Price Net USA Inc – ‘10KSB’ for 12/31/00

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Annual Report — Small Business   —   Form 10-KSB
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Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB       Annual Report -- Small Business                       36±   152K 
 2: EX-23.2     Consent of Experts or Counsel                          1      4K 
 3: EX-27.1     Financial Data Schedule (Pre-XBRL)                     1      5K 

10KSB   —   Annual Report — Small Business
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UNITED STATES                                                                   
SECURITIES AND EXCHANGE COMMISSION                                              
Washington, D.C. 20549                                                          
---------------------                                                           

FORM 10-KSB                                                                     

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

[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                   

[ ]      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 0-31319                                                  

 PRICE NET USA, INC.
 (Name of small business issuer as specified in its charter)

NEVADA                                       33-0775716       
(State or other jurisdiction of             (I.R.S. Employer Identification     
No.)                                        incorporation or organization)    

2575 McCabe Way   
Irvine, CA 92614  
(Address of principal executive offices)
Issuer's telephone number, including area code: (949) 225-6200

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

Securities registered pursuant to Section 12(g) of the Act:  Common Stock,      
                                                          $0.001 par value

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

     Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. |_|                                

The issuer's revenues for the fiscal year ended December 31, 2000 were          
$3,373,456.                                                                     

     As of March 31, 2001, 16,770,866 of the issuer's common shares were
issued and outstanding, approximately 4,200,000 of which were held by           
non-affiliates. As of March 31, 2001, the aggregate market value of shares      
held by non-affiliates was approximately $336,000 based upon the closing bid    
and asked quotation on the OTC Bulletin Board.                                  

 DOCUMENTS INCORPORATED BY REFERENCE

None.                                                                           

 Transitional Small Business Disclosure Format: Yes [ ] No [X]

PART I                                                                          

ITEM 1.  BUSINESS OVERVIEW                                                      

Price Net U.S.A., Inc., (the Company) was founded in order to market and        
operate an Internet based infrastructure that supports a home-based business.   
We market an extensive line of products and services on the Internet, which     
includes independent mall sites, a company branded merchandise "super store",   
web site design and hosting services, long distance telephone service,          
internet service provider (ISP) capabilities and more.                          

Customers have the service, convenience and advantage of using the Internet     
from their home or office to make purchases. We market products and services    
to retail consumers as well as business to business.  We utilize an             
alliance-marketing program of independent representatives and mall operators    
to sell the products and services.  The mall operators typically pay an         
initial set-up and training charge, and a monthly mall maintenance fee.  Our    
program affords the Company the advantage of a rapidly expanding sales force    
without the normal upfront and ongoing costs of maintaining a sales             
organization of this size.  Each mall operator is compensated on the retail     
purchases of products and services from their Internet shopping mall.           

The Company's products and services are marketed exclusively through an         
alliance marketing system. This system enables the Company's independent mall   
operators to earn profits by selling products from the Company's branded super  
store as well as offering the host of Internet and telecommunication services   
to the operator's customer base. Mall Operators may also develop their own      
down-line organizations by sponsoring other independent mall operators to join  
the organization and provide e-commerce business in any market where the        
Company operates, entitling the sponsors to receive commission overrides on     
product sales and services sold within their down-line organizations.           

We believe that the Company's alliance marketing system is ideally suited for   
Internet e-commerce, because sales of such products and services are            
strengthened by ongoing personal contact between the retail consumers and the   
independent mall operators. Many of the customers are close friends or          
relatives of the mall operators and are willing to purchase products based on   
the notion that they are helping the mall operator receive a commission while   
receiving a very reasonable or discounted price for the products or services.   
The Company's alliance marketing system appeals to a broad cross-section of     
people throughout the world, particularly those seeking to supplement family    
income, start a home business or pursue employment opportunities other than     
conventional, full-time employment.                                             

Industry Overview                                                               

The Internet is an increasingly significant interactive global medium for       
information, communication and commerce. The Internet and e-commerce, as the    
world knows it, is less than 6 years old. Yet, in that short time, it has       
become one of the leading business growth areas in the global marketplace.      
International Data Corporation, a market research firm, estimates that the      
number of users who make purchases over the Internet worldwide will grow from   
31 million in 1998 to more than 183 million in 2003.                            

Internet commerce has emerged as an exciting alternative to traditional retail  
shopping. Internet commerce can be transacted in the convenience of one's home  
or business and consumers have access to virtually millions of products and     
services. Plus shopping can be done 24 hours a day.                             

We believe that manufacturers using traditional store-based retailers confront  
a number of challenges in providing a satisfying combination of products to     
consumers, including:                                                           

.  The number and variety of items available to the consumer is constrained 
by the limited shelf space available in the retail outlet, thereby    
limiting selection for consumers;                                     

.  Because of the cost of carrying inventory in multiple store locations,   
traditional store-based retailers focus their product selection on the
 most popular products that produce the highest inventory turns, thereby
further limiting consumer selection; and                              

.  The ability to make sales is limited to the hours the traditional store- 
based retailers are open for business.                                

In addition, we believe that many consumers find the traditional shopping       
experience to be time-consuming, inconvenient and unpleasant due to factors     
such as location, store layout, product selection, level of customer service    
and the inconvenience of having to leave home to purchase something that can    
be sold and delivered another way.                                              

Operating Strengths                                                             

The Company believes the source of its success is its commitment to serving     
the needs of its independent mall operators and representatives. The Company    
provides its mall operators with virtually millions of high quality brand name  
products through its merchandising affiliate, internet and telecommunication    
services and products, and an appealing network marketing system that combines  
a highly attractive compensation program with extensive Company-sponsored       
training and motivational events and services. The Company has established a    
strong operating platform to support representatives and facilitate future      
growth. The key components of this platform include the following:              
Brand Name Products. The Company offers millions of brand name products         
through its strategic alliance with a major on-line wholesale merchandiser.     
This means that the Company's mall operators can offer their customers a        
tremendous selection of products at very reasonable and/or discount prices.     
Attractive Independent Mall Operator Commission Program. The Company believes   
that it offers a financially rewarding commission program in the alliance       
marketing, e-commerce industry. Each mall operator and their up-line receive a  
commission ranging from 2 to 10 percent of the gross margin of the products     
and/or services sold. Mall operators also receive tremendous commissions of up  
to 33% of the gross cost of mall sites for establishing and sponsoring          
additional mall operators.                                                      

Comprehensive Representative Support Services. The Company is committed to      
training and motivating its mall owners and independent representatives and     
providing ongoing support. The Company regularly conducts motivational events   
and training programs, both live and via teleconferences, and a wide range of   
promotional literature (including catalogs and newsletters), all in multiple    
languages and tailored to meet the particular needs of the Company's            
representatives worldwide. In addition to Company-sponsored live events each    
month, independent representatives themselves conduct numerous local training   
and motivational events each month.                                             

Advanced Global Information Systems. To facilitate the Company's global         
expansion, the Company employs advanced computer and telecommunications         
systems that link its domestic and international operations and provide timely  
and accurate product ordering, commission payment processing and                
representative support.                                                         

Alliance Marketing System                                                       

The Company's products and mall sites are distributed through an alliance       
marketing system consisting of an extensive network of independent              
representatives. Independent representatives are in essence independent         
contractors who promote the Company's Independent Mall Operator sites. Mall     
operators and their customers purchase products directly from the Company       
sponsored "super store". Mall operators and Representatives may elect to work   
on a full-time or part-time basis. The Company believes that its alliance       
marketing system appeals to a broad cross-section of people worldwide,          
particularly those seeking to supplement family income, start a home business   
or pursue employment opportunities other than conventional, full-time           
employment, and that a majority of its organization therefore work on a         
part-time basis. Many of the customers are close friends or relatives of the    
mall operators and are willing to purchase products based on the notion that    
they are helping the mall operator receive a commission while receiving a very  
reasonable or discounted price for the products.                                

Online shopping mall sites are sold by the company's network of Independent     
Representatives (IR). Each mall site is considered an Independent Mall          
Operator (IMO) as well as an independent contractor. When initially             
established, each Independent Mall Operator (IMO) receives a unique reference   
number for their site. This number is used to track all Internet retail         
activity for their site. Each IMO provides access codes, free of charge, to     
its base of customers so the customers will purchase items on the IMO's         
shopping site. The Company's merchandise distributor actually captures,         
processes and provides customer support for all IMO retail sales and services.  
On a monthly basis the distributors provide data and submit sales commissions   
information to the Company, who then distributes commissions to the IMO. To     
maintain active online and within the organization, each IMO must pay a         
nominal monthly e-service fee.                                                  

An Independent Representative (IR) is considered an independent contractor      
working their own businesses similar to other network marketing companies in    
the industry.  Independent representatives earnings are derived from several    
sources. First, an IR earns commission on merchandise sold by IMOs within       
their down-line organization. Second, an IR who sponsors other IMOs to join     
the organization and establish their own mall-shopping site earns commissions   
on the IMO start up fees. Third, an IR earns the right to receive royalties     
upon attaining the various levels of director status. The Company believes      
that the right of independent representatives to earn royalties and production  
bonuses contributes significantly to the Company's ability to retain its most   
productive representatives. To become an independent representative, a person   
must purchase an independent representative kit from the Company. The Company   
seeks to expand its independent representative base in each market by offering  
representatives attractive compensation opportunities.                          

The Company maintains a computerized system for processing and tracking mall    
operator and independent representative activity and calculating commission     
and bonus payments, which enable the company to remit such payments promptly    
to IMOs and IRs. The Company believes that prompt remittance of commissions is  
vital to maintaining a motivated network of IMOs and IRs and that its sales     
organizations' loyalty to the Company has been enhanced by the Company's        
history of consistently making commission and bonus payments on a scheduled     
basis.                                                                          

Communications and Management Information Systems                               

In order to facilitate its continued growth and support organization            
activities, the Company continually upgrades its communications and management  
information systems. These systems include, among other things:                 

(1)     A centralized host computer server located in the Company's Irvine,     
California corporate office, which is linked to the Company's international     
locations through a dedicated wide area network that provides on-line,          
real-time computer connectivity and access;                                     

(2)     Local area networks of personal computers within the Company's          
domestic and foreign markets, serving the Company's corporate staff, and;       

(3)     An international web site and inter-company e-mail system through       
which the Company's customers, mall operators, independent representatives,     
and potential investors can access and communicate by.                          

