XIN NET CORP, 10SB12G/A, 1999-08-30

XIN NET CORP
10SB12G/A, 1999-08-30
COMMUNICATIONS SERVICES, NEC

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SECURITIES EXCHANGE COMMISIION
Washington, D.C. 20549

FORM 10-SB

General Form for Registration of Secutities of Small business Issurers
Commission file number _________

CIK No. 0001082603

XIN NET CORP.
-----------------------------------------------------------
(Exact name of registrant as specified in this charter)

Florida 330751560
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

#830 - 789 West Pender Street, Vancouver, B.C. Canada V6C 1H2
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (604) 632-9638

Securities Registered to be Pursuant to Section 12(b) of the Act:

NONE

Securities Registered to be Pursuant to Section 12(g) of the Act

COMMON STOCK $.001 PAR VALUE

<PAGE>

TABLE OF CONTENTS

PART I

Page

Item 1. Business 3

Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations

Item 3. Properties 10

Item 4. Security Ownership of Certain Beneficial Owners and Management 10

Item 5. Directors and Executive Officers of the Registrant 12

Item 6. Executive Compensation 13

Item 7. Certain Relationships and Related Transactions 15

Item 8. Description of Securities 15

PART II

Item 1. Market for Registrant's Common Stock and Security Holder Matters 16

Item 2. Legal Proceedings 17

Item 3. Changes in and Disagreements with Accountants on 17
Accounting and Financial Disclosure

Item 4. Recent Sales of Unregistered Securities 17

Item 5. Indemnification of Directors and Officers 32

PART F/S

Financial Statements and Supplementary Data 33

Signature Page 36

Exhibits, Financial Statement Schedule and Reports on Form 8-K 35

<PAGE>

PART I

ITEM 1. BUSINESS

(a) General Description and Development of Business.

HISTORY OF COMPANY

On September 6, 1996, the Registrant was incorporated under the laws of
the State of Florida under the name of Placer Technologies, Inc. The Company
conducted a small public offering of 200,000 shares @ $.25 per share to achieve
$50,000 in capital. In December 1996 a Rule 15c2-11filing resulted in trading
approval on the OTCBB

The Company's initial primary service consisted of developing Web Home
Pages for small businesses in USA. Minimal revenues were generated in 1996.

On April 2, 1997, the Registrant purchased 100% interest of Infornet
Investment Limited (a Hong Kong corporation). Through this subsidiary in 1997,
the Registrant entered into a joint-venture agreement under Chinese law with Xin
Hai Technology Development Ltd.(Xin Hai), an experienced Internet Service
Provider (ISP) which owns and operates Internet licenses in the cities of
Beijing and Shenyang, China. The Infornet/Xin Hai agreement provides the
Registrant with an 80% interest in Xin Hai joint venture, until Infornet has
recouped all of its invested capital, at which time the profit sharing reverts
49% to XIN HAI and 51% to Infornet.

On June 11, 1997, the Registrant purchased 100% interest of Infornet
Investment Corp., a British Columbia corporation. Infornet Investment Corp.
manages the daily operations for the Registrant.

On July 24, 1998, the Registrant changed its name from Placer
Technologies, Inc. to Xin Net Corp. in order to reflect the core business of
the Registrant more accurately.

THE COMPANY BUSINESS

General Operations
------------------

The Company's core business is to act as a supplier of Internet services
in China by covering the major cities through its operating partner-Xin Hai.
Businesses include ISP, Home-page portal, Internet Advertising, E-commerce and
other value-added services.

Current Business
----------------

Through its wholly owned subsidiary Infornet Investment LTD (Hong Kong)
the company is in a joint venture with Xin Hai Technology Development Ltd. for
upgrading telecommunication services in China. This has evolved into an internet
focused service provider business. Xin Hai Technology Development LTD started
its Internet service in Beijing in April 1997. For purposes of this discussion,
the joint venture operations will be termed "Xin Hai"

ISP licenses in China are tightly controlled by the Ministry of Posts and
Telecommunications and provide a substantial barrier to entry. The Infornet/Xin
Hai agreement provides Infornet with 80% participation in Xin Hai until Infornet
recoups its investment, at which time the profits share reverts to 49% to Xin
HAI and 51% to Infornet. Xin Hai is a supplier of Internet services in China in
the major cities Bejing and Shenyang. Xin Hai management is currently planning
to open offices in Shanghai (pop. 14 million) and Taiyuan (pop. 7 million), for
which licenses are already in hand. License application in 6 other major cities
are underway. Official statistics put the number of internet users in China at
2.1 million at the end of 1998. This number is predicted to grow to 4 million at
the end of the current year, and to 10 million at the end of year 2000.

<PAGE>

The Xin Hai joint venture plans on introducing an expanded online
E-Commerce service to the Chinese market in 1999. Xin Hai is already offering a
"flea market" to its subscribers currently with over 10,000 items offered for
sale. The expanded services will be made available during the summer of 1999.
For the expansion program, the company has completed a $5.5 million private
placement of restricted shares.

To facilitate this goal, the Xin Hai joint venture will solicit PC
manufacturers and retailers to bundle services, put more effort on system
integration services, and Xin Hail will offer more value-added services such as
Internet Voice, Internet Fax, Fax to E-mail . The joint venture will enhance Xin
Hai's portal type home page and E-commerce offerings. The Joint Venture will
also look for strategic alliances with suitable partners.

Xin Hai has attracted more than 20,000 subscribers in less than 2 years of
operations. The company has about 50 employees at its present locations in
Beijing and Shenyang.

As of April 6, 1999 Xin Net Corp. entered into an agreement with EDUVERSE's
Internet based English language instruction system (freeENGLISH) in China.
Under the terms of the agreement, EDUVERSE will provide a localized Mandarin
version of freeENGLISH to Xin Net Corp. websitefor launch in the summer of,
1999. Both companies will participate in marketing activities to attract new
users to the Xin Net network and the freeENGLISH application. freeENGLISH is a
premium English as a Second Language computer program that teaches spoken
English over the Internet WWW.FREEENGLISH.COM . The program is completely free
to use and generates revenue by displaying embedded advertising throughtout the
course content.

The Company currently maintains its office at: #830 - 789 West Pender
Street, Vancouver, B.C. Canada V6C 1H2. Its telephone number is 1-604-632-9638.
It also has offices in Beijing at Suite 210, Building B, No - 11Wu Gen Lin Road,
West District, Beijing, PRC, and in Shenyang, P.R.C. at # 44 North HuangHe St.,
HuangGu, Shenyang, Liaoning, P.R.C., Post Code 110034.

(b) Parents and Subsidiaries

Parent

XIN NET CORP., a Florida corporation

Subsidiaries

INFORNET INVESTMENT CORP., a British Columbia corporation (100%)

INFORNET INVESTMENT LIMITED, a Hong Kong corporation (100%)

PLACER TECHNOLOGY CORP., a Joint Venture in China (80%, reverting to 51%
Infornet Investment Limited and 20%, reverting to 49%, Xin Hai Technology
Development).

The primary focus of the Company is to be a major Internet Service
Provider in China. Presently through the Xin Hai joint venture it is the fifth
largest in Beijing and the third largest in Shenyang. It is one of only a
handful of privately owned Internet Service Providers in China.

Governmental regulation for Internet services in China
- ------------------------------------------------------

To date, Chinese Internet operating licenses have been restricted to
Chinese companies only.

<PAGE>

The Registrant, through its subsidiary Infornet, participates with Xin Hai
Technology Development LTD. a chinese government owned company in the ISP
business in China. As the chinese government liberalizes policy toward foreign
participation in Internet Operating Licenses, it could substantially increase
competition in the markets where the joint venture operates. Thereby adversely
affecting the company markets. Direct operations by foreign companies may
commence in 2 - 3 years.

The Chinese government, while currently open to joint ventures, could at
any time, restrict operations, or expropriate from foreign participants' assets
in China. Any such action could have disastrous financial consequences to the
company and its business.

China Economy
- -------------

China is one of the largest countries in the world and is the most
populated. Since 1949, China underwent about 30 years of severe central planning
and was mostly closed to the outside world. Within that period the country was
subjected to the "Great Leap Forward" of the late 50's and the "Cultural
revolution" of the late 60's. When the country was returned to a market economy
by Deng Xiaoping, 1 billion Chinese were set free to pursue economic growth and
its rewards. Today, after over 20 years of economic reforms, China has risen
from an under-developed economy with little technical or industrial expertise to
the third largest economy in the world after the United States and Japan.

China - Computer Industry
- -------------------------

With 1.2 billion people, China accounts for about one fifth of the world's
population. Computer usage is rapidly growing, especially amongst the younger
age groups, leading industry analysts to be optimistic about the prospects for
this market. Computer consultant International Data Corp. (IDC) predicted that
PC sales in China would amount to 3.9 million units in 1998, a 30% increase over
the previous year. During the second quarter of the year, 994,000 DC units were
sold, making the Chinese market the second-fastest growing market for PCs in
Asia, after India.

Growth is expected to keep climbing in 1999, with IDC forecasting sales of
4.9 million units for this year. Analysts expect tremendous long-term growth in
the consumer market because of China's large population and the actually low
penetration rate of home computers.

Although large companies like IBM and Microsoft dominate the world market,
in 1998 Chinese PC companies held about 60% of the domestic market share. The
reason is simply one of price and affordability.

China - Computer Affordability
- ------------------------------

The average annual per capita disposable income in urban households has
increased significantly since 1992. Then, monthly income of 400 Yuan (about
US$50) was desirable, yet currently, urban foreign JV employees' salary falls in
a range of 5,000 to 10,000 Yuan (about US$625 to US$1,250) per month. Urban
local enterprise employees' salary averages 4,500 Yuan (about US$562.50) per
month. The mainstream computer sells for 8,000 to 15,000 Yuan (about US$1,000 to
1,875), the low end sells for only 6,000 Yuan to 8,000 Yuan (about US$750 to
US$1,000).

China - Internet
- ----------------

Chinese Internet users have increased from 10,000 in 1994 to 620,000 by
the end of 1997. At present, Internet users are increasing by 150,000 per month
on average. There were about 2.1 million at the end of 1998, and by the end of
year 2000, there may be 10 million users. China's PC market's exponential growth
and technological advancements are the major forces driving the Internet boom.

Large corporations are entering the China market. In March 1999, Microsoft
unveiled a new product called Venus, developed by a joint venture in China.
"Venus" would let Chinese consumers view the Internet through their TV sets and
is similar to Microsoft Web TV product in the U.S.

<PAGE>

Future Plans for ISP in China
- -----------------------------

China has recently allowed other domestic companies to do businesses
formerly monopolized by China TeleCom. Presently, foreign investors are still
restricted from direct operation for the next 2 to 3 years. China is also
investing heavily to improve the bandwidth and the quality of their backbone -
ChinaNet, while at the same time reducing the rates for telecommunications
services. Based on those facts, Xin Net management plans to open more offices in
major cities and enhance E-commerce and other value-added services.

Products, Services, Markets, Methods of Distribution and Revenues.
- ------------------------------------------------------------------

Internet Services are presently the principal services of the company. The
market is focused on China's major cities; Xin Hai offices in Beijing and
Shenyang have been operating since 1997. Offices in Shanghai and Taiyuan will
open soon. Revenues come from subscription fees, online usage fees, home page
design fees and other miscellaneous sources.

Working Capital Needs
- ---------------------

The working capital needs of the Registrant arise primarily from: expand
existing capacity of the services, open more offices in other major cities,
launch new value-added services, enhance capability for E-commerce design and
development in the People's Republic of China. These requirements have been met
by a private placement for an amount of US$5.5 millions. This provides the
needed working capital for the near and medium term of the Company.

