  effective  March 30, 2000 and therefore no revenue
and expense is reflected in the Company's  Unaudited  Consolidated  Statement of
Loss  for the  period  January  1 - March  31,  2000.  The pro  forma  condensed
Statements  of Loss below  present the results of  operations of the Company for
the six  months  ended June 30,  2000  assuming  the  acquisition  of  CoolAudio
occurred on January 1, 2000.  The amounts  presented  for the Company  have been
derived from the Company's  historical  financial  statements for the six months
ended June 30, 2000.  The amounts  presented for  CoolAudio  are the  historical
financial  position and results of operations of CoolAudio.  Had the acquisition
occurred on January 1, 2000,  actual  results of  operations  would  likely have
differed  from the  amounts  presented  in these  pro  forma  statements.  These
unaudited  pro  forma  condensed   consolidated  financial  statements  are  not
necessarily  indicative  of the  results  of  operations  that  would  have been
attained had the acquisition  actually taken place on the dates indicated and do
not purport to be indicative of the effects that may be expected to occur in the
future.

                            NETGAIN DEVELOPMENT, INC
                UNAUDITED PRO FORMA CONDENSED STATEMENTS OF LOSS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
                                 SIX MONTHS ENDED    PERIOD ENDED
                                  JUNE 30, 2000       JANUARY 1 -
                                   CONSOLIDATED     MARCH 31, 2000       PRO FORMA
                                     NETGAIN          COOL AUDIO        ADJUSTMENTS      PRO FORMA
                                     -------        --------------      -----------      ---------
<S>                               <C>                 <C>                               <C>
Revenue                           $    180,064        $     58,520                      $   238,584
Cost of Goods Sold                     130,814              56,532                          187,346
Gross Profit                            49,250               1,988                           51,238
Operating Expenses                   5,247,639           1,295,605        494,467(a)      7,037,711
Operating Loss                      (5,198,389)         (1,293,617)                      (6,986,473)
Other income                                 0               1,213                            1,213
Interest income                         11,404               5,786                           17,190
Net Loss                          $ (5,186,985)       $ (1,286,618)    $ (494,467)(a)   $(6,968,070)
Basic Loss per Share              $      (0.28)                                         $     (0.36)
Weighted Average Common Shares
  Outstanding                       18,484,146                                           19,372,199
</TABLE>

----------
(a)  Goodwill in the amount of $5,933,606 is being amortized over three years.

                                       7
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - ACQUISITIONS AND INVESTMENTS IN PARTNER COMPANIES (CONTINUED)

     Simultaneously  with  and in  connection  with the  CoolAudio  transaction,
NetGain  entered into Consulting  Agreements  with Rajiv Bhatia,  Ted Karkus and
Eric  Schwartzman  dated March 20, 2000. All of the agreements are for a term of
one year,  provided that either party may either terminate the agreement upon 30
days prior  written  notice.  The  agreements  may be  extended  for  additional
one-year  terms  if not  terminated.  Two of the  agreements  were  subsequently
revised on June 12, 2000.

     With respect to Rajiv Bhatia's  agreement,  Mr. Bhatia is to be paid $7,500
per month,  plus ordinary and reasonable out of pocket expenses.  Mr. Bhatia was
also granted,  concurrently  with the execution of the Agreement,  non-qualified
stock  options to purchase an aggregate of 350,000  shares of common stock at an
exercise  price of $1.75 per share.  Such  options  become  exerciseable  over a
one-year  period in equal quarterly  installments  and expire ten years from the
date of grant.  The exercise  price was amended from $4.00 to $1.75 per share on
June 12, 2000.

     With  respect  to  Ted  Karkus'  agreement,   Mr.  Karkus  is  entitled  to
reimbursement of all ordinary and reasonable out of pocket expenses.  Mr. Karkus
was  also  granted,   concurrently   with  the   execution  of  the   Agreement,
non-qualified stock options to purchase an aggregate of 150,000 shares of common
stock at an exercise price of $1.75 per share. Such options become  exerciseable
over a one-year period in equal quarterly installments and expire ten years from
the date of grant.  The exercise price was amended from $5.00 to $1.75 per share
on June 12, 2000.