Credit Card Processing Arrangements                                             

Most sales of the Company's retail products are made over the Internet through  
credit card purchases. We use credit card processing companies to verify        
credit cards and provide risk management services. These companies are          
connected to our affiliates as well as our own platform and database and        
verification or denial is usually accomplished within seconds. We pay these     
processing companies a percentage of sales as their fee and must also provide   
a deposit for potential charge backs.                                           

Electronic Marketing                                                            

The Company's products and mall sites are mainly distributed through an         
alliance marketing system consisting of an extensive network of independent     
representatives. However, we have developed a secondary marketing strategy      
based on increasing customer traffic to our Web site and strengthening our      
company name.                                                                   

Internet Advertising. We have taken a selective approach in our advertising     
strategy. We attempt to maximize the return from promotional expenditures by    
choosing advertising media based on the cost relative to the likely audience    
and ability to generate increased traffic for our Web site. We place            
advertisements on various Web sites frequently visited by this customer group   
in the United States and abroad. These advertisements usually take the form of  
banner ads that encourage readers to click through directly to our Web site.    
We also advertise on Internet portals that are super Web sites with search      
engines and multiple services available to site visitors. We believe that       
placing banner advertising on these and other portals may significantly         
increase our targeted exposure to prospective customers and increase our name   
identity.                                                                       

Customer Electronic Mail Broadcasts. We actively market to our base of          
customers through e-mail broadcasts. All new mall operators are automatically   
added to our electronic mailing list. We anticipate sending e-mail messages     
each month announcing new products, new countries, and new features.            

Electronic Mail to Select Mailing Lists. We also plan to deliver e-mail         
broadcasts to certain select mailing lists from time to time announcing         
pertinent information, including the addition of a new country, new products    
and rates.                                                                      

Other Methods. We will continually review other potential cost-effective        
methods of advertising and marketing our products and services through the      
Internet. Such methods may include the use of an affiliate program, chat        
rooms, video e-mail and other methods.                                          

Mall Operator and Independent Representative Support Services                   

We believe that our ability to establish and maintain long-term relationships   
with our mall operators and encourage repeat purchases is dependent, in part,   
on the strength of our mall operator and independent representative support     
services. Our support and service personnel are available from 8:00 a.m. to     
5:00 p.m. Pacific Time, five days a week to provide assistance via e-mail or    
telephone. They are responsible for handling all mall operator or independent   
representative inquiries.                                                       

We provide support via both e-mail and telephone service during business        
hours. If a mall operator or independent representative has encountered a       
problem, our service department will take the call, or the e-mail, and respond  
immediately but resolution of the matter may take two or more business days.    

Our Web site has been designed around industry standard architecture to reduce  
downtime in the event of outages or catastrophic occurrences. Our Web site      
provides 24-hour day, seven-day week availability. Our Web site operations      
staff consists of systems administrators who manage, monitor and operate our    
Web site. The continued uninterrupted operation of our Web site is essential    
to our business, and it is the job of the site operations staff to ensure, to   
the greatest extent possible, the reliability of our Web site. We provide our   
own connection to the Internet utilizing dedicated T-1 data lines and through   
Qwest's hosting backbone. We believe that this telecommunications and Internet  
service facility are essential to our operation and we anticipate upgrading     
these facilities as volume and demand for our services grow.                    

Technology                                                                      

We use a combination of commercially available licensed technology to conduct   
our Internet and telephone routing operations. Our engineering staff consists   
of database, hardware and software development engineers and consultants. Our   
engineering strategy focuses on the development of our Web site, which          
includes the enhancement of features and functionality of our existing          
hardware and software components, the development of additional new software    
components, and the integration of off-the-shelf components into our systems.   

Commercially Available Licensed Technology. Our strategy has also been to       
license commercially available technology whenever possible rather than seek a  
custom-made or internally developed solution. We believe that this strategy     
enables us to reduce our operating costs and to respond to changing demands     
due to growth and technological shifts. This strategy also allows us to focus   
our development efforts on creating and enhancing the specialized software      
applications that are unique to our business. Listed below are some of the      
Company's key architectural components:                                         

.  High-speed links to the Internet through Qwest's backbone;               

.  Compaq 1600 and Dell 2300 file servers for Web and data base application 
running Windows NT;                                                   

.  Microsoft Internet Information Server 4.0 has been chosen for its        
  ability to secure sensitive customer information through SSL encryption,
and;                                                                  

.  Microsoft SQL Server 7.0 is the relational database provider. All        
customer, mall operator and independent representative names and      
 addresses, number of purchases and sales records are stored within this
database.                                                             

Factors Affecting Future Operating Results                                      

We believe that this document contains "forward-looking statements" within the  
meaning of the Private Securities Litigation Reform Act of 1995. These          
statements are subject to risks and uncertainties and are based on the beliefs  
and assumptions of our management based on information currently available to   
our management. Use of words such as "believes," "expects," "anticipates,"      
"intends," "plans," "estimates," "should," "likely" or similar expressions,     
indicate a forward-looking statement. Forward-looking statements involve        
risks, uncertainties and assumptions. Certain of the information contained in   
this annual report on Form 10-K consists of forward-looking statements.         
Important factors that could cause actual results to differ materially from     
the forward-looking statements include the following:                           

We are primarily dependent on our Internet content, applications and alliance   
marketing system and our future revenue depends on continued demand for our     
services. Currently, our future growth depends on the commercial success of     
our Internet content, applications and alliance marketing system and other      
services and products we may develop and/or offer. While we have been selling   
our services commercially since 1997, sales may not continue in the future for  
a variety of reasons. First, the market for our existing services is            
relatively new and issues concerning the commercial use of the Internet,        
including security, reliability, speed, cost, ease of access, and quality of    
service, regulatory initiatives and necessary increases in bandwidth            
availability, remain unresolved and are likely to affect its development. Any   
failure of our network infrastructure could lead to significant costs and       
disruptions, which could reduce our revenue and harm our business, financial    
results and reputation.                                                         

Employees                                                                       

As of March 2001 Price Net had 7 full-time employees and 4 part-time            
employees.                                                                      

Of our full-time employees, 3 were in marketing and sales, 2 were in senior     
management, and 2 were in administration.                                       

Company History                                                                 

On March 11, 1998 we were known as Gold Star Gaming, Inc. and we                
purchased/merged with Price net U.S.A., Inc.  The surviving entity was Gold     
Star Gaming, Inc., which changed its name to Price net, U.S.A., Inc.  Price     
net was organized October 7, 1997.  For this purchase Gold Star issued          
2,250,010 shares of common stock and exchanged these shares with Price net      
shares.  The Gold Star shareholders then gave back to the company all of their  
shares except 1,100,000.  The final result us with 3,350,010 shares of common   
stock issued   and outstanding.  This purchase was properly accounted for as a  
reverse merger because Gold Star was considered the nominal acquirer.  A        
reverse merger means that for accounting purposes the nominal acquirer is       
viewed as having been acquired by the legally acquired company.  Reverse        
merger also means that the historical data shown on the financial statements    
will be that of the acquired company.  In other words, for accounting, the      
merger is as if Price net purchased Gold Star.                                  

On October 11, 1999 we purchased 100% of shareholder interest in NCN            
investments, Inc.  NCN Investments, Inc is a holding company, which wholly      
owns NCN Communications, Inc.  NCN Communications, Inc. is a long distance      
telephone service provider company.  NCN has gross telephone service sales      
revenue of approximately $800,000 per month that contributes to a net revenue   
stream of approximately $75,000 per month.                                      

On June 19, 2000 we acquired 100% of Eagle Equity Group II (MNS), a fully       
reporting public OTC Bulletin Board company.  We issued 50,000 shares of restric
ted common stock and paid $100,000 in cash for this company.  We also issued    
an additional 450,000 shares of restricted common stock to agents for the       
associated finders fees and consulting fees as part of the acquisition.  All    
of the stock was valued at $125,000.                                            

ITEM 2.  DESCRIPTION OF PROPERTY                                                

Our executive offices are presently located in Irvine, California where we      
lease approximately 26,000 square feet under a lease at a monthly rental of     
approximately $41,000. The lease expires November 1, 2004. We believe our       
space is adequate for our current needs. As we expand, we expect that suitable  
additional space will be available on commercially reasonable terms, although   
no assurance can be made in this regard. The property is located in an office   
and industrial area with nearby access to freeways and airports.                