Dependence on client base.
- --------------------------

Presently the Registrant's primary revenue comes from subscription fees
from the client base in Beijing and Shenyang. At the end of 1998, the number of
subscribers totaled 17,000, that number increased to 20,000 by the end of March,
1999. The Company's dependence on its client base will continue in the
foreseeale future.

Backlog of Orders. None.
- ------------------ -----

Government Contracts. None.
- --------------------- -----

Competitive Conditions.
- -----------------------

The Internet Services industry in China is highly competitive. Xin Hai
faces competition from government owned ISPs and other privately owned ISPs.
Many of them possess greater financial and personnel resources than Xin Hai and
therefore have greater leverage to use in developing new services, expanding
capacities, hiring personnel and marketing. Accordingly, a high degree of
competition in these areas is expected to continue. The markets for Internet
services have increased substantially in recent years. But cost of lines rental
is still the major expense of Xin Hai, Currently, all ISPs can only rent lines
from China TeleCom. There is uncertainty as to future line cost, although it has
been reduced by half recently and is expected to continue to come down. There is
no assurance the Registrant's revenues will not be adversely affected by these
factors.

The market in China is monitored by the Government, which could impose
taxes or restrictions at any time which would make operations unprofitable and
infeasible and cause a write-off of capital investment in Chinese ISP
opportunities.

A number of factors, beyond the Registrant's control and the effect of
which cannot be accurately predicted may affect the marketing of the ISP and
services. These factors include political policy on ISP's operation, political
policy to open the doors to foreign investors, the availability of adequate
bandwidth of the ChinaNet backbone and gateway.

Y2K Compliance
- --------------

The Xin Hai joint venture operating hardware and software are Y2K
compliant.

Registrant Sponsored Research and Development. None.
- ----------------------------------------------

<PAGE>

Compliance with related Laws and Regulations.
- ---------------------------------------------

The operations of the Xin Hai joint venture are subject to local,
provincial and national laws and regulations in the People's Republic of China.
Xin Hai Technology Development LTD. holds licenses to do businesses in the
currently operated locations: Beijing and Shenyang, as well as in Shanghai and
Taiyuan, where office openings are planned in late 1999. The Registrant is
unable to assess or predict at this time what effect such regulations or
legislation could have on its activities in the future.

(a) Local regulation -

The Registrant cannot determine to what extent future operations and
earnings of the Xin Hai joint venture may be affected by new legislation, new
regulations or changes in existing regulations.

(b) National regulation -

The Registrant cannot determine to what extent future operations and
earnings of the Xin Hai joint venture may be affected by new legislation, new
regulations or changes in existing regulations.

The value of the Registrant's investments in the Xin Hai joint venture may
be adversely affected by significant political, economic and social
uncertainties in the People's Republic of China ("PRC"). Any changes in the
policies by the Government of the PRC could adversely affect the Xin Hai joint
venture by, among other factors, changes in laws, regulations or the
interpretation thereof, confiscatory taxation, restrictions on currency
conversion, the expropriation or nationalization of private enterprises, or
political relationships with other countries.

Material Agreements
- -------------------

(1) Joint Venture Agreement

By an agreement dated August 25, 1998 through a 100% owned subsidiary
Infornet Investment Ltd., ( Registered in Hong Kong) - the Registrant agrees to
contribute 100% of the capital expenditure of the Xin Hai joint venture; in
return, Infornet Investment Ltd. will control 80% of the profit generated by Xin
Hai until recoupment of its investment and thereafter the profit share will
revert to 49% to Xin Hai Technology Developmnet, LTD. and 51% to the company.

Number of Persons Employed
- ---------------------------

As of May 31, 1999, the Registrant had two employees, Xiao-qing Du and Xin
Wei, through Infornet Investment Corp., each at a salary of C$2,500 per month,
who assume the day-to-day management of the Company.

The Xin Hai joint venture had over 50 full-time employees in the PRC at
the end of May 1999.

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

The information presented herein, should be read in conjunction with the
Registrant's consolidated financial statements and related notes appearing
elsewhere herein.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND CHANGES IN
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

The Company had cash capital of $536,189 at 1998 year end which was
virtually unchanged from year end 1997.

The Company had no other capital resources other than the ability to use
its common stock to achieve additional capital raising in a private placement.
The Company has equipment of $227,427 on the books which is not necessarily
liquid at such value. Other than cash capital, the other assets would be
illiquid.

The Company remains in the development stage and, since inception,
has experienced significant liquidity problems. The Company has current assets
of over $5,000,000 in the form of cash and has current liabilities of
approximatley $160,000 for operations expenses.

The Registrant has revenues from its operations at this time. However
capital from private placements and/or borrowing against assets are required to
fund future operations. The Company completed a private offering of Common Stock
at $0.40 per share for $750,000 in June 1998. In 1999 the Company closed a
private placement of 5.5 million units of common stock at US$1.00 per Unit
consisting of one (1) common share and one (1) Non-Transferable Share Purchase
Warrant. One (1) Warrant entitles the holder to purchase on or before March 31,
2001 one (1) additional unit of the Issuer at a price of US$2.00 per Unit, each
Unit consisting of one (1) common share and one (1) additional warrant. The
additional warrant entitles the holder to purchase one (1) additional common
share of the Issuer at a price of US$5.00 per share on or before March 31, 2002.

RESULTS OF OPERATIONS

The company will carry out its plan of business as discussed above. The
Company cannot predict to what extent its liquidity and capital resources will
be depleted by the operating losses (if any) of the Xin Hai joint venture. For
fiscal year 1999, the Company anticipates increased revenues derived from an
increase in subscriber base.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO THE
YEAR ENDED DECEMBER 31, 1997

The Company achieved revenues of $527,988 in 1998 in the form of the net
sales from its joint venture in China with XIN HAI Technology Ltd. Its net sales
in 1997 were $96,177. The Company incurred operating expenses of $510,555 in
1998 compared to operating expenses of $333,084 in 1997. Operating income for
1998 was $17,433 in contrast to the 1997 operating loss of ($236,907). The
Company had miscellaneous income of $4,845 in 1998 and $7,221 in 1997. The net
income in 1998 was $22,278 compared to the net loss in 1997 of ($229,686). The
per share income for 1998 was $.001, and the per share loss for 1997 was ($.02)

<PAGE>

Future trends: The Company cannot assure that any profit on revenues can
continue in the future, because the Company intends, under its joint venture
agreement, to invest in further Internet "backbone" and technology for its China
Internet operations. The Company expects to spend in excess of $500,000 in 1999
on development of its business in China, and it could be expected that it may
have a loss on operations.

CHANGES IN FINANCIAL CONDITION

At year end 1998 the Company's assets had increased to $604,575 compared to
$554,768 at year 1997. The current assets totaled $376,179 at 1998 year end
compared to $365,428 at 1997 year end. Total and current liabilities at year end
1998 were $40,504 compared to $12,975 at 1997 year end.

RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999 AS COMPARED TO THE
QUARTER ENDED MARCH 31, 1998

The Company had revenues of $139,315 in the first quarter of 1999 as
compared to $114,803 in the same quarter in 1998. The Company incurred general
and administrative expenses of $102,698 in the quarter in 1999 and similar
general administrative expenses of $103,569 in the same quarter in 1998. The
Company reflected on operating profit of $36,617 in the first quarter of 1999 as
compared to $11,234 in profits in the same quarter in 1998. The Company had
miscellaneous income of $1,033 in 1999 and $1,413 in 1998 in the quarter. Net
earnings for the quarter in 1998 were $37,650 and $12,647 in the quarter in
1998. The earnings per share in the quarter in 1999 and 1998 were nominal.

NEED FOR ADDITIONAL FINANCING

The Company has capital sufficient to meet the Company's current
cash needs, including the costs of compliance with the continuing reporting
requirments of the Securities Exchange Act of 1934. The Company may have to seek
loans or equity placements to cover future cash needs to continue expansion.
There is no assurance, however, that the available funds will ultimately prove
to be adequate to continue its business and the Company's needs for additional
financing are likely to increase substantially.

No commitments to provide additional funds have been made by
management or other stockholders.Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover
operations expenses. The company achieved a private placement of $5,500,000 in
spring 1999 and retains over $5,000,000 as capital.

If future revenue declines, or operations are unprofitable, the Registrant
will be forced to develop another line of business, or to finance its operations
through the sale of assets it has, or enter into the sale of stock for
additional capital, none of which may be feasible when needed. The registrant
has no specific management ability, nor financial resources or plans to enter
any other business as of this date.

From the aspect of whether the Registrant can continue toward its business
goal of maintaining and expanding its joint venture Internet Services in China,
the Registrant may use all of its available capital without generating a profit.

ITEM 3. PROPERTIES

The Company currently maintains an office at #830, 789 W. Pender Street,
Vancouver, B.C., Canada as its corporate headquarters. It has offices in Beijing
China at Suite 210, Building B, No. 11 Wu Gen Lin Road, West District, Beijing
and also in Shenyang China at #44 North Huang He St., HuangGu, Shenyang,
Liaoning, P.R. China, Post Code 110034.

As of March 31, 1999, The Registrant had the following tangible assets.
(The amount is quoted in US Dollar)

(a) Real Estate. None

(b) Office Equipment 3,440

(d) Furniture 3,349

(e) Accumulated depreciation (58,913)
(through Dec. 31, 1998)

<PAGE>

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CONFLICTS OF INTEREST

The officers and directors of the Company will not devote more than
a portion of their time to the affairs of the Company. There will be occasions
when the time requirements of the Company's business conflict with the demands
of their other business and investment activities. Such confllict may require
that the company attempt to employ additional personnel. There is no asurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.

There is no procedure in place which would allow officers or directors to
resolve potential conflicts in an arms - length fashion. Accordingly, they will
be required to use their discretion to resolve them in a manner which they
consider appropriate.

(a) Beneficial owners of five percent (5%) or greater, of the Registrant's
Common Stock: No Preferred Stock is outstanding at the date of this offering.
The following sets forth information with respect to ownership by holders of
more than five percent (5%) of the Registrant's Common Stock known by the
Registrant based upon 20,975,000 shares outstanding at August 25, 1999.

<PAGE>

Title of Name and Address Amount of Percent of
Class of Beneficial Owner Beneficial Interest Class
- ----- ------------------- ------------------- -----

Xiao-qing Du
Common Stock #2754 Adanac St. 2,076,000 9.8%
Vancouver, BC V5K 2M9

Common Stock Richco Investors Inc. 2,800,000 13.3%
Ste 830 789 West Pender
St. Vancouver, BC V6C 1H2

(b) The following sets forth information with respect to the Registrant's
Common Stock beneficially owned by each Officer and Director, and by all
Directors and Officers as a group, at August 25, 1999.

Title of Name of Amount of Percent of
Class Beneficial Owner Beneficial Ownership Class

Common Stock Xiao-qing Du (Director) 2,076,000 9.8%
2754 Adonac St.
Vancouver, B.C. V5K 2M9

Common Stock Ernest Cheung 0 0
Richco Investors
(See Richco Investors below)

Common Stock Maurice Tsakok 0 0
Richco Investors
(See Richco Investors below)

Common Stock Richco Investors, Inc. 2,800,000 13.3%
Ste. 830,789 W. Pender St.
Vancouver B.C. V6C 1H2
(beneficially owned by Ernest Cheung, Director and Secretary)
Maurice Tsakok (a Director) is also Director of Richco
Investors, Inc.

Common Stock S. Y. Marc Hung 118,000 .5%
830,789 W. Pender St.
Vancouver B.C. V6C 1H2

Total as a group 4,994,000 23.6%

<PAGE>

ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) The following table furnishes the information concerning the directors
of the Registrant as of June, 1999. The directors of the Registrant are elected
every ear and serve until their successors are elected and qualify.