     With respect to Eric Schwartzman's  agreement,  Mr. Schwartzman is entitled
to  reimbursement  of all ordinary and  reasonable out of pocket  expenses.  Mr.
Schwartzman was also granted,  concurrently with the execution of the Agreement,
non-qualified  stock options to purchase an aggregate of 50,000 shares of common
stock at an exercise price of $5.00 per share. Such options become  exerciseable
over a one-year period in equal quarterly installments and expire ten years from
the date of grant.

     In   January    2000,    the   Company    acquired    the   domain    name,
www.forsalebyowner.com,  together with a fully  operational  website,  including
designs,  programming,  database and technology for $835,000 in cash. The assets
were  purchased  from the individual who owned the domain name and developed the
website.  Subsequent  to the purchase,  the Company  assigned,  transferred  and
delivered the assets to FSBO, a newly formed and wholly owned  subsidiary of the
Company.  The Company has  accounted  for this  transaction  under the  purchase
method of  accounting.  The Company has allocated the entire  purchase  price to
intangible assets,  which is being amortized using the straight-line method over
three years.

                                       8
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - ACQUISITIONS AND INVESTMENTS IN PARTNER COMPANIES (CONTINUED)

     During the first  quarter of fiscal year 2000,  the Company  increased  its
aggregate  investments  by $1.4  million  in certain  of its  Partner  Companies
specifically,  MicroCast, Perform.com and Orbit Networks. Also, during the first
quarter  of  fiscal  year  2000,  the  Company  made  new  minority  investments
aggregating  $2.5 million in the Linux Fund,  eSaludo.com and Bascom.  The Linux
Fund is a holding  company/incubator  of eight LINUX software companies,  with a
large  number  of  LINUX  luminaries  as  founders,  directors,  and  investors,
including  Netscape  founder and Browser  inventor Marc Anderseen.  eSaludo is a
Spanish  electronic  greeting  card site which has an  exclusive  contract  (for
Spanish  greeting  cards) with  Paramount,  a major greeting card  manufacturer.
BASCOM  is a  LINUX-based  middleware  and  plug-and-play  network  connectivity
software   provider  for  hardware   integrators  and  ISP's  to  provide  LINUX
thin-server  based easy and  inexpensive  Internet  access by companies to ISP's
without concern about firewall and web catching implementations.

     During the second  quarter of fiscal year 2000,  the Company  increased its
aggregate  investments  by $1.2  million  in certain  of its  Partner  Companies
specifically,  eSaludo.com and Bascom.  Also during the second quarter of fiscal
year 2000, the Company made a new minority investment of $.25 million in College
Boardwalk.com. The $1 million investment in the Linux Fund was reclassified as a
receivable  from a Partner  Company,  since  Linux  Fund  will be paying  the $1
million back to the Company within the next 30 - 90 days.

NOTE 4 -  PUBLIC RELATIONS CONSULTANCY FEE

     On January 1, 2000, the Company issued 50,000 shares of common stock valued
at $171,000 to Access I Financial  in  connection  with an  agreement  to obtain
various investor relations consulting services.

     During  June 2000,  the Company  issued  1,390,000  shares of common  stock
valued at $3,252,600  to Liviakis  Financial  Communications,  Inc in connection
with an agreement to obtain public relations consulting services.

                                       9
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES

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

     In addition to historical information, this Report contains forward-looking
statements regarding the Company and its Partner Companies, which represents the
Company's  expectations  or beliefs  including,  but not limited to,  statements
concerning  the Company's and our Partner  Companies'  operations,  performance,
financial  condition,  business  strategies  and  other  information.  For  this
purpose,  any  statements  contained in this Report that are not  statements  of
historical fact may be deemed to be forward-looking statements. Without limiting
the  generality  of the  foregoing,  words  such  as  "may,"  "will,"  "expect,"
"believe,"  "anticipate,"  "intend,"  "could,"  "estimate" or "continue," or the
negative or other variations  thereof or comparable  terminology are intended to
identify  forward-looking  statements.  The  statements by their nature  involve
substantial  risk and  uncertainties,  certain of which are beyond the Company's
and  Partner  Companies'  control,  and actual  results  may  differ  materially
depending on a variety of important factors, including among other things:

     *    development of an e-commerce market,
     *    growth in demand for Internet products and services,
     *    our ability to  identify  trends in our markets and the markets of our
          Partner Companies,
     *    our and our Partner  Companies'  ability to  successfully  execute our
          business model,
     *    our ability to acquire interests in additional companies,
     *    our and our Partner Companies' ability to attract key executives, and
     *    our Partner Companies' ability to successfully  compete against direct
          and indirect competition.