ITEM 3.  LEGAL PROCEEDINGS                                                      

PENDING OR THREATENED LITIGATION, CLAIMS AND ASSESSMENTS                        

The term "pending or asserted claims" as used herein means only claims,         
litigation and assessments pending against the Company as of December 31,       
2000, or claims, litigation and assessments arising since that date and         
pending as of the date of this filing for which Price Net has devoted           
substantive attention in the form of legal consultation for representation.     
In addition to the matters discussed below, the Company is involved in various  
legal matters that arise in the normal course of business. The Company          
believes that the ultimate resolution of the matters described below and other  
matters it is currently aware of will not have an unfavorable material impact   
on its financial condition, results of operations or cash flows. As of          
December 31, 2000 we have engaged counsel to give substantive attention to, or  
represent the Company in connection with pending or threatened litigation,      
claims or assessments in the following matters:                                 

Ballah, The Big Store, The Big Hub, The Big Biz.com, OhGolly.com, IPowerBiz,    
Price Net Marketing, and MGI WorldNet.com (the Ballah group)                    

Price Net USA, Inc. has filed a lawsuit in the superior court of Orange         
County, California against the former Director/President Jerry Ballah, Bruce    
Ballah, The Big Store.com, The Big Hub.com, The Big Biz.com, OhGolly.com,       
IPowerBiz, PriceNet Marketing, and MGI WorldNet.com (the Ballah group). The     
lawsuit was filed during August 2000 in the amount of not less than             
$25,000,000 for Breach of Fiduciary Duty, Fraud, Breach of Contract,            
International Interference with Contractual Relationships, Misappropriation of  
Trade Secrets, Unfair Competition, Accounting, and Injunctive Release. The      
discovery process is ongoing and the Company is vigorously pursuing the matter  
toward a favorable outcome. The case is set for a settlement hearing in August  
2001.                                                                           

Breakaway Solutions                                                           

The action was filed by Breakaway Solutions, formerly known as the    
Counsel Group, in Orange County Superior Court was settled for the sum of       
Fifty Thousand Dollars ($50,000.00) payable in monthly installments.            
Sweeney                                                                         

Litigation between the Company and the former Co-Chairman/Chief       
Operations Officer James A. Sweeney, for Intentional Interference with          
Economic Relationship, Breach of Fiduciary Duty, Fraud, Breach of Contract and  
Trade Libel has been settled and dismissals shall be filed upon completion of   
the settlement agreement.  There will be no exchange of cash or stock in the    
settlement.                                                                     

Back Bay LLC                                                                    

The Company's former landlord at the Bristol Street location has filed          
litigation.  The range of dispute for back rent and issues of non-delivery of   
premises by the landlord ranges from a low of One Hundred Fifteen Thousand      
Dollars ($115,000.00) to a high of Eight Hundred Thirty Thousand Dollars        
($830,000.00).  The Company is vigorously prosecuting the matter.               

Gilbert / Shaft                                                                 

Two former employees have filed a suit in Orange County Supreme Court over      
commissions due on the "Platinum Card" concept.  The Company asserts that the   
parties were overpaid on cards sold to date, while the two former employees     
have not defined their dollar claim.  The Company is vigorously prosecuting     
the matter.                                                                     

Conseco                                                                         

A dispute has arisen with threatened litigation over computer hardware          
purchased under an installment contract.  The Company asserts it did not        
receive new and/or equipment ordered.  Resolution is uncertain.                 

PART II                                                                         

ITEM 5.  MARKET FOR COMMON SHARES AND RELATED SHAREHOLDER MATTERS               

The Common Stock is currently quoted on the OTC Bulletin Board, Symbol PUSA.    
On March 30, 2001, the high and low prices for the Common Stock on the OTC      
Bulletin Board was $0.095 and $0.080, respectively. The following table         
reflects the high and low closing bid quotations reported by the OTC Bulletin   
Board. Such prices represent inter-dealer quotations, do not include markups,   
markdowns, or commissions and may not reflect actual transactions. As of        
March 30, 2001, there were approximately 900 holders of record of the Common    
Stock.                                                                          

                            High             Low
                            ----             ---
Year Ended December 31, 2000                                                    
-----------------------------                                                   
January 1 to March 31, 2000                $14.10          $ 3.00               
April 1 to June 30, 2000                   $ 6.00          $ 0.90               
July 1 to September 30, 2000               $ 3.50          $ 1.25               
October 1 to December 31, 2000             $ 1.87          $ 0.26               

Year Ended December 31, 2001                                                    
-----------------------------                                                   
January 1 to March 30, 2001                $ 0.34          $ 0.08               

The Company has not paid any cash dividends since its inception. The Company    
currently intends to retain future earnings in the operation and expansion of   
its business and does not expect to pay any cash dividends in the foreseeable   
future.                                                                         

Sale of Unregistered Shares 

The Company issued the following shares without registration under the          
Securities Act of 1933 during the year ended December 31, 2000.                 

During the twelve months ended December 31, 2000, the Company issued a total    
of 4,623,632 shares of stock for legal settlements, distributor commissions,    
employee bonuses, consulting and vendor services, and the acquisition of a      
company.  Each of the stock certificates issued bears the Rule 144 restriction  
endorsement. The following paragraphs identify the nature of the stock          
issuances.                                                                      

Stock for Independent Representative Commissions                                

During 1999 the Company adopted special promotional campaigns to encourage the  
sales of its Internet Malls.  Part of the compensation paid to IRs for these    
campaigns included restricted common stock. Most of the stock was issued        
during 1999 but 22,000 shares totaling $12,410 in non-cash consulting expense   
was issued during the six months ended June 30, 2000.                           

Stock for Employee Bonuses                                                      

In an effort to maintain a positive working environment and to retain key       
individuals, the Company issued to its employees 159,000 shares of restricted   
common stock as bonuses. The non-cash compensation cost for the Company         
totaled $138,540.                                                               

Stock for Distributor Commissions, Consulting and Vendor Services               

The Company reimbursed attorneys, independent representatives, consultants and  
vendor costs with its restricted common stock. The Company issued 2,442,632     
shares for a total non-cash value of $1,483,090, which was recorded to various  
associated expense accounts.                                                    

Stock for Acquisition and Defense of International Sales Rights                 

On March 28, 2000 the Company resolved a long-standing dispute with Victor      
Barron, a former Officer and Director of the Company, regarding the ownership   
of international sales rights. The settlement allows Price Net to retain the    
international sales rights and in return, the Company issued to Mr. Barron      
1,000,000 shares of restricted common stock at a total non-cash value of        
$500,000. The sales rights were recorded as a capital asset for the Company     
(see Note 17 below).                                                            

Stock for Acquisition of MNS Eagle Equity Group II                              

On June 19, 2000 the Company acquired 100% of MNS Eagle Equity Group II (MNS),  
a fully reporting public OCT Bulletin Board company. The Company issued 50,000  
shares of restricted common stock and $100,000 in cash for 682,500 shares of    
MNS, which represented 100% of the issued and outstanding stock of MNS. The     
company issued an additional 450,000 shares of restricted common stock to       
agents for the associated finders fees and consulting fees as part of the       
acquisition. The non-cash cost associated with the stock issuance portion was   
valued at $125,000. See Note 18 below regarding this acquisition.               
Stock Sale to Foreign Investor                                                  

On July 2, 2000 the Company sold 500,000 shares of restricted common stock to   
a foreign investor for $500,000 cash. The sale was conducted pursuant to        
Regulation S and the investor acknowledged in the subscription agreement that   
they conformed to the Regulation S requirements.                                

The Company believes all such issuances were exempt pursuant to Regulation D,   
Regulation S, Section 4(2) and/or 4(6) of the Securities Act of 1933.           

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

The following Selected Financial Data should be read in conjunction with the    
financial statements and notes thereto found elsewhere herein.                  

The following discussions contain forward-looking statements regarding Price    
Net and its business, prospects and results of operations, which are subject    
to certain risks and uncertainties posed by many factors and events that could  
cause the Company's actual business and results of operations to differ         
materially from those that may be expressed or implied by such forward-looking  
statements.                                                                     

Overview                                                                        

Price net U.S.A., Inc. was originally organized in Nevada as Gold Star Gaming,  
Inc. on May 31, 1994.  We were founded in order to market and operate an        
internet-based company that supports a home-based business.                     

Internet Shopping Mall Concept                                                  

We market an extensive line of products and services on the Internet.           
Customers have the service, convenience and advantage of using the Internet     
from their home or office to make purchases.                                    

Marketing through Networking                                                    

We market products and services to retail consumers as well as business to      
business.  We utilize an alliance-marketing program of independent              
representatives and mall operators to sell their products and services.  The    
mall operators typically pay an initial setup and training charge, and a        
monthly mall maintenance fee.  This program offers us the advantage of a        
rapidly expanding sales force without the normal upfront and ongoing costs of   
maintaining a sales organization of this size.  Each mall operator is           
compensated on the retail purchases of products and services from their         
Internet shopping mall and long distance phone calls made.                      

Revenue                                                                         

We receive revenue from retail product sales, services, the sales of online     
shopping mall sites, and monthly site fees.  Services, which are available to   
the independent distributors for personal use and to sell, include long         
distance telephone service, Internet provider service (ISP), prepaid legal      
service, income tax audit protection service and Internet site maintenance and  
upgrading.                                                                      

When initially established, each Independent Mall Operator (IMO) receives a     
unique reference number for their site.  This number is used to track all       
Internet retail activity for their site.  Each IMO provides access codes to     
customers so the customers will purchase items on their shopping site.  Price   
net has associations with various merchandise vendors that actually capture,    
process and provide customer support for all Internet retail sales.  On a       
monthly basis the vendors provide data and submit sales commissions to us.  We  
then pay the independent distributors their commissions and the difference is   
our gross profit for the month.  Although we began merchandise sales in 1998,   
we have never been able to establish a significant revenue stream with product  
sales from the Internet mall sites.                                             

Our main sources of revenue have been the commissions on long distance          
telephone calls, and mall site sales.                                           

Cost Of Sales                                                                   

Cost of sales consists primarily of the costs of commissions paid to our        
network of independent sales representatives. Also included are refunds from    
prior period sales.                                                             

Expenses                                                                        

Price Net's expenses consist of sales and marketing, and general and            
administrative expenses. Sales and marketing and general and administrative     
expenses consist of salaries and related benefits, commissions, promotional     
expenses, public relations services, professional services, stock issued for    
services, stock-based compensation, amortization of goodwill, and general       
operating costs.                                                                

Results of Operations                                                           

The Company has incurred losses from operations and negative cash flows from    
operating activities and has accumulated a deficit at December 31, 2000 in the  
amount of $19,125,053. The Company's net loss of $8,430,470 in 2000 included    
non-cash operating expenses of $4,417,193 for Stock Based Compensation and      
Services, Amortization of Goodwill, Depreciation, write down of inventory and   
impairment of intangible assets. The Company's net loss of $9,171,926 in 1999   
included non-cash operating expenses of $5,106,803 for Stock Based              
Compensation and Services, Amortization of Goodwill and Depreciation.           