Name Age Title Term
- ---- --- ----- ----
Xiao-qing Du 28 President of Subsidiary
Infornet Investment Corp. and
Director Annual
S.Y. Marc Hung 54 President
Director Annual
Ernest Cheung 49 Director Annual
Maurice Tsakok 47 Director Annual

On March 10, 1999 Jing Liang resigned as a director of the Company.

On April 6, 1999, Xiao-qing (Angela) Du stepped down as president of Xin
Net Corp. Messrs. Maurice Tsakok and Marc Hung were elected to the board of
directors. Marc Hung was appointed to the position of President.

The term of office for each director is one (1) year, or until his/her
successor is elected at the Registrant's annual meeting and is qualified. The
term of office for each officer of the Registrant is at the pleasure of the
board of directors.

The board of directors has neither nominating nor auditing committee.
Therefore, the selection of persons or election to the board of directors was
neither independently made nor negotiated at arm's length.

(b) Identification of Certain Significant Employees.

Strategic matters and critical decisions are handled by the directors and
executive of the Company. Day-to-day management is delegated to Xiao-qing
(Angela) Du and Xin Wei who are employees of the Registrant's wholly-owned
subsidiary, Infornet Investment Corp.

(d) Business Experience.

The following is a brief account of the business experience during the
past five years of each director and executive officer of the Registrant,
including principal occupations and employment during that period and the name
and principal business of any corporation or other organization in which such
occupation and employment were carried on.

Xiao-qing (Angela) Du, President and Director, age 28, was President and
Director of the Registrant from 1996 to April 1999. She received a Bachelor of
Science in International Finance in 1992 from East China Normal University. She
received a Master of Science in Finance and Management Science in 1996 from
University of Saskatchewan Canada. She has been Business Manager of China
Machinery & Equipment I/E Corp. (CMEC) from 1992 to 1994. She is now President
of Infornet Investment Corp., a wholly owned subsidiary and remains a director
of regisrant.

Ernest Cheung, Secretary and Director, age 49, has been Secretary of the
Registrant since May, 1998. He received a B. Math in 1973 from University of
Waterloo Ontario. He received an MBA in Finance and Marketing from Queen's
University, Ontario in 1975. From 1991 to 1993 he was Vice President of Midland
Walwyn Capital,Inc. of Toronto, Canada.From 1992 - 1995 he served as Vice
President and Director of Tele Pacific International Communications Corp. (VSE).
He has also served as President for Richco Investors, Inc. (CDN) since 1995. He
has been a Director of Registrant since 1996. He is currently a Director of Agro
International Holdings, Inc. since 1997, Spur Ventures, Inc. since 1997, Richco
Investors, Inc. since 1995 and Drucker Industries, Inc. since 1997.

<PAGE>

Marc Hung, B.A.Sc.(E.E.), M.A. Sc. (E.E.) University of Montreal (1969 & 1971),
President and Director, age 54, has been President of the Registrant since April
6, 1999. He has over 25 years experience as engineer, manager and senior
executive in a major Quebec utility Hydro Quebec. Throughout the years, he has
been closely associated with technical and technological development and
management, including computer hardware and software.

Maurice Tsakok, Director, age 47, has over 15 years of computer and financial
industry experience. He holds an Engineering degree BSc (1974 University of
Minnesota) as well as an MBA specializing in Management Information Systems
(MIS) (1976 Hofstra University).

(e) Directors Compensation

Directors who are also officers of the Registrant receive no compensation
for services as a director.

ITEM 6. EXECUTIVE COMPENSATION

(a) Cash Compensation.

Compensation paid by the Registrant for all services provided during the
fiscal year ended December 31, 1998, (1) to each of the Registrant's five most
highly compensated executive officers whose cash compensation exceeded $60,000
and (2) to all officers as a group.

SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Awards

- --------------------------------------------------------------------------------
Name and Year Salary Bonus Other Annual Restricted Securities
Principal ($) ($) Compensation Stock Underlying
Position ($) Award(s) ($Options/SARs(#)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Xiao-qing 1998 15,000 0 0 0 0
(Angela) Du,
President and
Director
(resigned as
Pres. In 1999)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Jing Liang, 1998 8,000 0 0 0 0
Secretary and
Director
(resigned in
1999)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ernest Cheung, 1998 0 0 0 0 0
Secretary and
Director

(b) Compensation Pursuant to Plans. None.

(d) Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year (None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)

(e) Compensation of Directors.

Compensation paid by the Registrant for all services provided during the
fiscal year ended December 31, 1998, (1) to each of the Registrant's directors
whose cash compensation exceeded $60,000 and (2) to all directors as a group is
set forth below:

<PAGE>

SUMMARY COMPENSATION TABLE OF DIRECTORS

(Except for compensation of Officers who are also Directors which Compensation
is listed in Summary Compensation Table of Executives)

Cash Compensation Security Grants

- --------------------------------------------------------------------------------
Name and Year Annual Meeting Consulting Number Securities
Principal retainer Fees ($) Fees/Other of Underling
Position Fees ($) Fees ($) Shares Options/SARs(#)
(#)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Xiao-qing Du, 1998 0 0 0 0 0
Director

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ernest Cheung, 1998 0 0 0 0 0
Director
(resigned in
1999)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Directors as a 0 0 0 0 0 0
group
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

No director, except for those who are also officers of the Company as
listed above, received any compensation in 1998.

Effective on May 1, 1998, Jing Liang resigned from his position as
Secretary of the Registrant. Ernest Cheung was appointed Secretary of the
Registrant as of the same date.

Effective March 10, 1999 Jing Liang resigned as director of the Company.

Effective on April 6, 1999, Mr. Marc Hung and Mr. Maurice Tsakok were
elected as directors of the board. Ms. Angela X. Du stepped down as the
President of the Registrant, and Mr. Marc Hung was appointed President of the
Registrant as of the same date.

(e) Termination of Employment and Change of Control Arrangements. None.

(f) Stock purchase options:

On February 26, 1999, stock options for a total of 1.4 million share at
$.40 per share were granted to parties that had contributed to the success of
the company in the past. They are: Lancaster Pacific Investment Ltd., Tandoor
Holdings Limited, Marc Hung, Kun Wei and Xin Wei. All 1.4 million share options
were exercised as of April 6, 1999.

Section 16(a) of the Securities Exchange Act of 1934, as amended (The
"Exchange Act"), requires the Registrant's officers and directors, and persons
who own more than 10% of a registered class of the Registrant's equity
securities, to file reports of ownership and changes in ownership of equity
securities of the Registrant with the Securities and Exchange Commission and
NASDAQ. Officers, directors and greater-than 10% shareholders are required by
the Securities and exchange Commission regulation to furnish to Registrant with
copies of all Section 16(a) that they file.

<PAGE>

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Transactions
--------------------

On February 20, 1997, the Company issued 4,000,000 shares of cmmon stock
for services rendered at $.001 per share to 15 shareholders, none of whom were
affiliated or shareholders. The following shareholders recived shares equal to
or greater than 5% of the then outstanding shares: Kun Wei - 450,000, Xin Wei -
750,000 shares, Xi Ping Qu - 300,000 shares, Gemsco Management Ltd - 700,000
shares, Farmind Link Corp. - 700,000 shares, Simon Yuen - 700,000 shares and
Lionel Welch 320,000 shares.

During 1997, the Company issued 5,000,000 shares of common stock to
acquire the wholly owned subsidiary, Infornet Investment Corp. (Canada) to X.
Qing (Angela) Du - 4,000,000 shares and Jing Liang - 1,000,000 shares.

On August 25, 1997, through the wholly-owned subsidiary, Infornet
Investment Limited (Hong Kong), the Company formed an 80% cooperative joint
venture called Placer Technologies Corp. (a limited liability company) with Xin
Hai Technology Development Ltd. (a People's Republic of China Corporation) as a
20% partner, for a term of twenty (20) years. Xin Hai Technology Development
Ltd. (Xin Hai) is engaged in the business of developing computer hardware,
software, and telecommunication network technology, and providing consultation
and training services.

In May 1999, Marc Hung, President and Director, purchased 80,000 units of
the private placement at the $1.00 offering price. Richco Investors, Inc. a
shareholder controlled and beneficially owned by Ernest Cheung and Maurice
Tsakok, purchased 700,000 units in the private placement at $1.00 per unit in
May 1999.

In February 1999, Marc Hung, who was neither an officer nor director but
since has become President and Director, was granted and exercised (in March) an
option to purchase 150,000 shares of common stock at $.40 per share.

In February 1999, Kun Wei, a shareholder, was granted and exercised (in
March) an option to purchase 330,000 shares of common stock at $.40 per share.

In February 1999, Xin Wei, a shareholder, was granted and exercised (in
March) an option to purchase 330,000 shares of common at $.40 per share.

ITEM 8. DESCRIPTION OF SECURITIES

COMMON STOCK

The Company's Articles of Incorporation as amended authorize the issuance
of 50,000,000 shares of common stock no par value. Each record holder of Common
Stock is entitled to one vote for each share held on all matters properly
submitted to the stockholders for their vote. Cumulative voting for the election
of directors is not permitted by the Articles of Incorporation.

Holders of outstanding shares of Common Stock are entitled to such
dividends as may be declared from time to time by the Board of Directors out of
legally available funds; and, in the event of liquidation, dissolution or
winding up of the affairs of the Company, holders are entitled to receive,
ratable, the net assets of the Company available to stockholders after
distribution is made to the creditors. Holders of outstanding shares of Common
Stock have no preemptive, conversion or redemptive rights. Allof the issued and
outstanding shares of Common Stock are, and all unissued shares when offered and
sold will be,duly authorized, validly issued, fully paid, and nonassessable. To
the extent that additional shares of the Company's Common Stock are issued, the
relative interests of then existing stockholders may be diluted.

WARRANTS

The Company has issued 5,500,000 warrants as part of its unit private
placement in May 1999. Each warrant entitles the holder to purchase, on or
before March 31, 2001, one (1) additional unit of the Issuer at a price of US
$2.00 per unit, each unit consisting of one (1) common share and one (1)
additional warrant. The additional warrant entitles the holder to purchase one
(1) additional common share of the Issuer at a price of US $5.00 per share on or
before March 31, 2002.

<PAGE>

TRANSFER AGENT

The Company has engaged Holloday Stock Transfer, Inc., 2939 North 67th
Place, Scottsdale, Arizona, 85251 as transfer agent.

REPORTS TO STOCKHOLDERS

The Company plans to furnish its stockholders with an annual report for
each fiscal year containing financial statements audited by its independent
cerftified public accountants. In the event the Company enters into a business
combination with another company, it is the present intention of management to
continue furnishing annual reports to stockholders. Additionally, the Company
may, in its sole discretion, issue unaudited quarterly or other interim reports
to its shockholders when it deems appropriate. The Company intends to comply
with the periodic reporting requirements of the Securities Exchange Act of 1934
for so long as it is subject to those requirements.

PART II

ITEM 1. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS

(a) The Registrant's common stock is traded on the NASD Electronic Bulletin
Board. The following table sets forth high and low bid prices of the
Registrant's common stock for years ended December 31, 1997 and December 31,
1998 and through June 30, 1999 as follows:

Bid (U.S. $)
------------

1999
----

High Low
---- ---
First Quarter $2.00 $ .34

Second Quarter $6.625 $2.3125

1998
----

First Quarter $ .53 $.187
Second Qurater .375 .15
Third Quarter 1.06 .25
Fourth Quarter .78 .24

1997
----

First Quarter $ .75 $.03
Second Quarter .84 .68
Third Quarter .45 .25
Fourth .50 .156

Such Bulletin Board quotations reflect interdealer prices, without mark
up, mark down or commission and may not necessarily represent actual
transactions.

(b) As of August 25, 1999, the Registrant had 108 shareholders of record of
common stock.

(c) No dividends on outstanding common stock have been paid within the last two
fiscal years, and interim periods. The Registrant does not anticipate or intend
upon paying dividends for the foreseeable future.