     The  Company  does not  intend  to  engage  primarily  in the  business  of
investing,  reinvesting  or  trading  in  securities  so as to be an  investment
company  required to register as such under the Investment  Company Act of 1940.
Nevertheless,  the Company may be required to register as an investment  company
as a consequence  of  investments  that it has made  subsequent to its change of
control  to the extent  that it  presently  holds  "investment  securities"  (as
defined by the  Investment  Company Act) which  constitute  more than 40% of the
value of the Company's assets (exclusive of U.S. government  securities and cash
items) on an unconsolidated  basis,  unless the Company  restructures or reduces
its  holdings  of  investment  securities  within a  reasonable  period of time.
Although it is the  intention  of the Company to take the actions  necessary  to
avoid investment company status, no assurance can be given that the Company will
be able to take such  actions.  The  Investment  Company  Act of 1940  imposes a
comprehensive   scheme  of   regulation   which  would   require  a  substantial
restructuring  of the  operations of the Company to permit the Company to comply
with applicable  regulations.  Applicable regulations may also operate to impose
significant  restrictions on the permissible  activities and transactions of the
Company. If the Company cannot restructure its operations or reduce its holdings
of investment  securities to avoid the need for investment company registration,
the Board of Directors will consider  taking such actions as may be necessary or
appropriate under the circumstances.

BASIS OF PRESENTATION

     Certain  amounts  for  prior  periods  in  the  accompanying   consolidated
financial  statements,  and in the discussion  below have been  reclassified  to
conform with the current period presentations.

                                       10
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES

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

RESULTS OF OPERATIONS

     The  Company's  corporate  objective  is to become a major  technology  and
internet  company  (i) by  operating  our own  subsidiaries,  (ii) to a  limited
extent,  by taking  minority  positions in  companies  and (iii) by acting as an
incubator providing  consulting  services.  In light of the change in control of
the Company and change in the Company's  business focus,  which was effective in
June 1999, an analysis of the Company's results of operations for the three- and
six-month  periods  ended  June 30,  2000,  compared  to June 30,  1999,  is not
indicative of the results of operations in future periods.

     The various  interests that the Company  acquires in its Partner  Companies
are accounted for under three broad  methods:  consolidation,  equity method and
cost method.  The  applicable  method is generally,  but not always,  determined
based on the  Company's  voting  interest in a Partner  Company.  As of June 30,
2000,  we owned  interests  in 18  companies,  which we refer to as our  Partner
Companies.  Of those 18, we consolidate two Partner Companies and the results of
operations from those Partner  Companies have been included in the  Consolidated
Statements of Loss from the date of acquisition.  All intercompany  accounts and
transactions  are  eliminated.  All other Partner  Companies  have been recorded
under the cost method of accounting.  Under this method,  the Company's share of
the  earnings  or  losses  of such  Partner  Companies  is not  included  in the
Unaudited Consolidated Statements of Loss.

     For the three  months  ended  March 31,  2000,  FSBO was  consolidated  and
accounted  for all of our  consolidated  revenue  and  approximately  .6% of our
consolidated selling,  general and administrative  expense. For the three months
ended June 30, 2000,  FSBO  accounted for 42 % of our  consolidated  revenue and
approximately  1%  of  our  consolidated  selling,  general  and  administrative
expense.  CoolAudio  was  acquired  effective  March 30, 2000 and  therefore  no
revenue  and  expense  is  reflected  in the  Company's  Unaudited  Consolidated
Statements of Loss for period  January 1, - March 31, 2000. For the three months
ended June 30, 2000,  CoolAudio  was  consolidated  and accounted for 50% of our
consolidated revenue and approximately .07% of our consolidated selling, general
and administrative expense.

     Selling,  general and administrative  expenses comprise mostly professional
fees,  compensation  and office  services.  The  expenses are as a result of the
infrastructure and resources necessary to implement and support our strategy. We
expect certain of these expenses to increase as we continue our growth strategy.

     Amortization  expense  increased  substantially  in the  current  quarterly
reporting period, as a result of our recent CoolAudio acquisition.  In addition,
we anticipate  that  amortization  expense will increase in future periods as we
continue to make acquisitions.

     Interest income is comprised of interest earned on cash balances.