Results of Operations (continued)                                               
  Year Ended                           December 31, 2000     December 31, 1999
                                       -----------------     -----------------

Sales                                    $     3,373,456       $     8,306,759  
Cost of Sales                                  3,208,363             8,709,921  
Gross Profit                                     165,093                        
(403,162)                                                                       
Operating Expenses                                                              
Payroll and Professional Fees                3,350,871             5,610,134
Rent                                         1,210,302               532,033
Advertising and Promotion                      102,272               289,639
Amortization                                 1,231,675               251,941
Depreciation                                   161,502                61,930
Interest Expense                               144,601                43,828
Bad Debt                                        13,441                 7,153
Impairment of Intangibles                      639,981                    --
Inventory Valuation Reduction                  572,925                    --
Other General and Administrative               1,167,993           1,972,106

Total Operating Expenses                     8,595,563             8,768,764
 Net Loss                               $    (8,430,470)      $    (9,171,926)

Results of Operations for the Fiscal Year Ended December 31, 2000 Compared to   
Fiscal Year Ended December 31, 1999                                             

Revenue                                                                         

Revenue decreased to $3,373,456 for the fiscal year ended December 31, 2000     
from $8,306,759 for the comparable period in 1999 as a result of the            
significant reorganization and restructuring of our operation and customer      
base stemming from the termination of our Company President as well as the      
departure of certain field leadership associated with the president. Of the     
$3,373,456 revenue for the fiscal year ended December 31, 2000, $2.6 million    
represents independent mall site sales; merchandise sales and monthly service   
fees. The remainder represents long-distance phone service revenue of           
$737,187.                                                                       

Cost of Sales                                                                   

Cost of sales consists primarily of the costs of commissions paid to our        
network of independent sales representatives. Also included are refunds from    
prior period sales. Cost of sales decreased to $3,208,363 for the fiscal year   
ended December 31, 2000 from $8,709,921 for the comparable period in 1999.      
This decrease was primarily attributable to our decrease in sales volume. Cost  
of sales for the fiscal year ended December 31, 2000 included approximately     
$756 thousand in refund requests. As mentioned in the notes to the financial    
statements, refund requests are recorded immediately to the financial           
statements. However, most of the refund requests are subject to offset by       
commissions paid to the independent representatives and the offset amounts are  
not reflected in the financial statement. We expect the overall dollar cost of  
sales to increase in future periods to the extent that our sales volume         
increases but not as a percentage of revenue.                                   

Operating Expenses                                                              

Selling, General and Administrative. Selling, general and administrative        
expenses consist of advertising and promotional expenditures, payroll and       
related expenses for executive and administrative personnel, facilities         
expenses, professional and consulting services expenses, travel and other       
general corporate expenses. Selling, general and administrative expenses        
decreased to $8.5 million for the fiscal year ended December 31, 2000 from      
$8.7 million for the comparable period in 1999. Overall operating expenses are  
expected to decrease as a percentage of revenue during future periods because   
our sales of mall sites and merchandise are based on e-commerce, which allows   
increases in the volume of purchases without having to incrementally add        
overhead. We expect selling, general and administrative expenses to increase    
in absolute dollars as we continue to pursue advertising and marketing          
efforts, expand our locations worldwide, expand our staff and incur additional  
costs related to the growth of our business and being a public company.         

Net Loss                                                                        

We incurred a net loss of $(8,430,470) for the fiscal year ended December 31,   
2000 as compared to $(9,171,926) for the comparable period in 1999. Net loss    
for the fiscal year ended December 31, 2000 was primarily affected by the       
non-cash transactions and refund requests as mentioned above.                   

Recent Developments                                                             

In June 2000 we negotiated a strategic arrangement with 2HQ.com, Inc., for      
mall product sales applications including the back-end processing, order        
fulfillment, distribution, and customer service. The arrangement also provides  
for web site mega-search engine technology and private labeling of the          
Company's web page.                                                             

Liquidity and Capital Resources                                                 

Since inception, we have financed our operations primarily through private      
sales of equity and debt and cash generated from operations. As of December     
31, 2000, we had approximately $150,364 of cash and cash equivalents. As of     
that date, our principal commitments consisted of obligations outstanding       
under operating leases for facilities, vehicles and equipment, obligations to   
vendors stemming from costs associated with the daily on-going operations, and  
obligations for certain costs associated with the phone company acquisition in  
October 1999.                                                                   

Net cash used in operating activities was $1,911,756 for the fiscal year ended  
December 31, 2000 compared to $3,827,716 for the comparable period in 1999.     
Net cash used in operating activities for the fiscal year ended December 31,    
2000 primarily consisted of net operating losses adjusted for expenses paid by  
stock issuances, decreases in accounts receivable, increases in accounts        
payable, amortization costs and the adjustment for the write down of            
inventory. Net cash used in operating activities for the fiscal year ended      
December 31, 1999 primarily consisted of net operating losses adjusted for      
items such as the issuance of stock for expenses, the increase in inventory,    
an increase in accounts payable and decreases in prepaids and deposits.         

Net cash used in investing activities for the fiscal year ended December 31,    
2000 consisted the purchase of MNS Eagle Equity Group II and the                
purchase/defense of international sales rights. Net cash used for investing     
activities for the fiscal year ended December 31, 1999 included fixed asset     
purchases. Net cash used in investing activities was $805,815 for the year      
ended December 31, 2000 compared to $971,834 for the comparative year ended     
period in 1999.                                                                 

Net cash provided by financing activities was $1,783,534 for the year ended     
December 31, 2000 compared to $5,737,822 for the year ended December 31, 1999.  
Net cash provided by financing activities for 1999 was affected by the large    
sales of private placement common stock.                                        

The Company had a working capital position as of December 31, 2000 of           
approximately  $4,235 as compared to a working capital position of              
approximately  $938,272 as of December 31,1999.                                 

The Company had a Stockholders' Equity of $(1,058,944) as of December 31, 2000  
as compared to a Stockholders' Equity $4,612,486 as of December 31,1999.  The   
Company had an accumulated Retained Earnings deficit of $19,125,053 at          
December 31, 2000, in comparison to an accumulated Retained Earnings deficit    
of $10,694,583 as of December 31, 1999. The increase in the accumulated         
deficit is due to the net loss of $8,430,470 for the fiscal year ended          
December 31, 2000.                                                              

The Company does not currently possess a financial institution source of        
financing and the Company cannot be certain that it's existing sources of cash  
will be adequate to meet its liquidity requirements. Therefore, the Company is  
considering the following options to meet its liquidity requirements:           

(a)     Attempting to raise additional funds through the sale of equity         
 securities to persons or entities who are not presently stockholders of the
Company;                                                                  
(b)     Attempting to franchise or license its technology and proprietary       
rights to foreign countries;                                              
(c)     Reducing the Company's present rate of expenditures, which might        
materially adversely affect the ability of the Company to market its      
products and services effectively.                                        

The Company's future capital requirements will depend on factors, including     
(i) the progress and effectiveness of its sales activities and marketing        
approach, and (ii) the ability of the Company to maintain its existing          
customer base and establishing and expanding its customer base into new         
domestic and foreign markets. However, if operating expenses are higher than    
expected or if cash flow from operations is lower than anticipated, there can   
be no assurance that the Company will have sufficient capital resources to be   
able to continue as a going concern.                                            

We may need to raise additional capital funds if, for example, we pursue        
business or technology acquisitions or experience operating losses that exceed  
our current expectations. If we raise additional funds through the issuance of  
equity, equity-related or debt securities, such securities may have rights,     
preferences or privileges senior to those of the rights of our common stock     
and our stockholders may experience additional dilution. We cannot be certain   
that additional financing will be available to us on favorable terms when       
required, or at all.                                                            

Unless the Company is able to continue to generate revenues or obtain           
additional financing in the future, the continuing losses incurred by the       
Company might raise substantial doubt about the Company's ability to continue   
as a going concern.  Therefore, the Company's ability to continue in business   
as a going concern depends upon its continuing ability to sell its products,    
to generate franchise and licensing fees from the potential sales of its        
technology and products, to conserve liquidity by setting sales and marketing   
goals and other priorities, reducing expenditures, and to obtain financing      
through equity offerings or conventional banking sources.  In any event, there  
is no assurance that any expenditure reductions, financings or other measures   
that the Company may enact will enable it to meet its working capital           
requirements.                                                                   

ITEM 7. FINANCIAL STATEMENTS                                                    

    Financial statements are filed as part of this report on pages F-1
through F-17.                                                                   

PART III                                                                        

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

Executive Officers and Directors                                                

Set forth below is information regarding (i) the directors of the Company as    
of March 30, 2001, or until their successors are elected or appointed and       
qualified, and (ii) the executive officers of the Company as of March 30,       
2001, who are elected to serve at the discretion of the Board of Directors.     

NAME                    POSITION WITH THE COMPANY                  AGE      
------------------------------------------------------------------------    

Donald Rackemann        Chairman and Chief Executive Officer        71      
Henry Camacho           Director, and Secretary/Treasurer           70      

Donald Borba            Director and Chief Operating Officer        55      

Donald Rackemann has been the Chairman of the Board and the Chief Executive     
Officer since 1998. Prior to heading up Price Net USA.com, Mr. Rackemann was    
semi-retired but very involved in the manufacturing of golf equipment. From     
1988 to 1994, he served as Chairman and CEO of National Telephone &             
Communications, Inc. a long-distance telephone service provider, which he       
co-founded and was responsible for its early growth and success. Incomnet,      
Inc. acquired the company during 1994.                                          

Henry Camacho has served as Secretary, Treasurer, and Director for Price Net    
since 1998. From - to  - Mr. Camacho served as Manager, Information Systems of  
National Telephone and Communications, Inc. Mr. Camacho retired from Rockwell   
International in 1992 after 20 years of service in various management           
positions in the area of research and development.                              

Donald Borba has been a member of Price Net's board of directors since 1999.    
Mr. Borba has served as President of NCN Communications since 1991. Price Net   
acquired NCN Communications in October 1999. Prior to NCN Communications, Mr.   
Borba served as President of Entourage International, a publicly traded         
multi-product manufacturer.  From 1981 to 1989, Mr. Borba served as Executive   
Vice President of Scientia Corporation, a petroleum products manufacturer and   
the developer of the "Slick 50" automotive product.                             