<PAGE>

ITEM 2. LEGAL PROCEEDINGS

The Company is not a party to any pending legal proceedings and no such
proceedings are known to be contemplated.

No director, officer or affiliate of the Company, and no owner of record
of beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such director, officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
pending litigation.

ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

In connection with the audits of the most recent fiscal years and any
interim period preceding resignation, no disagreements exist with any former
accountant on any matter of accounting principles or procedure, which
disagreements if not resolved to the satisfaction of the former accountant would
have caused him to make reference in connection with his report to the subject
matter of the disagreement(s).

The principal accountant's report on the financial statements for any of
the past two years contained no adverse opinion or a disclaimer of opinion nor
was qualified as to uncertainty, audit scope or accounting principles.

ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES

Since September 12, 1996 (the date of the Company's formation), the
Company has sold its Common Stock to the persons listed in the table below in
transactions summarized as follows:

Consideration consisted of pre-incorporation consulting services rendered
to the Registrant related to investigating and developing the Registrant's
proposed business plan and capital structure and completing the organization and
incorporation of the Registrant.

Date of Price per
Consideration Purchase # of Shares Share
------------- -------- ----------- -----
Ken Finkelstein Founder 10/96 3,000,000 $.001
Services rendered
Prior to Nov. 1996

1996 Original Purchasers List
- ---- ------------------------

Name Address Date of Number Consideration Price per
- ------------- Purchase of Shares ------------- Share
- ------------- -------- --------- -----
<S> <C> <C> <C> <C>

Sinh Le
1403- 4300 Mayberry St. Burnaby,
B.C. V5H-4A4 12/11/96 1000 $250 $.25

Terrence Johnson
1403- 4030 Mayberry St. Burnaby,
B.C. V5H-4A4 12/11/96 1000 $250 $.25

Kashmir Singh
1025- Augusta Ave, Burnaby,
B.C. V5A-1K3 12/11/96 2000 $500 $.25

<PAGE>

Noah Natovitch
121-3280 E. 58th Ave,Vancouver,
B.C V5S-3T2 12/11/96 1000 $250 $.25

Todd H. Weaver
2000 South Ocean Lane #11,
Ft. Lauderdale FL 33316 12/11/96 4000 $1,000 $.25

Fleet Sparrow, Inc.
7 Prince Street, P.O. Box 1117,
Belize City, Belize 12/11/96 2000 $500 $.25

David Mundie
2419 TreeTop Lane, N. Vancouver,
B.C. V2H-2K6 12/11/96 2000 $500 $.25

Redbrook Creek Corp
7 Prince St. P.O. Box 1117,
Belize City, Belize 12/11/96 2000 $500 $.25

Wes Janzen
#100- 8500 Alexandra Road,
Richmond, B.C. V6X-1C4 12/11/96 2000 $500 $.25

Wes Kroeker
#100- 8500 Alexandra Road,
Richmond, B.C. V6X-1C4 12/11/96 2000 $500 $.25

L. James Harder
5512 Okanagan N. Ave., Site 1B
Camp 11, Vernon B.C.V1T-6Y5 12/11/96 2000 $500 $.25

Kari - Anne Chase
85 Walnut Crescent, Whitehorse,
Yukon Y1A-5C7 12/11/96 2000 $500 $.25

<PAGE>

Steven Giles
309-727 Hughton Road, Kelowna,
B.C. V1X-7J7 12/11/96 1000 $250 $.25

Robert N. Hatton
1830 Large Ave, RR #5 S-17B, C-53,
Kelowna, B.C. V1X-4K4 12/11/96 1000 $250 $.25

Adrian Klien
575 Perry Road, Kelowna,
B.C. V1X-1J1 12/11/96 1000 $250 $.25

Lamber Dhaliwal
3556 Calder Ave, N.
Vancouver, B.C. 12/11/96 2000 $500 $.25

Biro Dhaliwal
3556 Calder Ave, N.
Vancouver, B.C. 12/11/96 2000 $500 $.25

Doris Mackney
Box 44021, Oyama,
B.C. V4V01ZS 12/11/96 2000 $500 $.25

Stephane Martin
1704 Smithson Dr., Kelowna,
B.C. V1Y-4E3 12/11/96 1000 $250 $.25

Guy Martin
1704 Smithson Dr., Kelowna,
B.C. V1Y-4E3 12/11/96 1000 $250 $.25

Lawrence Kit
Box 32, Vegreville,
Alberta, T9C-1R1

Mervyn Kit
6604-132 A/ Ave.
Edmonton, AB T5C-2 B.C. 12/11/96 1000 $250 $.25

<PAGE>

Emil Kit
5365 Bogette Place
Kamloops, B.C. V2C-6B2 12/11/96 1000 $250 $.25

Robert Thompson
14250 Middlebench Rd,
Oyama, B.C. V4V-2B9 12/11/96 1000 $250 $.25

Bob Mackney
P.O. Box 44021,
Oyama, B.C. V4V-1Z5 12/11/96 11,000 $2,750 $.25

Dean Mackney
11574 Artela Rd,
Winfield, B.C. V4V-1H4 12/11/96 1000 $250 $.25

Robert Brown
13525 Lake Pine
Winfield B.C. V4V-1A3 12/11/96 1000 $250 $.25

Susan Bozyk
109-980 Dilworth Dr,
Kelowna, B.C. V1V01S6 12/11/96 500 $125 $.25

Cal McCarthy
10060 McCarthy Road,
Winfield, B.C. V4V-1T1 12/11/96 1000 $250 $.25

Sheelagh Thompson
14250 Middllebench Road,
Oyama, B.C. V4V-2B9 12/11/96 1000 $250 $.25

<PAGE>

Tarif Mapara
1790 Boundary Rd,
Burnaby, B.C. V5M-4M2 12/11/96 1000 $250 $.25

Saira Mapara
1790 Boundary Rd,
Burnaby, B.C. V5M-4M2 12/11/96 1000 $250 $.25

Zaher Mapara.
1576 Lodgepole Pl,
Coquitlam, B.C. V3E-2V9 12/11/96 1000 $250 $.25

Mumtaz Mapara
1576 Lodgepole Pl,
Coquitlam, B.C. V3E-2V9 12/11/96 1000 $250 $.25

Riaz Mapara
1576 Lodgepole Pl,
Coquitlam, B.C. V3E-2V9 12/11/96 1000 $250 $.25

Fairous Mapara.
1576 Lodgepole PI,
Coquitlam, B.C. V3E-2V9 12/11/96 1000 $250 $.25

Sam Mapara ITF:
Arman Mapara 2932
Blackbear Ct. Coq, B.C. 12/11/96 1000 $250 $.25

Sam Mapara ITF:
Ariana. Mapara 2932
Blackbear Ct. Coq, B.C. 12/11/96 1000 $250 $.25

Anisha Mapara
2932 Blackbear Court,
Coquitlam, B.C 12/11/96 1000 $250 $.25

Sameer Mapara
2932 Blackbear Court,
Coquitlam, B.C. 12/11/96 1000 $250 $.25

Tazmina MangaIji
8214 Lakeland Drive,
Burnaby, B.C. V5A-4C9 12/11/96 2000 $500 $.25

Maidenhood MangaIji
8214 Lakeland Drive,
Burnaby, B.C. V5A-4C9 12/11/96 2000 $250 $.25

Garry McColl
#1405-2020 Bell Wood Ave,
Burnaby, B.C. V5B-4P8 12/11/96 1000 $250 $.25

<PAGE>

Larry Kozak
1103-9595 Erickson Dr,
Burnaby, B.C. V3J-7N9 12/11/96 2000 $500 $.25

Rob Kozak
1103-9595 Erickson Dr,
Burnaby, B.C. V3J-7N9 12/11/96 500 $125 $.25

Garry Messer
25767 La Salina Pl,
Moreno Valley, CA 92551 12/11/96 500 $125 $.25

Sharon Delbridge
25767 La Salina PI,
Moreno Valley, CA 92551 12/11/96 1000 $250 $.25

James M. Lucas
P.O. Box 872,
Blue Jay, CA 92317 12/11/96 2000 $500 $.25

Joe Gamache
1421 Barber Ct.
Bunning, CA 92220 12/11/96 1000 $250 $.25

Dustin Lee Sexton
8350 Magnolia Ave, Unit 125,
Riverside, CA 92504 12/11/96 1000 $250 $.25

Ramona Lee Sexton
3957 San Mateo,
Riverside, CA 92504 12/11/96 1000 $250 $.25

William Navarro
23403 Silver Strike Dr,
Canyon Lake, CA 92587 12/11/96 2000 $500 $.25

<PAGE>

Jake Penner
1688 West 65th Ave,
Vancouver, B.C. V6P-2R3 12/11/96 2000 $500 $.25

Vern Craig
1369 Compton Cres,
Tsawwassen, B.C. V4L-IP8 12/11/96 1000 $250 $.25

Doug Maxwell
605 West Kent Ave,
Vancouver, B.C. V6P-6T7 12/11/96 1000 $250 $.25

M. Erik Nylin
RR6-S600, C36,
Courtenay, B.C. V9N-8H9 12/11/96 1000 $250 $.25

Dorothy L. Nylin
RR6-S600, C36,
Courtenay, B.C. V9N-8H9 12/11/96 500 $125 $.25

Richard T, Wotruba
501 Las Alturas Rd,
Santa Barbara, CA 93103 12/11/96 500 $125 $.25

Patricia A. Wotruba
501 Las Alturas Rd,
Santa Barbara, CA 93 10-1 12/11/96 1200 $300 $.25

Bhupinder Mroke
5076 Victoria Dr,
Vancouver, B.C. V5P-3T8 12/11/96 1000 $250 $.25

Jackueline Herauf
#56-28 Berwick Cres NW,
Calgary, AB T3K-IY7 12/11/96 2000 $500 $.25

Larry I Sandler D.D.S
272 Wolverine Lake Dr,
Wolverine Lake, MI 48390 12/11/96 2000 $500 $.25

<PAGE>

Linda C. Sandler
272 Wolverine Lake Dr,
Wolverine Lake, NU 483 90 12/11/96 1000 $250 $.25

D. Percy Ryan
2423 37th Street SE,
Calgary, AB T2B-OZI 12/11/96 2000 $500 $.25

Jageero Singh
122 West Braemar Rd, N.
Vancouver, B.C. V7N-2S8 12/11/96 2000 $500 $.25

Jagbir Johl
122 West Braemar Rd, N.
Vancouver, B. C. V7N-2 S 8 12/11/96 2000 $500 $.25

Bob L. Stobbe
9420 98A Ave,
Fort St John, B.C. V 15-1 1R4 12/11/96 500 $125 $.25

Britt L. Weaver
6741 Alexandria Lane,
Charlotte, NC 28270 12/11/96 500 $125 $.25

Katherine H. Weaver
6741 Alexandria Lane,
Charotte, NC 28270 12/11/96 1000 $250 $.25

Dorilda Limoges
6509 Coach Hill Rd SW,
Calgary, A13 T2B-1H5 12/11/96 1000 $250 $.25

Vincent Luong
192 Saratoga Close NE,
Calgary, AB T 1 Y-7AI 12/11/96 1000 $250 $.25

Sigurd B. Peterson
2671 MacDonald Dr,
Victoria, B.C. V8N-1Y1 12/11/96 1000 $250 $.25

Dr. John Dale
Box 499, Nelson, B.C. VIL-5R3 12/11/96 1000 $250 $.25

Diana Haschke
Box 489,
Nelson, B.C. VIL-5R3 12/11/96 1000 $250 $.25

Errol Biebrick
104 Pinewind Close NE,
Calgary, AB TI 8-2H3 12/11/96 1000 $250 $.25

Bradley T. Johns
4602- 45th Ave NE #3 29,
Tacoma, WA 98422 12/11/96 1000 $250 $.25