     For the  six  months  ended  June  30,  2000,  we  recorded  a net  loss of
$5,186,985. Excluding amortization and non-cash public relations consulting fees
the net loss was $1,092,353. The loss was primarily due to the factors described
above.  Management  expects these losses to continue and possibly increase until
the Company is able to successfully implement its business plan.

                                       11
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES

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

LIQUIDITY AND CAPITAL RESOURCES

     As of June 30, 2000, the Company had cash and  equivalents of $322,086.  In
addition,  as of June 30, 2000,  the Company had  accounts  payable of $943,819.
These amounts are substantially a result of the acquisition of CoolAudio.  As of
June 30, 2000, the Company had working capital of approximately  $603,715.  Cash
used in  operations  was  $1,644,710  for the six months ended June 30, 2000 and
resulted primarily from the net loss of $5,186,985 offset by non-cash charges of
$4,120,867.

     Cash used in investing  activities  was $3,147,949 for the six months ended
June 30,  2000.  This was  comprised  of  investment  in  Partner  Companies  of
$5,185,000,  Receivable  from a Partner  Company of  $1,000,000  and purchase of
property  and  equipment  of $19,172 less cash  acquired in our  acquisition  of
CoolAudio.  As discussed above,  the Company expects  investments to increase as
part of its on-going strategy.

     Cash  provided  by  financing  for the six months  ended June 30,  2000 was
generated by the sale of 333,333 shares of the Company's  common stock for $4.50
per share or  $1,500,000  in the  aggregate  and the sale of 9,000 shares of the
Company's common stock for $2.50 per share or $22,500 in the aggregate.

     The Company  believes  that  additional  liquidity  and  increased  capital
resources, as well as increased profitability,  will be developed as a result of
the two following transactions in the quarter ending Sept. 30, 2000.

     On July 12, 2000 AsiaNetCorp. Ltd., one of the Company's Partner companies,
agreed to be acquired by Littauer  Technologies  Company  Ltd.,  in a stock deal
valued at  approximately  $1.2  billion.  Under the terms of the  merger,  seven
shares of AsiaNetCorp will be exchanged for one share of Littauer  Technologies.
At the time of the  closing  of that  transaction,  based on the stock  price of
Littauer  Technologies,  the unrealized profit to the Company as a result of the
transaction was approximately $11 million.  The cost of the Company's investment
in AsiaNet is $1 million. The stock price of Littauer is highly  volatile and is
currently  significantly  lower  than at the  time of  closing  and  there is no
guarantee that such a profit will be sustained by the time the Company sells its
shares to realize its profit.  Twenty percent of the shares  received by NetGain
are sellable now and 80% will be sellable in January 2001.  Based on the sale of
the  Company's  free  trading  shares of Littauer  stock the Company  expects to
generate cash proceeds to increase its capital resources.

     The  Company  intends to  continue  to fund  existing  and future  Internet
efforts,  acquire additional  companies for cash, stock or other  consideration.
The Company will  require  additional  working  capital to fund  operations  and
future  acquisitions and opportunities.  Therefore,  management intends to raise
additional  monies in order to enable it to continue to execute its strategy and
develop its business plan.

     During June 2000 the Company retained  Liviakis  Financial  Communciations,
Inc.  ("Liviakis") as financial public relations consultant to the Company for a
one (1) year period.  Liviakis  will:  (1) present the Company's  name to a wide
array of financial market professionals and financial media sources; (2) provide
access to financial  media outlets that the Company  otherwise  could not easily
reach;  and (3) consult and assist the Company in  developing  and  implementing
appropriate  plans and means for presenting the Company and its business  plans,
strategy and personnel to the financial community, establishing an image for the
Company in the financial  community,  and creating the foundation for subsequent
financial  public  relations  efforts.  Liviakis'  fee  for its  services  is as
follows: (1) One Million Three Hundred Ninety Thousand (1,390,000) shares of the
Company's  common  stock;  and (2) a  monthly  consultancy  fee of One  Thousand
(1,000) shares of the Company's common stock.

     On August  11,  2000,  the  Company  agreed  with  certain  of its  current
shareholders,  who had funded the  Company  with the same  Series A  Convertible
Preferred Stock financing in the past, to effect a private financing of Series A
Convertible  Preferred Stock to "accredited  investors"  pursuant to Rule 506 of
Regulation D promulgated  under the Securities Act of 1933, as amended,  for the
sale of 1,000  shares  of  series A  Convertible  Preferred  Stock at a price of
$1,000 per share,  resulting in gross proceeds to us of  $1,000,000.  No fees or
commissions  will be paid to brokers in  connection  with such  transaction.  We
intend to use these proceeds for operations,  to acquire operating  entities and
to purchase equity positions in a number of Internet private companies.