ITEM 10.  EXECUTIVE COMPENSATION.                                               

The following table sets forth compensation received by the Company's Chief     
Executive Officer and by each of the persons who were, for the fiscal year      
ended December 31, 2000, the other most highly compensated executive officers   
of the Company whose total compensation during that year exceeded $100,000      
(the "Named Officers"), for the three fiscal years ended December 31, 2000 or   
for the shorter period during which the Named Officer was compensated by the    
Company.                                                                        

                                          SUMMARY COMPENSATION TABLE

                                                                 Long Term
                                                                  Compensation
                                        Annual Compensation       Awards
                                        ------------------------- ------------
                                                                  Securities
                                                  Other annual    Underlying
Name and principal position   Year       Salary ($) compensation   ($) Options  
--------------------------- -------     --------- --------------- ------------  
Donald J. Rackemann, CEO     2000        $120,000      $---               $---  
                           1999         107,000      $---               $---
                           1998          33,000      $---               $---

Henry Camacho, Sec./Treas.   2000          65,000      $---               $---  
                           1999         107,000      $---               $---
                           1998          33,000      $---               $---

Donald Borba, COO            2000         240,000      $---               $---  
                           1999             ---      $---               $---
                           1998             ---      $---               $---

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.       

The following table sets forth certain information regarding beneficial         
ownership of the common stock of PRICENET as of December 31, 2000 by:           

   o    Each person or entity known to be a beneficial owner of more than 5%
of the issued and outstanding common stock and;             

o    Directors and Officers of Price Net                              

Beneficial Owner                 Number of Shares                     
   Name and Title                   Beneficially Owned            Percentage
   -----------------------          ------------------            ----------

Donald J. Rakemann, CEO,                                              
     Chairman of the Board             1,560,000                    9.3%
(D.R. & L.R. Trust)                                           

Donald Borba, COO,                                                    
     Director                            294,327                    1.7%

Henry Camacho, Secretary,                                             
     Treasurer, Director                 288,000                    1.7%
(Camco)                                                       

   ------------------------         ------------------            ----------
 Total (as a group)                    2,142,327                   12.7%

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                       

The Chairman of the Board of Directors and the Company's Chief Executive        
Officer is the father of the administrator of the DR & LR Trust. The trust      
purchased the office facility at 2575 McCabe Way, Irvine CA from the Company's  
landlord after the Company had moved into the facility. The trust has also      
lent money to the Company on numerous occasions and currently has an            
outstanding note receivable due from the Company.  During 1999 the Company      
purchased from the DR & LR Trust inventory items that consisted of the 6,400    
Web PAL units. The price per unit was reduced from an estimated wholesale       
value of $249 per unit to $100 per unit.                                        

ITEM 13.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM     
8-K.                                                                            

(a) INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES                    

                                                                    Page
No.                                                                             
Title of Documents                                                              

Report of Mark Shelley, Intl., Independent Certified Public                     
Accountant, on the December 31, 2000 and 1999 Financial               
     Statements .........................................................F-1

Consolidated Financial Statements:                                              

   Consolidated Balance Sheets as of December 31, 2000 and 1999 .........F-2

Consolidated Statements of Operations for the Years Ended             
     December 31, 2000 and 1999 .........................................F-3

Consolidated Statements of Stockholders' Equity (Deficit) for the     
     Years Ended December 31, 2000 and 1999 .............................F-4

Consolidated Statements of Cash Flows for the Years Ended             
     December 31, 2000 and 1999 .........................................F-5

Notes to Consolidated Financial Statements ........................F-6 to F-15  

Financial Statement Schedules:                                                  

All schedules are omitted because they are not applicable or the required       
information is shown in the financial statements or the notes thereto.          

(b) Reports on Form 8-K                                                         

The Company originally filed Form 8-K12G3 on June 30, 2000 and re-filed the     
amended Form 8-K12G3/A on October 23, 2000 with all related attachments and     
exhibits. The Item disclosed in the Form 8-K12G3/A related to a "Change in      
Control" of MNS Eagle Equity Group II.                                          

Pursuant to a Stock Exchange Agreement (the "Exchange Agreement") dated as of   
June 19, 2000 between Price Net U.S.A., Inc (PRICENET), a Nevada corporation,   
and the shareholders of MNS Eagle Equity Group II, Inc. ("MNS"), a Nevada       
corporation, 100% of the outstanding shares of common stock of which is held    
by less than 20 MNS shareholders were exchanged for 50,000 shares of common     
stock of PRICENET and $100,000 cash in a transaction in which PRICENET          
effectively became the parent corporation of MNS.                               

(c) EXHIBITS                                                                    

NUMBER          DESCRIPTION OF EXHIBIT                                          

2.0  Stock Exchange Agreement date June 19, 2000 between Price Net USA,         
  Inc. and MNS Eagle Equity Group II, Inc. (included as Exhibit 2.0 to the
Company's Form 8-K12G3 dated June 30, 2000, previously filed with the 
Commission and is incorporated herein by reference).                  

3.1  Articles of Merger and Articles of Incorporation (included as Exhibit      
 3.1 to the Company's Form 8-K12G3 dated June 30, 2000, previously filed
with the Commission and is incorporated herein by reference).         

3.2  Bylaws (included as Exhibit 3.3 to the Company's Form 8-K12G3 dated        
 June 30, 2000, previously filed with the Commission and is incorporated
herein by reference).                                                 

23.2 Consent of Mark Shelley Intl., CPA.                                        

27.1 Financial Data Schedule                                                    

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PRICE NET USA, INC.                                                             
AUDITED FINANCIAL STATEMENTS                                                    
TABLE OF CONTENTS                                                               

                                                            Page

Report of Independent Certified Public Accountants             F-1    

Consolidated Balance Sheets - December 31, 2000 and 1999       F-2    

Consolidated Statements of Operations for the Years Ended             
December 31, 2000 and 1999                                  F-3 

Consolidated Statements of Stockholders' Equity (Deficit)             
for the Years Ended December 31, 1999 and 2000              F-4 

Consolidated Statements of Cash Flows for the Years                   
Ended December 31, 2000 and 1999                            F-5 

Notes to Consolidated Financial Statements                F-6 to F-15 

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Shelley Intl., CPA                                                              
443 E. 10th Ave.                                                                
Mesa, AZ 85204                                                                  
(480) 461-8301                                                                  

Price Net U.S.A., Inc.                                                          
Audit Committee and                                                             
Board of Directors                                                              

I have audited the accompanying consolidated balance sheet of Price Net         
U.S.A., Inc. as of December 31, 2000 and 1999 and the related consolidated      
statements of operations; stockholders' equity and cash flows for the three     
years then ended December 31, 2000.  These financial statements are the         
responsibility of the company's management.  My responsibility is to express    
an opinion on these financial statements based upon my audit.                   

I conducted my audit in accordance with generally accepted auditing             
standards.  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.  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 consolidated financial position of Price Net         
U.S.A., Inc. as of December 31, 2000 and 1999 and the related consolidated      
statements of operations, stockholders' equity and cash flows for the three     
years then ended December 31, 2000 in conformity with generally accepted        
accounting principles.                                                          

The accompanying financial statements have been prepared assuming that the      
company will continue as a going concern.  As shown in the financial            
statements the company has had a net loss since inception.  Previously, the     
company was able to raise funds through stock sales to pay ongoing overhead     
and keep the operations active.  During the fall of 2000 the company's ability  
to raise additional capital was curtailed by its lack of earnings and by        
general market conditions.  Without additional capital the company was forced   
to reduce operations, which caused sales to cease.  Currently the company has   
no sales except its telephone revenue. These factors raise doubt about the      
company's ability to continue as a going concern.  The financial statements do  
not include any adjustments that might result from the uncertainty.             

        Shelley Intl., CPA

    /s/ Shelley Intl., CPA

April 3, 2000                                                                   

F-1                                                                             

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Price Net USA, Inc.                                                             
Consolidated Balance Sheet                                                      
as of December 31, 2000 and December 31, 1999                                   

                                             12/31/00               12/31/99

Assets                                                                          

Cash                                             4,235                 938,272  
Receivables                                    146,129                 334,498  
Inventory                                          -                   572,925  
Prepaids                                                                  -     
                                           ---------               ---------
   Total Current Assets                      150,364               1,845,695
                                           ---------               ---------
Equipment and Furniture, net of depreciation   909,782                 991,361  

Investment                                     187,500                  33,000  
NCN Client Files                             1,500,000               2,834,834  
Deposits                                         8,080                  72,029  
                                           ---------               ---------
   Total Assets                            2,755,726               5,776,919
                                           =========               =========
Liabilities                                                                     

Bank Overdraft                                                                  
Accounts Payable                             1,024,832                  72,972  
Other Current Liabilities                    1,761,415                 864,072  
Notes Payable                                1,028,423                 227,389  
                                           ---------               ---------
   Total Current Liabilities               3,814,670               1,164,433
                                           ---------               ---------

Stockholders' Equity                                                            

Preferred Stock, 25,000,000 shares authorized                                   
none outstanding, par value $0.001                                   -

Common Stock, 50,000,000 shares                                                 
authorized, 16,770,866 and                                            
12,147,234 shares outstanding                                         
   par value $0.001                           16,771                  12,147

Paid in Capital                             18,379,338              15,924,962  

Stock Subscribed                              (330,000)               (630,040) 

Retained Earnings (Loss)                   (19,125,053)            (10,694,583) 
                                           ---------               ---------
   Total Stockholders' Equity             (1,058,944)              4,612,486
                                           ---------               ---------
Total Liabilities and Stockholders'                                   
    Equity                                 2,755,726               5,776,919
                                           =========               =========

The accompanying notes are an integral part of these statements       

F-2                                                                             

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Price Net USA, Inc.                                                             
Consolidated Statement of Operations                                            
for the years 2000, 1999 and 1998                                               