Bhupinder Mann
1182 E, 33rd Ave,
Vancouver, B.C. V5V-3B3 12/11/96 1000 $250 $.25

<PAGE>

Nirmal S. Mann
1182 F. 33rd Ave,
Vancouver, B.C. V5V-3B3 12/11/96 1000 $250 $.25

S.P. Swadron
3914 W 11th Ave,
Vancouver, B.C. V6R-2L2 12/11/96 2000 $500 $.25

Sylvia Moir
905 Signal Hill Green SW,
Calgary, AB T3H-2Y4 12/11/96 1000 $250 $.25

John R. Moir
214 555 Strathcona Blvd SW,
Calgary, AB T3H-2Z9 12/11/96 1000 $250 $.25

Charanjit S. Parmar
17924-99A Ave,
Edmonton, AB T5T-3RI 12/11/96 2000 $500 $.25

Harjit K. Parmar
17924-99A Ave,
Edmonton, AB T5T-3RI 12/11/96 2000 $500 $.25

Murray Bisset
11402-120 St,
Edmonton, AB T5G-2Y2 12/11/96 2000 $500 $.25

Tom Schreiber
14316-123 St,
Edmonton, AB T5X-3M2 12/11/96 2000 $500 $.25

Don Pierson
100 Nottingham Rd,
Sherwood Park, AB T8A-5M5 12/11/96 2000 $500 $.25

Usha Bibra
6112-34A Ave,
Edmonton, AB T6L-IE4 12/11/96 1000 $250 $.25

Sachin Bibra
6112-34A Ave,
Edmonton, AB T6L-1E4 12/11/96 500 $125 $.25

KamaIjit Lall
3664-31A St,
Edmonton, AB T6T-1H6 12/11/96 500 $125 $.25

Tajinder Chohan
165 W. 65th Ave,
Vancouver, B.C. V5R-3T7 12/11/96 73,300 $18,325 $.25
------ ------
TOTAL 200,000 $50,000
</TABLE>

The offering and sales of the shares was made in reliance upon the exemptions
contained in Rule 504 of Regulation D and Regulation S to offshore residents,
and in Canada pursuant to the exemptions from registration contained in section
55(2) (4) and 55 (2) (9) of the Securities Company Act (B.C. and/or paragraphs
128(a) or 128(h) of the Securities Rules to the Securities Act).

1997 PRIVATE PLACEMENT
- ---- -----------------

Subscriber Date of Consideration Shares Price Per
- ---------- ------------- ------
Purchase Share
-------- -----
<S> <C> <C> <C> <C>

Balraj Mann 6/2/97 $40,000 100,000 $.40
6228 Tiffany Blvd.
Richmond, B.C. V7C 4Z2

Thesis Group Inc. 6/2/97 $20,000 50,000 $.40
19 Hanover Terrace
Regents Park
London, England NW1 4RT

<PAGE>

Hare & Co. 6/2/97 $40,00 100,000 $.40
EB.C. Zurich AG
Bellariastrasse 23
8027 Zurich, Switzerland

Cayman Islands Securities Ltd. 6/2/97 $100,000 250,000 $.40
P.0, Box 1062 GT
Grand Cayman
BWI

Strategic Lines Asset Management 6/2/97 $40,000 100,000 $.40
3/F 73 Front Street
Hamilton HM NX
Bermuda

Floyd Hill 6/2/97 $29,000 72,500 $.40
4557 - W, 8th Ave.
Vancouver, B.C. V6R 2A4

Richard Angus 6/2/97 $100,000 250,000 $.40
1548 Marine Dr.
Vancouver, B.C. V7V 1H8

Taylor Oil Products 6/2/97 $100,000 250,000 $.40
Box 1062
3rd Floor, One Capital Place
Grand Cayman, BWI

Silver Shadow Investment Ltd. 6/2/97 $100,000 250,000 $.40
P.O. Box 546
St. , Helier, Jersey J E4 8XY
Channel Islands

Billee Davidson 6/2/97 $25,000 62,500 $.40
3902 - W. 38th Avenue
Vancouver, B.C. V6N 2Y6

A. Gregori Imports Ltd, 6/2/97 $60,000 150,000 $.40
112 - 1010 West Georgia St,
Vancouver, B.C. V6E 2Y2

J R Ing & Associates 6/2/97 $30,000 75,000 $.40
1360 W. 32nd
Vancouver, B.C. V6H 2J3

Linda A. Massie 6/2/97 $6,000 15,000 $.40
4379 Arbutus St,
Vancouver, B.C. V6J 4S4

<PAGE>

Debby Tonn 6/2/97 $15,000 37,500 $.40
4899 Meadfield Rd.
West Vancouver, B.C.
V7W 3E6

Daphne Killas 6/2/97 $25,000 62,500 $.40
608-1888 York Ave.
Vancouver, B.C. V6J 5A7

Chris MacPherson 6/2/97 $10,000 25,000 $.40
Suite 3434 - 666 Burrard Street
Vancouver, B.C. V6C 2X8

Rod Morreau 6/2/97 $5,000 12,500 $.40
Suite 3434 - 666 Burrard Street
Vancouver, B.C. V6C 2X8

Wendy Chan 6/2/97 $5,000 12,500 $.40
Suite 3434 - 666 Burrard Street
Vancouver, B.C. V6C 2X8
6/2/97 $750,000 1,875,000 $.40
</TABLE>

The issuance of the shares was made in reliance upon the exemption contained in
Regulation S as amended, to offshore residents and in Canada pursuant to the
exemptions from registration contained in section 55(2) (4) and 55 (2) (9) of
the Securities Company Act (British Columbia) and/or paragraphs 128(a) or 128(h)
of the Securities Rules to the Securities Act.

1997
- ----

Date of Consideration Number of Price per
-------------
Purchase Shares Share
-------- ------ -----
Xiao Qing Du March 3,1997 4,000,000
2754 Adanac Street
Vancouver, B.C., V5K 2M9 ( Exchange for
( acquisition of
( 100% of stock of
( Infornet Investment,
( L.T.D.
Jing Liang March 3,1997 . 1,000,000
403-1333 Haro Street 1,000,000
Vancouver, B.C., V6E 1G4

TOTAL 5,000,000

The issuance of the shares was made in reliance upon the exemption to
Registration contained in Regulation S as amended, to offshore residents, and in
Canada pursuant to the exemptions from registration contained in section 55(2)
(4) and 55 (2) (9) of the Securities Company Act (British Columbia) and/or
paragraphs 128(b) and or 128(h) of the Securities Rules to the Securities Act.

<PAGE>

1999 Option Exercise
- ---- ---------------

Date of Consideration Price Per Number
Purchase Share of Shares

1. Lancaster Pacific Investment Ltd. 4/6/99 $ 88,000 $.40 220,000
14/F Tung Hip Commercial Building
244-252 Des Voeux Road C.
Hong Kong

2. Tandoor Holdings Limited 4/6/99 $148,000 $.40 370,000
20D Primrose Mansion
Taikooshing, Hong Kong

3. S.Y.Marc Hung 4/4/99 $ 60,000 $.40 150,000
6-1200 Brunette Ave.
Coquitlam, B.C.,
Canada V3K I G3

4. Kun Wei 4/4/99 $132,000 $.40 330,000
#69 West Gulou Street
Beijing, P.R. China

5. Xin Wei 4/4/99 $132,000 $.40 330,000
#2754 Adanac Street
Vancouver, B.C.
Canada V5K 2M9

560,000 1,400,000

PRIVATE PLACEMENT

Name & Address Number Consideration Date of Price per
- -------------- -------------
of Shares Purchase Share
--------- --------
(Units)
-------
<S> <C> <C> <C> <C>

Mitsukiku Investments Ltd 625,000 $625,000 5/19/99 $1.00
PO Box 428
Les Braves House,
Les Banques St. Peter Port
Guernsey
4V1 3W2

<PAGE>

Tandoor Holdings Ltd 570,000 $570,000 5/19/99 $1.00
20D Primrose
Mansion
Taikooshing
Hong Kong

Richco Investors Inc. 700,000 $700,000 5/19/99 $1.00
830-789 West Pender Street
Vancouver B.C.
Canada V6C 1H2

Development Fund 11 of
Nova Scotia Inc. 190,000 $190,000 5/19/99 $1.00
c/o Richco Investors Inc.
830-789 West Pender Street
Vancouver B.C.
Canada V6C 1H2

Mr. Minhas Sayani 75,000 $75,000 5/19/99 $1.00
PO Box 30020 Dubai
United Arab Emirates

Xerxes Venture Capital Fund Ltd. 50,000 $50,000 5/19/99 $1.00
PO Box 88 I Grenville St.
St. Helier, Jersey
JE4 9PF UK

Goldpac Investment Fund 40,000 $40,000 5/19/99 $1.00
16D 139 Drake St
Vancouver B.C.
V6Z 2T8 Canada

Nottinghill Resources Ltd. 50,000 $50,000 5/19/99 $1.00
Mareva House 4 George St.
Nassau, Bahamas

Mr. Allan Slaughter 10,000 $ 10,000 5/19/99 $1.00
1368 Madrona Dr. Bay, B.C.
V9P 9C9 Canada

Mr. David Atkinson 7,500 $7,500 5/19/99 $1.00
4590 Keith Rd
West Vancouver B.C.
V7W 1W2 Canada

Mr. Michael Atkinson 7,500 $7,500 5/19/99 $1.00
#210 1315 W. 11th Ave.
Vancouver B.C.
V6H 1K7 Canada

<PAGE>

Mrs. Juanita L. Po 5,000 $5,000 5/19/99 $1.00
842 Clements Ave.
North Vancouver B.C.
V7R 2K7 Canada

Mr. Joseph Go and 10,000 $ 10,000 5/19/99 $1.00
Mrs. Babs Po
1045 Montroyal Blvd.
N. Vancouver 13C
V7R 2H5 Canada

Bradstone Equity Partners Inc. 200,000 $200,000 5/19/99 $1.00
#638-375 Water St.,
Vancouver B.C.
V6B 5C6 Canada

403401 B.C. Ltd. 150,000 $150,000 5/19/99 $1.00
#638-375 Water St.,
Vancouver B.C.
V6B 5C6 Canada

Silver Shadow Investments Ltd. 20,000 $20,000 5/19/99 $1.00
PO Box
546 28-30 The Parade
St. Helier Jersey
Channel Islands

Cayman Islands Securities Ltd. 80,000 $80,000 5/19/99 $1.00
PO Box 2835 G.T.
Grand Cayman
B. W. I.

Chelsea Capital Corp. 70,000 $70,000 5/19/99 $1.00
#200-750 W. Pender St.
Vancouver B.C.
V6C 1B5 Canada

Mr.Carlo K.Rahal 25,000 $25,000 5/19/99 $1.00
6410 Charing Crt.
Burnaby B.C.
V5E 3Y3 Canada

Mr.David M.Lyall 100,000 $100,000 5/19/99 $1.00
6745 W. Blvd B.C.
V6P 5R8 Canada

Ms. Linda A. Massie 10,000 $10,000 5/19/99 $1.00
305-1750 West 13th Ave
Vancouver B.C.
V6J 2H1 Canada

<PAGE>

Mr. Patrick Hung 60,000 $60,000 5/19/99 $1.00
6-1200 Brunette Ave.
Coquitlam B.C.
V3K 1G3 Canada

Ms Chantal Hung 60,000 $60,000 5/19/99 $1.00
6C Winston Churchill Lane
Curepipe
Mauritius

Mr. Marc Hung 80,000 $80,000 5/19/99 $1.00
6- 1200 Brunette Ave.
Coquittam B.C.
V3K 1G3 Canada

Hare & Co. 100,000 $100,000 5/19/99 $1.00
C\o Bank of New York
1 Wall Street - 3rd Floor
New York, N.Y. 10286

Clariden Bank, 180,000 $180,000 5/19/99 $1.00
Claridestrasse 26,
8002 Zurich
Switzerland

Mr.Brian Findlay 50,000 $50,000 5/19/99 $1.00
29433 Simpson Rd,
Abbotsford, B.C.
V6C I H9 Canada

Mr.Hazel L. Allington 3,500 $3,500 5/19/99 $1.00
4614 Woodgreen Dr.
West Vancouver B.C.
V7S 2V2 Canada

Ms.Sharon Allington 1,500 $1,500 5/19/99 $1.00
4614 Woodgreen Dr
West Vancouver B.C.
V7S 2V2 Canada

Orbit Leasing Corp. 90,000 $90,000 5/19/99 $1.00
310-1324 17th Ave.SW
Calgary Alberta
T2T 5S8 Canada

Taylor Oil Products Ltd. 80,000 $80,000 5/19/99 $1.00
PO Box 1062 GT Grand Cayman.
B.W.I.