                                       12
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     There is one legal  proceeding  against the Company,  for which the Company
has  negotiated a  settlement  agreement  with  plaintiffs  pending  final court
approval of that settlement. This legal proceeding in which the Company has been
named as a defendant,  is a lawsuit  filed in federal court in New Jersey by two
individuals who, pursuant to a merger  agreement,  sold their stock in a company
named Conversion  Services  International,  Inc. ("CSI") to Elligent  Consulting
Group, Inc. ("Elligent"), a company for which Andreas Typaldos acts as Chairman,
CEO and President.  The plaintiffs  added to their  original  complaint  charges
purportedly brought  derivatively on behalf of Elligent.  Those added claims are
to the effect that Typaldos and another NetGain Board member  diverted  business
opportunities  of Elligent,  namely the concept and strategy of NetGain becoming
an internet  incubator  company and the  opportunity of offering  technology and
consulting  services to, and investing in, early stage Internet  companies.  The
Company is alleged to have been  unjustly  enriched  by being the  recipient  of
those purported opportunities.

     While the Company  believes  that the claim against it is without merit and
has vigorously  defended itself, it also believes that an amicable settlement is
in the best interest of the Company and its shareholders  because of the cost of
continuing  litigation in terms of legal costs and management  distraction.  The
agreed  settlement  of this  proceeding  includes a non-cash  payment of 475,000
shares of NetGain to Elligent  and to  plaintiff's  attorneys  of which  187,500
shares is  returnable  back to  NetGain  if the price of its stock  remains at a
certain  level one year after the date of  settlement,  and  $50,000 in cash for
legal fees.

ITEM 2. CHANGES IN SECURITIES.

     On January 1, 2000,  the Company  issued  50,000  shares of common stock in
connection  with an agreement to obtain various  investor  relations  consulting
services.

     Effective  February  11,  2000,  the  Company  sold  333,333  shares of the
Company's  common stock for $4.50 per share or $1,500,000 in the aggregate.  The
shares  were  sold  in  a  transaction  exempt  from  registration  pursuant  to
Regulation S promulgated  under the  Securities  Act of 1933,  as amended,  to a
non-U.S.  Person (as defined in Regulation S). No fees or commissions  were paid
to brokers in connection with such transaction. The gross proceeds of $1,500,000
will be used for working capital and operations.

     Effective March 30, 2000, the Company issued 1,795,593 shares of its common
stock in connection  with the  acquisition of all of the issued and  outstanding
shares of  CoolAudio.com,  Inc. The shares were issued in a private  transaction
exempt from registration. No commissions were paid to brokers in connection with
this transaction.

     Effective  June 12, 2000,  the Company  sold 9,000 shares of the  Company's
common  stock  for  $2.50  per share or  $22,500  in the  aggregate.  No fees or
commissions were paid to brokers in connection with such transaction.  The gross
proceeds of $22,500 will be used for working capital and operations.

     During the  second  quarter  of 2000 a total of 1,659  shares of  preferred
stock were converted to 831,924 shares of common stock.

     During June 2000,  the Company  issued  1,390,000  shares of the  Company's
common stock to Liviakis Financial  Communications,  Inc. in exchange for public
relations consultancy services to be performed.

                                       13
<PAGE>
                   NETGAIN DEVELOPMENT, INC. AND SUBSIDIARIES
                           PART II - OTHER INFORMATION

ITEM 3. SUBSEQUENT EVENTS

     None

ITEM 4. DEFAULTS UPON SENIOR SECURITIES.

     None

ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None

ITEM 6. OTHER INFORMATION

     None

ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K.

     a)   Exhibits

          Exhibit 27-- Financial Data Schedule (SEC use only)

     b)   Reports on Form 8-K

          Form 8-K dated  March 31,  2000 and filed with the SEC on May 15, 2000
          regarding the acquisition of Cool Audio.

                                       14
<PAGE>
                                   SIGNATURES

In  accordance  with  Section 12 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.


                                        Netgain Development, Inc.


Dated: August 11, 2000                  By: /s/ Andreas Typaldos
                                            ------------------------------------
                                            Andreas Typaldos
                                            Chairman of the Board and
                                            Chief Executive Officer