                                          Year          Year          Year
                                          2000          1999          1998

Revenue                                                                         
   Mall, Service and Product Sales      2,636,269      8,086,630     123,890
Telephone Service Revenue              737,187        205,785         
   Other Income                               -           14,344       1,051
                                        ---------      ---------   ---------
   Total Revenue                        3,373,456      8,306,759     124,941
                                        ---------      ---------   ---------
Costs of Sales                                                                  
   Costs of Goods Sold                    195,561        485,784      45,198
Commissions                          3,012,802      8,224,137         
                                        ---------      ---------   ---------
   Total Costs of Sales                 3,208,363      8,709,921      45,198
                                        ---------      ---------   ---------
Gross Profit (Loss)                         165,093       (403,162)     79,743  
                                        ---------      ---------   ---------
Expenses                                                                        
   Payroll, Professional Fees           3,350,871      5,610,134     740,865
   Rent                                 1,210,302        532,033     170,479
   Advertising and Promotion              102,272        289,639      81,017
   Training, Relocation                                               43,424
Amortization                         1,231,675        251,941         
   Depreciation                           161,502         61,930      12,188
   Interest Expense                       144,601         43,828       8,631
   Bad Debt                                13,441          7,153       2,199
Impairment of Intangibles              639,981                        
Inventory Valuation Reduction          572,925                        
Other General and Administrative                                      
    Expenses                            1,167,993      1,972,106     341,860
                                        ---------      ---------   ---------
   Total Expenses                       8,595,563      8,768,764   1,400,663
                                        ---------      ---------   ---------
Income Before Income Taxes               (8,430,470)    (9,171,926) (1,320,920) 
                                        ---------      ---------   ---------
Provision for Income Taxes                      -            -            -     
                                        ---------      ---------   ---------
Net Income (Loss)                        (8,430,470)    (9,171,926) (1,320,920) 
                                        ---------      ---------   ---------
Basic Earnings per Share                      (0.59)         (1.21)      (0.39) 
                                        ---------      ---------   ---------
Basic Weighted Average Number of Shares  14,288,085      7,562,520   3,370,748  
                                        ---------      ---------   ---------
Diluted Earnings per Share                    (0.54)         (1.28)      (0.39) 
                                        ---------      ---------   ---------
Diluted Weighted Average Number of                                              
Shares                                  15,665,852      7,145,894   3,370,748 
                                        ---------      ---------   ---------

The accompanying notes are an integral part of these statements.      

F-3                                                                             

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Price Net USA, Inc.                                                             
Statement of Stockholder's Equity                                               
for the period from October 7, 1997 through December 31, 2000                   

                                                        [Enlarge/Download Table]


                                   Common Stock       Paid in    Stock          Retained     Total  
                                Shares     Amount     Capital    Subscribed     Earnings     Equity 
                                                                                                    

Capitalization               2,250,010      2,250      22,750                                25,000 
                                                                                                -   
Retained Earnings (Loss)                                                       (201,737)   (201,737)
                             ---------    --------- ---------   ---------      ---------  --------- 
                                                                                                -   
Balance, December 31, 1997   2,250,010      2,250      22,750         -        (201,737)   (176,737)
                                                                                                -   
Merger Price Net and Gold                                                                           
 Star                        1,100,000      1,100      (6,550)                               (5,450)
Stock Sales 504 Offering     1,205,349      1,205     998,484                               999,689 
Stock Sale Private Offering     25,000         25      29,975                                30,000 
                                                                                                -   
Retained Earnings (Loss)                                                      (1,320,920)(1,320,920)
                             ---------    --------- ---------   ---------      ---------  --------- 
                                                                                                -   
Balance,December 31, 1998    4,580,359      4,580   1,044,659         -       (1,522,657)  (473,418)
                                                                                                -   
Stock Sales                  6,161,695      6,162  11,253,728                            11,259,890 
Stock for NCN Purchase       1,090,160      1,090   2,996,850                             2,997,940 
Stock Subscribed               315,020        315     629,725    (630,040)                      -   
                                                                                                -   
Retained Earnings (Loss)                                                     (9,171,926) (9,171,926)
                             ---------    --------- ---------   ---------      ---------  --------- 
Balance, December 31, 1999  12,147,234     12,147  15,924,962    (630,040)  (10,694,583)  4,612,486 

Stock Sales                  3,123,632      3,124   2,130,916                             2,134,040 
MNS Purchase                   500,000        500     124,500                               125,000 
International Rights                                                                                
 Purchase                    1,000,000      1,000     499,000                               500,000 
Stock Subscription Cancelled                         (300,040)    300,040                       -   

Retained Earnings                                                            (8,430,470) (8,430,470)
                             ---------    --------- ---------   ---------      ---------  --------- 
Balance, December 31, 2000  16,770,866     16,771  18,379,338    (330,000)  (19,125,053) (1,058,944)
                             =========    ========= =========   =========      =========  ========= 


F-4                                                                             

The accompanying notes are an integral part of these statements                 

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Price Net USA, Inc.                                                             
Statement of Cash Flow                                                          
for the years ended December 31, 2000, 1999 and 1998                            

                            Year          Year          Year
                            2000          1999          1998

Cash from Operations                                                            

Net Loss                            (8,430,470) (9,171,926)   (1,320,920)       

Yearly expenses paid for with stock  1,776,540   4,792,932                      
Net Change in Receivables              188,369    (329,386)       31,038        
Net Change in Inventory                           (174,953)       (3,972)       
Depreciation                           161,502      61,930        12,188        
Amortization                         1,231,674     251,941                      
Payables and Bank Overdraft          1,849,203     765,454         3,041        
Writedown of Assets                    607,796                                  
Impairment of Intangible Assets        639,681                                  
Prepaids                                                           5,000        
Deposits                                63,949     (23,708)      (34,521)       
                             ---------   ---------     ---------
Total Cash from Operations     (1,911,756) (3,827,716)   (1,308,146)  
                             ---------   ---------     ---------
Cash Used in Investments                                                        
Cash Used in Merger                                          (5,450)  
Purchase of Stock as Investment               (33,000)                
Merger with Eagle                (225,000)                            
Purchase of International Rights (501,000)                            
Purchase of Fixed Assets          (79,815)   (938,834)      (68,168)  
                             ---------   ---------     ---------
Total Cash Used for Investments  (805,815)   (971,834)      (73,618)  
                             ---------   ---------     ---------
Cash from Financing                                                             
Notes and Loans                   801,034    (185,136)      357,525   
Sales of Stock                    982,500   5,922,958     1,024,239   
                             ---------   ---------     ---------
Total Cash from Financing       1,783,534   5,737,822     1,381,764   
                             ---------   ---------     ---------
Net Change in Cash                    (934,037)    938,272         -            

Beginning Balance                      938,272       -             -            
                             ---------   ---------     ---------
Ending Balance                           4,235     938,272         -            
                             =========   =========     =========

The accompanying notes are an integral part of these statements       

F-5                                                                             

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PRICENET U.S.A., INC.                                                           
NOTES TO FINANCIAL STATEMENTS                                                   

NOTE 1.     GENERAL BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES     

Organization                                                                    
Price Net U.S.A., Inc. was originally organized in Nevada as Gold Star Gaming,  
Inc. on May 31, 1994.  We were founded in order to market and operate an        
internet-based company that supports a home-based business.                     

Internet Shopping Mall Concept                                                  
We market an extensive line of products and services on the internet.           
Customers have the service, convenience and advantage of using the internet     
from their home or office to make purchases.                                    

Marketing through Networking                                                    
We market products and services to retail consumers as well as business to      
business.  We utilize a network-marketing program of independent                
representatives and mall operators to sell their products and services.  The    
mall operators typically pay an initial setup and training charge, and a        
monthly mall maintenance fee.  This program offers us the advantage of a        
rapidly expanding sales force without the normal upfront and ongoing costs of   
maintaining a sales organization of this size.  Each mall operator is           
compensated on the retail purchases of products and services from their         
internet shopping mall and long distance phone calls made.                      

Accounting Basis                                                                
The basis is generally accepted accounting principles.                          

Revenue                                                                         
We receive revenue from retail product sales, services, the sales of online     
shopping mall sites, and monthly site fees.  Services, which are available to   
the independent distributors for personal use and to sell, include long         
distance telephone service, internet provider service (ISP), prepaid legal      
service, income tax audit protection service and internet site maintenance and  
upgrading.                                                                      

When initially established, each Independent Mall Operator (IMO) receives a     
unique reference number for their site.  This number is used to track all       
internet retail activity for their site.  Each IMO provides access codes to     
customers so the customers will purchase items on their shopping site.  Price   
net has associations with various merchandise vendors that actually capture,    
process and provide customer support for all internet retail sales.  On a       
monthly basis the vendors provide data and submit sales commissions to us.  We  
then pay the independent distributors their commissions and the difference is   
our gross profit for the month.  Although we began merchandise sales in 1998,   
we have never been able to establish a significant revenue stream with product  
sales from the internet mall sites.                                             

Our main sources of revenue have been the commissions on long distance          
telephone calls, and mall site sales.                                           

Advertising and Promotions                                                      
Advertising and Promotional expenses are expensed when incurred.  The majority  
of these costs relate to a monthly sales promotional meeting that we sponsor.   

F-6                                                                             

Sales Taxes                                                                     
Currently, we follow the normal industry practice of only collecting sales tax  
on shipments of products to consumers within our home state of California.      
The internet sales industry is new and changing constantly.  Local, state and   
federal agencies have not fully addressed this new sales medium.  We cannot     
predict what if any taxes a particular government or agency may impose on       
future or even past sales.  A successful assertion by one or more states or     
any foreign country could have a material adverse effect on our business and    
financial statements if the taxes are applied retroactively.                    

Income Taxes                                                                    
The provision for income taxes is the total of the current taxes payable and    
the net of the change in the deferred income taxes.  Provision is made for the  
deferred income taxes where differences exist between the period in which       
transactions affect current taxable income and the period in which they enter   
into the determination of net income in the financial statements.               