<PAGE>

Caribbean Avionics Ltd. 280,000 $280,000 5/19/99 $1.00
PO Box 599
Carribean Place Providenciales,
Turks & Caicos Is.

Yonderiche International
Consultant 15,000 $15,000 5/19/99 $1.00
102-1318 West 6th Ave.
Vancouver, B.C.
V6H 1A7 Canada

Ms. Jane Lee Kennedy 1,500 $1,500 5/19/99 $1.00
1253 Hunter Rd
Delta B.C.
V4L 1Y9 Canada

Mr. Billee Davidson 10,000 $10,000 5/19/99 $1.00
3902 West 38th Ave.
Vancouver B.C.
V6N 2Y6 Canada

Mr. F. Goelo 120,000 $120,000 5/19/99 $1.00
PO Box 10910 Grand Cayman
Cayman Islands
B.W.I.

Aberdeen Holdings Ltd. 50,000 $50,000 5/19/99 $1.00
60 Market Square
Belize City
Belize

Mr. Ken Aloysius Kow 16,000 $ 16,000 5/19/99 $1.00
Ms. Dannie Kow
(two names on the cert.)
2957 East 56 Ave
Vancouver B.C.
V5S 2A2 Canada

Mr. Floyd Hill 25,000 $25,000 5/19/99 $1.00
1800-609 Granville St.
Vancouver B.C.
V7S IC4 Canada

Ms. Linda Collins 25,000 $25,000 5/19/99 $1.00
3939 W. 38th Ave
Vancouver B.C.
V6N 2Y7 Canada

Mr. Patrick C. Lincoln 5,000 $5,000 5/19/99 $1.00
17 Leacock CT
Thornhill ON
L3T 6X9 Canada

<PAGE>

Mr. Rodney B. Johnston 25,000 $25,000 5/19/99 $1.00
17412-29th Ave.
S. Surrey B.C.
V4P 9R1 Canada

Mr. L. C. Allington 50,000 $50,000 5/19/99 $1.00
4614 Woodgreen Dr
West Vancouver B.C.
V7S 2V2 Canada

Mr. Hugh Cooper 10,000 $10,000 5/19/99 $1.00
425 Rabbit Lane
West Vancouver B.C.
V7S 1J1 Canada

Ms. Sharon Cooper 40,000 $40,000 5/19/99 $1.00
425 Rabbit Lane
West Vancouver 13C
V7S 1J1 Canada

J.F. Yang Capital Corp. 250,000 $250,000 5/19/99 $1.00
15 Starling House
Charlbert St.
London
NW8 7BS UK

Mr. Brent Petterson 2,500 $2,500 5/19/99 $1.00
603-1500 Ostler Court,
North Vancouver B.C.
V7G 2S2 Canada

Prism Holdings Inc. 25,000 $25,000 5/19/99 $1.00
PO Box 150, Design House,
Providenciales,
I Turks & Caicos Islands
B.W.I.

Ms.Christine Smith 10,000 $10,000 5/19/99 $1.00
#314-3738 Norfolk St.
Burnaby B.C.
V5G 4V4 Canada

First Nevisian Stockbrokers Ltd. 40,000 $40,000 5/19/99 $1.00
Barclays Building. Maw St.
Charlestown Nevis
B. W. I.

Tedburn Ltd. 150,000 $150,000 5/19/99 $1.00
2C Engineers Road,
Gibraltar

<PAGE>

J.R. Ing Associates 35,000 $35,000 5/19/99 $1.00
130 Adelaide St. West
Toronto ON
M5P I G6 Canada

Sirhc Holdings Ltd. 150,000 $150,000 5/19/99 $1.00
9 Church St.
Hamilton Hm11
Bermuda

A&E Capital Funding Inc. 250,000 $250,000 5/19/99 $1.00
2300 Yonge St. Suite 3000
Toronto ON
M4P 1E4 Canada

Thesis Group Inc. 150,000 $150,000 5/19/99 $1.00
19 Hanover Terrace Regents Park
London
NW1 4RJ UK

Mr.Barry Fraser 15,000 $15,000 5/19/99 $1.00
1300-777 Dunsmuir St.
Vancouver B.C.
V7Y I K2 Canada

Mr.William Adams 10,000 $10,000 5/19/99 $1.00
PO Box 922
40102 Skyline Pl.
Garibaldi Highlands
Vancouver B.C.
VON 1TO Canada

Mr.Fred TSE 40,000 $40,000 5/19/99 $1.00
186 Stevens Dr
West Vancouver B.C.

5,5000,000 $5,500,000
shares
</TABLE>

Price per
Date Share Consideration Shares
---- ----- ------------- ------
<S> <C> <C> <C> <C>

Xin Wei
2754 Adanac Street
Vancouver, B.C. VSK 3M9 2/20/97 $.001 750,000

<PAGE>

Kun Wei
403 No I Blvd
Qianmachang Lane
Gulou Street, West
Beijing, China 2/20/97 $.001 450,000

Xi-ping Qu
403 - 1333 Haro Street
Vancouver, B.C. V6E 1G4 2/20/97 $.001 300,000

Nicole Alagich
1400 - 400 Burrard Street
Vancouver, B.C. V6C 3G2 2/20/97 $.001 3,000

Terry Johnston
1408 - 4300 Mayberry Street
Burnaby, B.C. V5H 4A4 2/20/97 $.001 3,000

Ranjit Bhogal
9042 135 A Street
Surrey, B.C. V3V 7CS 2/20/97 $.001 3,000

Bhupinder Mann
1182 East 33rd Ave.
Vancouver, B.C. V5F 3B3 2/20/97 $.001 3,000

Charles Grahn
203 - 1386 West 73rd Ave
Vancouver, B.C. V6P 3E8 2/20/97 $.001 3,000

Gemsco Management Ltd.
53 Woodland Drive
Delta, B.C. V4L 2H4 2/20/97 $.001 700,000

Farmind Link Corp.
2998 Park Lane
West Vancouver, B.C. V7V 1E9 2/20/97 $.001 700,000

Simon Yuen
19835 64th Avenue
Langley, B.C. V2Y 11.S 2/20/97 700,000

Lionel Welch
7 Prince Street
Belize City, Belize 2/20/97 $.001 320,000

Kathleen Robinson
P.O. Box 170
Grand Turk
Turks & Caicos Islands, BWI 2/20/97 $.001 10,000

<PAGE>

Mr. Joseph A. Gamache
1421 Barber Court
Banning CA 92220 2/20/97 $.001 10,000

Hartford Capital Corporation
1400 - 400 Burrard Street
Vancouver, B.C. V6C 3G2 2/20/97 $.001 45,000

4,000,000
</TABLE>

Each of the sales listed above was made for cash or services as listed. All of
the listed sales were made in reliance upon the exemption from registration
offered by Section 4 (2) of the Securities Act of 1933, as amended. Based upon
Subscription Agreements completed by each of the subscribers, the Company had
reasonable grounds to believe immediately prior to making an offer to the
private investors, and did in fact believe, when such subscriptions were
accepted, that such purchasers (1) were purchasing for investment and not with a
view to distribution, and (2) had such knowledge and experience in financial and
business matters that they were capable of evaluating the merits and risks of
their investment and were able to bear those risks. The purchasers had access to
pertinent information enabling them to ask informed questions. The shares were
issued without the benefit of registration. An appropriate restrictive legend is
imprinted upon each of the certificates representing such shares, and
stop-transfer instructions have been entered in the Company's transfer records.
All such sales were effected without the aid of underwriters.

ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Florida Statutes provide that the Company may indemnify its officers and
directors for costs and expenses incurred in connection with the defense of
actions, suits, or proceedings where the officer or director acted in good faith
and in a manner he reasonable believed to be in the Company's best interest and
is a party by reason of his status as an officer or director, acted in good
faith and in a manner he reasonably believed to be in the Company's best
interest and is a party by reason of his status as an officer or director,
absent a finding of negligence or misconduct in the performance of duty.

As permitted Florida Statures, the Company may indemnify its directors and
officers against expenses and liabilities they incur to defend, settle, or
satisfy any civil or criminal action brought against them on account of their
being or having been Company directors or officers unless, in any such action,
they are adjudged to have acted with gross negligence or willful misconduct.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the company has been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in that Act and is, therefore, unenforceable.

Exclusion of Liability

The Florida Corporation Act excludes personal liability for its directors
for monetary damages based upon any violation of their fiduciary duties as
directors, except as to liability for any breach of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, acts in violation of the Florida Corporation Act, or any
transaction from which a director receives an improper personal benefit. This
exclusion of liability does not limit any right which a director may have to be
indemnified and does not affect any director's liability under federal or
applicable state securities laws.

<PAGE>

PART F/S

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this Item is included as a separate Exhibit to this
report. Please see pages F-1 through F-12 and Page 1 through 6.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements and Schedules. The following financial statements
and schedules for the Registrant are filed as part of this report.

(1) Financial statements of Xin Net Corp. (formerly Placer Technologies,
Inc.) and subsidiaries

Year 1998
- ---------
Page
----

Cover page

Index to Financial Statements F-1

Independent Auditors' Report for years ended December 31,
1998 and December 31, 1997 F-2

Consolidated Balance Sheet at December 31, 1998 F-3

Consolidated Statement of Stockholders Equity - December 31, 1998 F-4

Consolidated Statement of Operations As of End of December 31 1998 F-5

Consolidated Statement of Cash Flows As of End of December 31, 1998 F-6

Notes to the Consolidated Financial Statements F-7 - F-8

(2) Financial Statement Schedules:

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

Interim Financial Statements for period ended
March 31, 1999 (unaudited) F-1

Balance Sheet F-2

Statement of Operations F-3

Statement of Cash Flows F-4

Notes to Financial Statements F-5 - F-7

<PAGE>

SIGNATURES

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

DATE XIN NET CORP.

August 26, 1999 by:/s/ Marc Hung, President
----------------------------
Marc Hung, President

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates indicated.

/s/Xiao-qing Du Director August 26, 1999
- -----------------
Xiao-qing Du

/s/ S.Y. Marc Hung President and Director August 26, 1999
- ------------------
S.Y. Marc Hung

/s/Ernest Cheung Secretary and Director August 26, 1999
- -----------------
Ernest Cheung

/s/Maurice Tsakok Director August 26, 1999
- ----------------
Maurice Tsakok

<PAGE>

FINANCIAL STATEMENTS
(A Development Stage Company)

XIN NET CORP.