Stock Based Compensation                                                        
We have elected to follow Accounting Principles Board Opinion No. 25,           
"Accounting for Stock Issued to Employees," for the disbursement of our common  
stock for compensation.                                                         

Earnings per Share                                                              
The basic earnings (loss) per share is calculated by dividing our net income    
(adjusted for certain dividends when paid) by the weighted average number of    
common shares during the year.  The diluted earnings (loss) (adjusted for       
certain dividends and certain interest when expensed) by the diluted weighted   
average number of shares outstanding during the year.  The diluted weighted     
average number of shares outstanding is the basic weighted average number of    
shares adjusted as of the first of the year for any potentially dilutive debt   
or equity.                                                                      

                                 12/31/00     12/31/99
Basic weighted average shares          14,288,085     7,562,520       
Options and Warrants                    1,377,767     1,583,600       
Diluted weighted average shares        15,665,852     9,146,120       

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

NOTE 2.     REVERSE ACQUISITION                                                 

On March 11, 1998 we were known as Gold Star Gaming, Inc. and we                
purchased/merged with Price net U.S.A., Inc.  The surviving entity was Gold     
Star Gaming, Inc., which changed its name to Price net, U.S.A., Inc.  Price     
net was organized October 7, 1997.  For this purchase Gold Star issued          
2,250,010 shares of common stock and exchanged these shares with Price net      
shares.  The Gold Star shareholders then gave back to the company all of their  
shares except 1,100,000.  The final result us with 3,350,010 shares of common   
stock issued   and outstanding.  This purchase was properly accounted for as a  
reverse merger because Gold Star was considered the nominal acquirer.  A        
reverse merger means that for accounting purposes the nominal acquirer is       
viewed as having been acquired by the legally acquired company.                 

F-7                                                                             

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Reverse merger also means that the historical data shown on the financial       
statements will be that of the acquired company.  In other words, for           
accounting, the merger is as if Price net purchased Gold Star.                  

NOTE 3.     GOING CONCERN                                                       

The accompanying financial statements have been prepared assuming we will       
continue as a going concern.  As shown in the financial statements we have      
never made a profit and have an accumulated net loss.  The internet is an       
emerging industry which to date has not proven itself profitable for most       
companies.  These factors raise doubt about our ability to continue as a going  
concern.  The financial statements do not include any adjustments that might    
result from these uncertainties.                                                

NOTE 4.     EQUIPMENT, FURNITURE AND IMPROVEMENTS                               

We capitalize purchases of equipment, furniture and leasehold improvements      
form major purchase purchases in excess of $1,000 per item.  Capitalized        
amounts are depreciated over the useful lives of the assets using the straight  
line method of depreciation.                                                    

Below are the asset groups, lives costs and accumulated depreciation at         
December 31, 2000 and 1999.                                                     

            Life     12/31/00     12/31/99
Equipment                5 years     295,327     $283,913             
Computer Software        5 years      83,798       56,620             
Leasehold Improvements  10 years     165,631      560,538             
Furniture                7 years     593,538      164,400             

Total Fixed Assets                 1,138,294    1,065,479             

Accumulated Depreciation             228,513       74,118             

Net Equipment and Furniture          909,781     $991,361             

NOTE 5.     INCOME TAXES                                                        

The provision for income taxes is the total of the current taxes payable and    
the net of the change in the deferred income taxes.  Provision is made for      
the deferred income taxes where differences exist between the period in which   
transactions affect current taxable income and the period in which they enter   
into the determination of the net income in the financial statements.  A        
valuation account is established for any tax benefit, which may not be          
realized.  As of December 31, 2000 we had a net operating loss of               
approximately $17,912,000.                                                      

Deferred income tax benefit netted with valuation account     0       
Current income taxes payable                                  0       

Provision for Income Taxes                                    0       

F-8                                                                             

NOTE 6.     RELIANCE ON OFFICER                                                 

Mr. Donald Rackeman serves as the Chairman of the Board of Directors, CEO and   
President.  His business experience is vital to us.  If Mr. Rackeman were       
unable to continue in his present roles we would be adversely affected.  We     
carry no key man insurance on Mr. Rackeman.  Aside from the business skills     
and business contacts, which Mr. Rackeman brings to us, he also has guaranteed  
personally the leased vehicles, the phone system and building leases.           

NOTE 7.     STOCKHOLDERS' EQUITY                                                

We have one class of preferred stock.  There are 25,000,000 shares of           
authorized stock.  No preferred stock has been issued or is outstanding at the  
end of December 31, 2000 and 1999.                                              

We have one class of common stock.  There are 50,000,000 shares authorized.     
The rights of this class of stock are all the same.  The common stock has all   
of the rights afforded Nevada shareholders.  As of December 31, 2000 we had     
16,770,866 shares of common stock outstanding.  As of December 31, 1999 we had  
14,147,234 shares of common stock outstanding.                                  

Common Stock Issuances during 1998                                              
Merger of Gold Star Gaming, Inc. with Pricenet U.S.A., Inc.                     
On March 11, Gold Star gaming purchased Pricenet U.S.A., Inc. in a reverse      
merger.  The net effect resulted in an additional 1,100,000 shares being        
issued.                                                                         

Regulation D, Rule 504 Offering                                                 
During the year 1998 we had a Regulation D, Rule 504 Offering.  The offering    
was completed prior to the end of December 31, 1998.  The shares ranged in      
price from $0.50 to $2.00.  We sold a total of 1,205,349 shares for $999,689.   

Stock for Independent Representative Commission                                 
In December 1998 we issued 25,000 shares of restricted common stock as a        
bonus.                                                                          

Common Stock Issuances during 1999                                              
During 1999, we issued shares of stock for cash payments, distributor           
commissions, employee bonuses, consulting and vendor services, cancellation of  
debt, and inventory acquisition.  Each stock certificate bears the R114         
legend.  We issued a total of 6,161,695 shares for a book value of              
$11,259,890.                                                                    

Stock for NCN Purchase                                                          
As part of the NCN purchase we issued 1,090,160 shares of restricted common     
stock.                                                                          

Stock Subscribed                                                                
We had stock subscribed totaling 315,020 shares valued at $630,040 as of        
December 31, 1999.  As of December 31, 2000 the stock subscribed was $330,000.  

Options                                                                         
Options were given to Independent Representatives as an incentive produce more  
sales.  The option stock is not included within the shareholder section of the  
Balance Sheet.  The stock options are, however, figured into the diluted        
earnings per share on the Statement of Operations.  As permitted under SFAS     
No. 123, we have not recognized compensation expense for the theoretical value  
of any options and warrants at the grant date, (in excess of the recognition    
of the intrinsic value).                                                        

F-9                                                                             

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Warrants                                                                        
During 1999 we entered into an agreement with a product merchandise             
distributor, "The Big Store".  The Big Store was to provide an outlet where     
internet mall operators could send their customers to buy products online.  As  
part of the agreement with The Big Store, we granted warrants to purchase       
1,000,000 shares of our stock at 110% of the per share market price at the      
grant date.                                                                     

Common Stock Issuances during 2000                                              
During the year 2000 we issued shares of stock for distributor commissions,     
employee bonuses, consulting and vendor services.  The total number of shares   
sold was 3,123,632 shares of restricted common stock at a value of $2,134,040.  

Stock for Acquisition of International Sales rights                             
On March 28, 2000 we resolved a long-standing dispute with a former officer     
and director with regard to the ownership of the international sales rights.    
The settlement allows us to retain the international rights and in return, we   
issued 1,000,000 shares of common stock at a value of $501,000.                 

Stock for Acquisition of MNS Eagle Equity Group II                              
On June 19, 2000 we acquired 100% of Eagle Equity Group II (MNS), a fully       
reporting public OTC Bulletin Board company.  We issued 50,000 shares of        
restricted common stock and paid $100,000 in cash for this company.  We also    
issued an additional 450,000 shares of restricted common stock to agents for    
the associated finders fees and consulting fees as part of the acquisition.     
All of the stock was valued at $125,000.                                        

NOTE 8.     COMMITMENTS AND CONTINGENCIES                                       

Office Leases                                                                   
On November 1, 1999 we entered into an agreement to lease a 24,342 square foot  
facility located at 2575 McCabe Way, Irvine, CA.  The lease term is 60 months   
and the initial monthly rent is $41,381.  Because of our lack of cash flow, we  
are currently not making this monthly payment and are technically in default    
on the lease.  The accrued lease payments are booked in the accounts payable.   

We also lease a facility located at 2424 S.E. Bristol, Newport Beach, CA which  
incurs a lease payment of $18,323 per month.  This facility is empty            
currently.  We are also in default with the payments of this lease and the      
landlord has made demand.  An amount equal to the demand is recorded as rent    
and accrued payables in the financial statements.                               

Vehicle Leases                                                                  
During 1999 and part of 2000 we provided leased vehicles to a select group of   
independent representatives and corporate senior management.  By the end of     
June 2000 there were twenty-one vehicles leased with a total monthly payment    
of $21,734 per month.  With declining sales after that time we had all of the   
vehicles returned from the distributors.  All but two of the vehicles were      
returned to the financing companies for sale.  On some of the vehicles sold a   
residual debt was still remaining.  These residuals are all listed as Notes     
Payable.  The two vehicles remaining were taken over by the corporate officers  
who were driving them.  As of December 31, 2000 we had no vehicles.             

F-10                                                                            

Office Equipment                                                                
We lease photocopying and other computer equipment from vendors.  The monthly   
payments for these leased  equipment totals approximately $300 per month.       

Below is a listing of operating lease commitments for the next five years as    
of December 31, 1999.                                                           

              Year 1     Year 2       Year 3
Office Leases                  781,593     849,956     $875,077                 
Vehicles $21,734/mth           260,812     197,782       24,663                 
Office Equipment                 3,600       3,600        3,600                 
              -------     -------      -------
Total                       $1,046,005  $1,051,238     $903,340                 

Below is a list of operating lease commitments for the next five years as of    
December 31, 2000.                                                              

Office Leases                 $496,572    $496,572     $496,572                 
Office Equipment                 3,600       3,600        3,600                 
              -------     -------      -------
Total                         $500,172    $500,172     $500,172                 

NOTE 9.     NOTES PAYABLE                                                       

  Below is a summary of our notes payable for the years ended December 31,
2000 and 1999.                                                                  

Note Holder                   Terms       12/31/00     13/31/99                 

DR. Trust                       6%                      $77,039                 
NCN Note                    no interest    $105,000     125,000                 
Former Employee                                                                 
Related                    no interest     327,851                            
Individual                                                                      
Investors                  none to 10%     791,442                            
Finance Companies                                                               
Vehicle Residuals                          104,130                            
                         ---------    --------
Total                                     1,028,423    $202,039                 

NOTE 10.     RELATED PARTIES                                                    

The chairman of the board of directors, our chief operating officer and         
president is the father of the administrator of the DR Trust.  The trust        
purchased the office facility at 2575 McCabe Way, Irvine, CA from the previous  
landlord after we moved into the facility.  The trust also lends us money from  
time to time.  Currently we are in arrears with our rent.  During 1999 we       
purchased inventory items from the trust for cash and stock.                    

NOTE 11.     PURCHASE OF NCN COMMUNICATIONS                                     

On October 11, 1999 we purchased 100% of shareholder interest in NCN            
investments, Inc.  NCN Investments, Inc is a holding company, which wholly      
owns NCN Communications, Inc.  NCN Communications, Inc. is a long distance      
telephone service provider company.  NCN has gross telephone service sales      
revenue of approximately $800,000 per month that contributes to a net revenue   
stream of approximately $75,000 per month.                                      
F-11                                                                            
Below is a summary of the purchase transaction.                                 

We paid the following for 100% interest in NCN.                                 

1,090,160 shares valued at $2.75 per share          $2,997,940        
Cash paid to shareholders                               25,350        

Total Price paid for NCN                             3,023,290        

We recorded the purchase in the following manner.                               

Net tangible equity                                   (183,485)       
Goodwill recognized as Client Files                  3,206,775        

Net booking                                          3,023,775        

The Client Files are being amortized over 36 months on a straight line basis.   

Beginning balance                                   $3,206,775        
Net Tangible Equity adjusted                          (121,678)       
Accumulated amortization                            (1,320,866)       
Ending Balance before Impairment Reduction           1,764,231        

Reduction in Basis due to market conditions and                       
A decreasing in income generation                      264,231        

Adjusted value of NCN Client Files                   1,500,000        

NOTE 12.     INTERNATIONAL SALES RIGHTS                                         

On March 28, 2000 we resolved a long-standing dispute with a former officer     
and director with regard to the ownership of the international sales rights.    
The settlement allows us to retain the international rights and in return, we   
issued 1,000,000 shares of common stock at a value of $501,000.  This           
agreement also requires us to pay nominal amounts for international sales.      
During the remainder of year 2000 as mentioned earlier we experienced severe    
sales and cash flow problems and were not able to take advantage of the         
international market.  We do not expect to take advantage of this market for    
the near future.  We have therefore devalued the valuation of the rights        
purchased for 1,000,000 shares.  Below is a chart enumerating this.             

Original Value                              501,000                   
Accumulated Amortization                   (125,250)                  
Intangible Impairment                      (375,750)                  

Net Value remaining 12/31/2000                    0                   

NOTE 13.     IMPAIRMENT AND DEVALUATION OF INTANGIBLES ASSETS                   

As mentioned in Notes 11 and 12 above we devalued two intangible assets during  
2000 because of market conditions and our inability to utilize them.  A         
summary of these two is listed below.                                           

F-12                                                                            

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Devaluation of NCN Client Database Files               $264,231                 
Devaluation of International Sales Rights               375,750                 

Total Devaluation of Intangible Assets                 $639,981                 

NOTE 14.     REFUNDS AND COMMISSIONS                                            

During 1999 we had a policy of refunding an IMO site of up to a year from the   
date of purchase.  The refunds are netted against future commissions that an    
IR might receive because of original commissions paid.  Beginning January 15,   
2000 we changed our policy.  We will refund a distributor the amount of a mall  
purchase minus any associated commissions in the request is received within 72  
hours of the purchase date.  This change conforms to federal law.  These        
refunds are recorded under Other Current Liabilities in the Balance Sheet.      

NOTE 15.     TERMINATION OF AGREEMENTS WITH 'THE BIG STORE.COM" AND "THE BIG    
HUB.COM"                                                                        

In the fall of 1999, we signed agreements with "The Big Store.com" and "The     
Big Hub.com" to facilitate web site product searches, merchandise sales, order  
fulfillment, distribution, and provide full customer service for IMO customer   
retail sales.  These agreements are outlined as follows.                        

The Big Store                                                                   
The agreement with "The Big Store" was for the back-end processing or order     
fulfillment, distribution, and customer service phase of mall product sales     
applications.  The agreement required us to pay a one time private label        
development fee of $150,000 to connect all of our current IMO sites.  In        
addition, we were accessed a store fee commission on monthly gross sales        
ranging from 2% to 6%.  The agreement also granted "The Big Store.com"          
warrants for 1,000,000 shares of restricted common stock.  The warrants have a  
five-year exercise period.                                                      

The Big Hub                                                                     
The agreement with "The Big Hub" was for the licensing of web site mega-search  
engine technology and also for licensing of a private label web page to access  
"The Big Store" products.  The agreement required us to pay for each IMO set    
up with back-end processing by "The big Store", a monthly maintenance fee of    
$5 for each IMO currently using "The Big Store" private label mall, and an      
annual renewal fee of $7.50 for each active IMO.                                

The two agreements mentioned above were terminated during May 2000 due to a     
dispute and a lawsuit has been filed against the two entities.                  

NOTE 16.     ACQUISITION OF MNS EAGLE EQUITY GROUP II                           

On June 19, 2000 we acquired 100% of Eagle Equity Group II (MNS), a fully       
reporting public OTC Bulletin Board company.  We issued 50,000 shares of        
restricted common stock and paid $100,000 in cash for this company.  We also    
issued an additional 450,000 shares of restricted common stock to agents for    
the associated finders fees and consulting fees as part of the acquisition.     
All of the stock was valued at $125,000.                                        

F-13                                                                            

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NOTE 17.     LEGAL ISSUES                                                       

PENDING OR THREATENED LITIGATION, CLAIMS AND ASSESSMENTS                        
The term "pending or asserted claims" as used herein means only claims,         
litigation and assessments pending against the Company as of December 31,       
2000, or claims, litigation and assessments arising since that date and         
pending as of the date of this filing for which Price Net has devoted           
substantive attention in the form of legal consultation for representation.     
We are involved in several lawsuits in the normal course of business and all    
amounts for exposure to these lawsuits have been recorded in our financial      
statements except as noted below. As of December 31, 2000 we have engaged       
counsel to give substantive attention to, or represent the Company in           
connection with pending or threatened litigation, claims or assessments in the  
following matters:                                                              

Ballah, The Big Store, The Big Hub, The Big Biz.com, OhGolly.com, IPowerBiz,    
Price Net Marketing, and MGI WorldNet.com (the Ballah group)                    

Price Net USA, Inc. has filed a lawsuit in the superior court of Orange         
County, California against the former Director/President Jerry Ballah, Bruce    
Ballah, The Big Store.com, The Big Hub.com, The Big Biz.com, OhGolly.com,       
IPowerBiz, PriceNet Marketing, and MGI WorldNet.com (the Ballah group). The     
lawsuit was filed during August 2000 in the amount of not less than             
$25,000,000 for Breach of Fiduciary Duty, Fraud, Breach of Contract,            
International Interference with Contractual Relationships, Misappropriation of  
Trade Secrets, Unfair Competition, Accounting, and Injunctive Release. The      
discovery process is ongoing and the Company is vigorously pursuing the matter  
toward a favorable outcome. The case is set for a settlement hearing in August  
2001.                                                                           

Breakaway Solutions                                                             

The action was filed by Breakaway Solutions, formerly known as the    
Counsel Group, in Orange County Superior Court was settled for the sum of       
Fifty Thousand Dollars ($50,000.00) payable in monthly installments.            
Sweeney                                                                         

Litigation between the Company and the former Co-Chairman/Chief       
Operations Officer James A. Sweeney, for Intentional Interference with          
Economic Relationship, Breach of Fiduciary Duty, Fraud, Breach of Contract and  
Trade Libel has been settled and dismissals shall be filed upon completion of   
the settlement agreement.  There will be no exchange of cash or stock in the    
settlement.                                                                     

Back Bay LLC                                                                    

The Company's former landlord at the Bristol Street location has filed          
litigation.  The range of dispute for back rent and issues of non-delivery of   
premises by the landlord ranges from a low of One Hundred Fifteen Thousand      
Dollars ($115,000.00) to a high of Eight Hundred Thirty Thousand Dollars        
($830,000.00).  The Company is vigorously prosecuting the matter.               

Gilbert / Shaft                                                                 

Two former employees have filed a suit in Orange County Supreme Court over      
commissions due on the "Platinum Card" concept.  The Company asserts that the   
parties were overpaid on cards sold to date, while the two former employees     
have not defined their dollar claim.  The Company is vigorously prosecuting     
the matter.                                                                     

F-14                                                                            

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Conseco                                                                         

A dispute has arisen during the second half of fiscal 2000 with threatened      
litigation over computer hardware purchased under an installment contract.      
The Company asserts it did not receive new and/or equipment ordered.            
Resolution is uncertain.                                                        

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F-15                                                                            

SIGNATURE                                                                       

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant      
caused this report to be signed on its behalf by the undersigned, thereunto     
duly authorized.                                                                

PRICE NET USA, INC.       

By  /s/ Donald Rackemann          
 -------------------
Donald Rackemann  
          Chairman and Chief Executive
Officer           

Date: March 30, 2001                  

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