<PAGE>

PLACER TECHNOLOGIES, INC.
AND SUBSIDIARIES

Vancouver, BC

AUDIT REPORT

DECEMBER 31, 1998 AND 1997

CONTENTS

Independent Auditors' Report ...............................................F-1

Consolidated Balance Sheet at December 31, 1998 and 1997 ...................F-2

Consolidated Statement of Operations For The Year Ended
December 31, 1998, For the Period From Inception (September 12, 1996)
To December 31, 1997, and For the Period From Inception
(September 12, 1996) to December 31, 1998 ...........................F-3

Consolidated Statement of Stockholders' Equity From Inception
(September 12, 1997) To December 31, 1998 ...........................F-4

Consolidated Statement of Cash Flows For The Year Ended
December 31, 1998, For the Period From Inception (September 12, 1996)
To December 31, 1997, and For the Period From Inception
(September 12, 1996) to December 31, 1998 .......................F-5 F-6

Notes to the Consolidated Financial Statements ........................ F-7 F-10

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

<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Xin Net Corp. and Subsidiaries
Vancouver, B.C. V6C 1H2

We have audited the consolidated balance sheet of Xin Net Corp. and Subsidiaries
(the Company), as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements present fairly, in all material
respects, the consolidated financial position of Xin Net Corp. and Subsidiaries
as of December 31, 1998 and 1997, and the consolidated results of their
operations and their consolidated cash flows for the years then ended, in
conformity with generally accepted accounting principles.

Clancy and Co., P.L.L.C.
Phoenix, Arizona
July 25, 1999

F-1

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND 1997

1998 1997
---- ----
ASSETS
<S> <C> <C>
Current Assets
Cash $ 336,189 $ 337,366
Accounts Receivable 37,376 28,062
Prepaid Expenses 2,614 0
------- ---------
Total Current Assets 376,179 365,428

Property and Equipment, Net (Note 3) 227,427 188,309

Other Assets
Organizational Costs, Net (Note 2) 969 1,031
------- ---------

Total Assets $ 604,575 $ 554,768
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Other Accrued Liabilities $ 20,504 $ 12,975
Other Advances (Note 4) 20,000 0
------- ---------
Total Liabilities 40,504 12,975

Commitments and Contingencies None None

Stockholders' Equity
Common Stock: $0.001 Par Value, Authorized
50,000,000; Issued and Outstanding, 14,075,000 14,075 14,075
Additional Paid In Capital 792,990 792,990
Retained Earnings (Accumulated Deficit) (242,994) (265,272)
-------- ---------
Total Stockholders' Equity 564,071 541,793
------- ---------

Total Liabilities and Stockholders' Equity $ 604,575 $ 554,768
======= ========

</TABLE>

The accompanying notes are integral part of these financial statements.

F-2

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

For The Year Ended For The
December 31, 1998 Year Ended
December 31, 1997
<S> <C> <C>
Revenues $ 527,988 $ 96,177

Expenses
General and Administrative 510,555 333,084
------- -------

Operating Income (Loss) 17,433 (236,907)

Other Income
Interest Income 4,845 7,221
----- -----

Net Income (Loss) Available to Common Stockholders
$ 22,278 $ (229,686)
====== ========

Basic Income (Loss) Per Common Share $ 0.001 $ (0.02)
===== ===========

Basic Weighted Average Common
Shares Outstanding 14,075,000 12,127,082
========== ==========

</TABLE>

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

F-3

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

Loss Accumulated
During the
Additional Development
Common Stock Paid In Stage
Shares Amount Capital Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 3,200,000 $ 3,200 $ 49,800 $ (35,586) $ 17,414
Issuance of Common Stock For Cash at
$.40 Per Share on June 2, 1997 1,875,000 1,875 748,125 750,000
Issuance of Common Stock in Exchange for
Acquisition of Subsidiary on March 3, 1997
5,000,000 5,000 (4,900) 100
Issuance of Common Stock For Services at
$.001 Per Share on February 20, 1997
4,000,000 4,000 4,000
Loss, Year Ended December 31, 1997 (118,313) (118,313)
---------- ----- ---------- ----------- --------

Balance, December 31, 1997, as
previously reported 14,075,000 14,075 793,025 (153,899) 653,201
Prior Period Adjustment - Error In
Consolidation of Subsidiary's 1997
Financial Statements Expressed in
Canadian Dollars Which Should Have
Been in U.S. Dollars (Note 7) (35) (111,373) (111,408)
---------- ----- ---------- --------- --------

Balance, December 31, 1997, as restated 14,075,000 14,075 792,990 (265,272) 541,793
Income, Year Ended December 31, 1998 22,278 22,278
---------- ----- ---------- --------- --------

Balance, December 31, 1998 14,075,000 $14,075 $792,990 $ (242,994) $ 564,071
========== ====== ======= ======== ========

</TABLE>

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

F-4

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

For the Year For the
Ended December Year Ended
31, 1998 December 31, 1997
<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss) $ 22,278 $ (229,686)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided By (Used in) Operating Activities
Depreciation and Amortization 47,930 46,760
Common Stock Issued for Services 0 4,000
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable (9,314) (28,062)
(Increase) Decrease in Prepaid Expenses (2,614) 0
(Increase) Decrease in Organizational Costs 0 (1,088)
Increase (Decrease) in Accounts Payable 7,529 12,975
------- -----------
Total Adjustments 43,531 34,585
------- -----------
Net Cash Provided By (Used in) Operating Activities 65,809 (195,101)

Cash Flows From Investing Activities
Purchase of Property and Equipment (86,986) (235,012)
------- -----------
Net Cash Flows Used in Investing Activities (86,986) (235,012)

Cash Flows From Financing Activities
Proceeds From Sale of Common Stock 0 750,000
Related Party Advances 20,000 65
------- -----------
Net Cash Provided by Financing Activities 20,000 750,065
------- -----------

Increase (Decrease) in Cash and Cash Equivalents (1,177) 319,952

Cash and Cash Equivalents, Beginning of Year 337,366 17,414
------- -----------
Cash and Cash Equivalents, End of Year $ 336,189 $ 337,366
======= ===========

For the Year For the
Ended December Year Ended
31, 1998 December 31, 1997
Supplemental Information:
Cash paid for:
Interest $ 0 $ 0
============ =============

Income taxes $ 0 $ 0
============ =============
Noncash Investing and Financing:
Common Stock Issued for Services $ 0 $ 4,000
============ =============
Common Stock Issued in Exchange for Acquisition of

Subsidiary $ 0 $ 65
============ =============

</TABLE>

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

F-5

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997

NOTE 1 - ORGANIZATION

Xin Net Corp. (the Company) was incorporated under the laws of the
State of Florida on September 12, 1996, under the name of Placer
Technologies, Inc., with an authorized capital of 2,000 shares of
common stock with a par value of one cent ($0.01) per share. On
December 11, 1996, the Company amended its Articles of Incorporation to
increase its capital stock to 50,000,000 shares with a par value of one
mil ($0.001) per share. On July 22, 1998, the Company amended its
Article of Incorporation and changed its name to Xin Net Corp. The
Company is involved in the development of Internet related products and
services, primarily developing web site home pages for small businesses
and electronic mail services.

The Company has two wholly owned subsidiaries: Infornet Investment
Limited, (a Hong Kong Corporation) which is a telecommunication and
management network company providing financial resources and expertise
in telecommunication projects; and Infornet Investment Corp., (a
Canadian Corporation), which is engaged in a similar line of business,
has 100,000,000 common shares of no par value authorized, with 100
shares issued and outstanding.

During 1997, the Company issued 5,000,000 shares of common stock to
acquire the wholly owned subsidiary, Infornet Investment Corp.
(Canada), for a total value of $65. The shares were issued on March 3,
1997.

On August 25, 1997, through the wholly owned subsidiary, Infornet
Investment Limited (Hong Kong), under the laws of the People's Republic
of China, the Company formed an 80% cooperative joint venture called
Placer Technologies Corp. (a limited liability company) with Xin Hai
Technology Development Ltd. (a People's Republic of China Corporation)
as a 20% partner, for a term of twenty (20) years. Xin Hai Technology
Development Ltd. (Xin Hai) is engaged in the business of developing
computer hardware, software, and telecommunication network technology,
and providing consultation and training services. Xin Hai is an
experienced Internet Service Provider (ISP) based in Beijing, China.
ISP licenses are tightly controlled by the Ministry of Information
Industry (MII) and provide a substantial barrier to entry. Xin Hai
plans to position itself as a major supplier of Internet services in
China by covering the major cities.

The joint venture company manufactures and sells computer network
systems, communication equipment and communication engineering
services, including development and construction of Internet access
networks in China. The joint venture will be operated in accordance
with the laws and regulations in China which allow Sino-foreign joint

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997

venture companies to construct Internet access networks and to have
ownership rights and rights for return on investment, but disallow
joint venture companies to operate such networks.

The Company was classified as a development stage company in prior
years. The year ended December 31, 1998, is the first year the Company
is no longer in the development stage.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

A. Method of Accounting

The Company's financial statements are prepared using the accrual
method of accounting.

B. Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with a
maturity of three months or less to be cash and cash equivalents.

C. Concentration of Credit Risk

The Company maintains U.S. Dollar cash balances in Canadian banks, that
are not insured.

D. Principles of Consolidation

The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, Infornet Investment
Corp. (Canada) and Infornet Investment Limited (Hong Kong). All
significant intercompany transactions and balances have been eliminated
in consolidation.

E. Purchase Method

Investments in companies have been included in the financial report
using the purchase method of accounting. The Company retains the
acquired companies as subsidiaries. The Company's wholly owned
subsidiaries, Infornet Investment Corp. (Canada) and Infornet
Investment Limited (Hong Kong), provide similar Internet services to
the Canadian and Chinese markets.

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

F. Property and Equipment

Property and equipment, stated at cost, is depreciated under the
straight-line method over their estimated useful lives, ranging from
three to seven years.

G. Revenue Recognition

Revenues are recognized as services are performed.

H. Cost Recognition

Selling, general, and administrative costs are charged to operating
expenses as incurred.

I. Amortization

Costs incurred to organize the Company have been capitalized and are
amortized using the straight-line method over seven years. Amortization
charged to expense during the year ended December 31, 1998 and 1997 was
$62 and $47, respectively.

J. Use of Estimates

Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses. Actual results could vary from
the estimates that were assumed in preparing the financial statements.

K. Income Taxes

The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes." Under SFAS No. 109, deferred tax liabilities and assets
are determined based on the difference between the financial statement
and tax bases of assets and liabilities, using enacted tax rates in
effect for the year in which the differences are expected to reverse.
See Note 5.

L. Per Share of Common Stock

Basic earnings or loss per share has been computed based on the
weighted average number of common shares outstanding. All earnings or
loss per share amounts in the financial statements are basic earnings
or loss per share, as defined by SFAS No. 128, "Earnings Per Share."

M. Stock-Based Compensation

The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Compensation cost for stock
options, if any, is measured as the excess of the quoted market price
of the Company's stock at the date of grant over the amount an employee
must pay to acquire the stock.

SFAS No. 123, "Accounting for Stock-Based Compensation," established
accounting and disclosure requirements using a fair-value-based method
of accounting for stock-based employee compensation plans. The Company
has elected to remain on its current method of accounting as described
above, and has adopted the disclosure requirements of SFAS No. 123,
effective January 1, 1997.

N. Foreign Operations

The financial position and results of operations of the Company's
foreign subsidiaries are maintained in a currency other than the
reporting currency. Prior to consolidation, the assets, liabilities,
revenues, expenses, gains and losses are remeasured into the reporting
currency, and any exchange gains or losses that result from remeasuring
foreign currency amounts are included in net income/loss in the
subsidiaries financial statements. Nonmonetary assets and liabilities,
such as property and equipment, accumulated depreciation, intangible
assets, amortization, and common stock, are remeasured into the
reporting currency using historical exchange rates. Monetary assets and
liabilities, such as cash and most liabilities, are remeasured based on

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

current exchange rates. Revenues and expenses related to nonmonetary
items, such as cost of goods sold, depreciation, and amortization of
intangible assets, are remeasured using the historical exchange rates,
while those related to monetary items are remeasured using current
exchange rates. See Note 6.

O. Business Segment Information

The Company implemented SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," effective January 1, 1998. The
Company's reportable segments are geographic areas that provide
Internet services and products. See Note 6.

P. Capital Structure

The Company has implemented SFAS No. 129, "Disclosure of Information
about Capital Structure," effective January 1, 1998, which established
standards for disclosing information about an entity's capital
structure. The implementation of SFAS No. 129 has no effect on the
Company's financial statements

Q. Comprehensive Income

The Company has implemented SFAS No. 130, "Reporting Comprehensive
Income," effective January 1, 1998, which requires companies to
classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid in capital in the equity section of a statement of financial
position. The implementation of SFAS No. 130 has no effect on the
Company's financial statements.

R. Reclassifications

Certain prior period amounts have been reclassified to conform to the
current year presentation.

S. Pending Accounting Pronouncements

It is anticipated that current pending accounting pronouncements will
not have an adverse impact on the financial statements of the Company.

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31:

1998 1997
------------------ ---------
<S> <C> <C>
Office Equipment $ 3,440 $ 3,767
Equipment 279,551 228,239
Furniture 3,349 3,004
------------------ ---------
Total 286,340 235,010
Less Accumulated Depreciation (58,913) (46,701)
------------------ ---------
Net Book Value $ 227,427 $ 188,309
================== =========

</TABLE>

Depreciation charged to expense during the year ended December 31, 1998
and 1997, was $47,868 and $46,701.

NOTE 4 - OTHER ADVANCES

Other advances of $20,000 at December 31, 1998, represent funds
advanced to the Company, bearing no interest and due on demand. The
advance was paid in full as of the date of issuance of these financial
statements.

NOTE 5 - INCOME TAXES

There is no current or deferred tax expense for the years ended
December 31, 1998 and 1997, due to the Company's loss position. The
benefits of timing differences have not been previously recorded.

The deferred tax consequences of temporary differences in reporting
items for financial statement and income tax purposes are recognized,
as appropriate. Realization of the future tax benefits related to the
deferred tax assets is dependent on many factors, including the
Company's ability to generate taxable income within the net operating
loss carryforward period. Management has considered these factors in
reaching its conclusion as to the valuation allowance for financial
reporting purposes. The income tax effect of temporary differences

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997

comprising the deferred tax assets and deferred tax liabilities on the
accompanying consolidated balance sheet is a result of the following:

NOTE 5 - INCOME TAXES (CONTINUED)

Deferred Taxes 1998 1997
----------------------------------- ---------- ----
Net Operating Loss Carryforwards $ 63,668 $ 32,729
Valuation Allowance (63,668) (32,729)
------ ------
Net Deferred Tax Assets $ 0 $ 0
====== ======

The Company has available net operating loss carryforwards of $187,259
for tax purposes to offset future taxable income, which expire
principally in the year 2012.

Pursuant to the Tax Reform Act of 1986, annual utilization of the
Company's net operating loss carryforwards may be limited if a
cumulative change in ownership of more than 50% is deemed to occur
within any three-year period.

NOTE 6 - SEGMENT AND GEOGRAPHIC DATA

The Company's reportable segments are geographic areas that provide
Internet services and products to the Chinese markets. Summarized
financial information concerning the Company's reportable segments is
shown in the following table. The "Other" column includes corporate
related items, and, as it relates to segment profit (loss), income and
expense not allocated to reportable segments.

China Canada Other Total
<S> <C> <C> <C> <C>
December 31, 1998
Revenue $ 527,988 $43,827 $ 0 $ 571,815
Operating Income (Loss) 114,747 (20,972) (71,497) 22,278
Total Assets 593,510 5,759 5,306 604,575
Capital Expenditures 282,900 3,440 0 286,340
Depreciation/Amortization 47,146 784 0 47,930
Interest Income 3,566 1,279 0 4,845

December 31, 1997
Revenue $ 96,177 $54,625 $ 0 $ 150,802
Operating Loss (139,659) 1,066 (91,093) (229,686)
Total Assets 255,138 298,984 646 554,768
Capital Expenditures 231,243 3,767 0 235,010
Depreciation/Amortization 46,249 511 0 46,760
Interest Income 0 7,124 97 7,221

</TABLE>

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997

Reconciliation of Segment Information - The reconciling item to adjust
total revenues to consolidated revenues is the amount of revenues
recorded on Canada's books (a subsidiary) as management fee income,
recorded as an expense on the parent's books, and eliminated in
consolidation. Management fee income/expense are $43,827 and $54,625
for the years ended December 31, 1998 and 1997, respectively.

NOTE 7 - PRIOR PERIOD ADJUSTMENT

The accompanying financial statements for 1997 have been restated to
correct an error in the consolidation of the Canadian subsidiary's
financial statements expressed in Canadian dollars which should have
been U.S. Dollars. The effect of the restatement was to decrease net
income by $111,373 for 1997.

NOTE 8 - SUBSEQUENT EVENTS

(1) The Company completed a 504 Offering Memorandum and has issued
5,500,000 shares of common stock, at $1.00 per share, or $5,500,000.
The Company has received all of the proceeds as of the date of issuance
of these financial statements.

(2) The Company granted 1,400,000 incentive options on February 26,
1999, exercisable at $0.40 per share and expiring on February 28, 2004.
On April 6, 1999, all of the options were exercised at $0.40 per share,
or $560,000. The Company has received all of the proceeds as of the
date of issuance of these financial statements.

F-6

<PAGE>

Interim Financial Statements
for Period Ended March 31, 1999
(unaudited)

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
( Prepared by management and without audit )

Stated in U.S. dollars March 31, 1999 December 31, 1998
- -------------------------------------------------------------------------------------------------------------

ASSETS
<S> <C> <C>
Current Assets
Cash $ $ 336,189
394,401
Accounts Receivable 37,376
65,507
Prepaid Expenses
- 2,614
Inventory
15,002 -
------------------- -----------------------
Total Current Assets 376,179
474,910

Property and Equipment, Net 227,427
245,779

Other Assets
Organizational Costs, Net
958 969

------------------- -----------------------
Total Assets $ 721,647 $ 604,575
============ =====================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts Payable and Other Accrued
Liabilities $ 99,926 $ 20,504
Other Advances 20,000
20,000
------------------- -----------------------
40,504
119,926

Commitments and Contingencies
- -

Stockholders' Equity (Note 2)
Common Stock : $0.001 Par Value
Authorized : 50,000,000
Issued and Outstanding : 14,075,000 14,075
14,075
Additional Paid In Capital 792,990
792,990
Deficit (205,344) (242,994)
------------------- -----------------------
Total Stockholders' Equity 564,071
601,721

Total Liabilities and Stockholders' Equity $ 721,647 $ 604,575
============ =====================

</TABLE>

See Accompanying Notes

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1999
AND 1998 ( Prepared by management and without
audit )

Expenses
Administration and office
19,505 12,436
Amortization
1,904 1,294
Consulting and management fees
9,923 -
Foreign exchange (gain) / loss
- (2,648)
Interest
1,106 430
Professional fees
10,068 343
Rent
2,124 -
Travel
- 856
Salaries and benefits
11,617 22,362
Selling expenses
46,451 68,496
--------------------- --------------------
102,698
103,569
--------------------- --------------------

Operating Profit
36,617 11,234

Other Income
Interest
1,033 1,413
--------------------- --------------------

Net Earnings Available to Common Stockholders $ $

37,650 12,647
======= ======

Basic Earnings Per Common Share (Note 3) $ - $ -

- -
== =

Basic Weighted Average Common Shares
Outstanding (Note 3) 14,075,000 14,075,000
========== ==========

Diluted Earnings Per Common Share (Note 3) $ $
======================= ==========
-
-

Weighted Average Common Shares Outstanding,
Assuming Dilution (Note 3) 14,314,587 14,075,000
========== ==========

</TABLE>

See Accompanying Notes

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1999 AND 1998
( Prepared by management and without audit )

Stated in U.S. dollars March 31, 1999 March 31, 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 37,650 $ 12,647
Adjustments to reconcile net income to net cash
Provided by (Used in) operating activities
Depreciation and amortization 1,904 1,294
Changes in assets and liabilities
Increase in accounts receivable (28,131) (117,469)
Decrease in prepaid expenses 2,614
-
Increase in inventory (15,002) (2,857)
Increase in accounts payable 79,422 19,602
--------------------- ---------------------
78,457 (86,783)
--------------------- ---------------------

Cash flows from investing activities
Purchases of property and equipment (20,245) (38,817)
--------------------- ---------------------
(20,245) (38,817)
--------------------- ---------------------

Increase (Decrease) in cash and cash equivalents 58,212 (125,600)

Cash and cash equivalents - beginning of period 336,189 337,366

--------------------- ---------------------
Cash and cash equivalents - end of period $ 394,401 $ 211,766
============ ===========

</TABLE>

See Accompanying Notes

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999 and 1998

( Prepared by management and without audit )

1 Basis of Presentation

The accompanying unaudited financial statements have been prepared in
conformity with generally accepted accounting principles. However,
certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted or condensed pursuant to the
rules and regulations of the Securities and Exchange Commission
("SEC"). In the opinion of the management all adjustments of a normal
recurring nature necessary for a fair presentation have been included.
The results for interim periods are not necessarily indicative of
results for the entire year. These condensed consolidated financial
statements and accompanying notes should be read in conjunction with
the Company's annual consolidated financial statements and the notes
thereto for the fiscal year ended December 31, 1998 included in its
Annual Report on Form 10-KSB.

The unaudited condensed consolidated financial statements include Xin
Net Corp. and its subsidiaries. Significant inter-company transactions
and accounts have been eliminated.

Certain prior-period amounts have been reclassified to conform to the
current period's presentation.

2 Stockholders' Equity

Stock Option Plan

On February 26, 1999, stock options for a total of 1.4 million shares
at $0.40 per share were granted.

All the options granted on February 26, 1999 were exercised as of April
6, 1999.

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999 and 1998

( Prepared by management and without audit )

3 Earnings Per Share

Basic earnings per share is computed by dividing net earnings available
to common stockholders by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share is computed
by dividing net earnings available to common stockholders by the
weighted-average number of common shares outstanding during the period
increased to include the number of additional common shares that would
have been outstanding if potentially dilutive common shares had been
issued.

The following table sets forth the computations of shares and net
earnings used in the calculation of basic and diluted earnings per
share for the first quarter of 1999 and 1998 :

Three months ended
<S> <C> <C>
3/31/99 3/31/98

Net earnings for the period $ 37,650 $ 12,647

Weighted-average shares outstanding 14,075,000 14,075,000

Effect of dilutive securities :
Dilutive options 239,587
-
------------------------

Dilutive potential common shares 239,587
-
------------------------
Adjusted weighted-average shares and assumed conversions 14,314,587 14,075,000
========== ==========

Basic earnings per share $ 0.00 $ 0.00
======== =======

Diluted earnings per share $ 0.00 $ 0.00
======== =======

</TABLE>

<PAGE>

XIN NET CORP. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999 and 1998

( Prepared by management and without audit )

4 Segment and Geographic Data

The Company's reportable segments are geographic areas that provide
internet services and products to the Chinese markets. Summarized
financial information concerning the Company's reportable segments is
shown in the following table. The "Other" column includes corporate
related items, and, as it relates to segment profit (loss), income and
expenses not allocated to reportable segments.

For three months ended 3/31/1999 China Canada Other Total
<S> <C> <C> <C> <C>
Revenue from customers $ 139,315 $ - $ - $ 139,315
Interest revenue 1,033 1,033
- -
Inter-segment revenue
- - - -
Operating income (loss) 73,577 (21,194) (14,733) 37,650

For three months ended 3/31/1998 China Canada Other Total

Revenue from customers $ 114,803 $ - $ - $ 114,803
Interest revenue 186 1,227 - 1,413
Inter-segment revenue
- - - -
Operating income (loss) 35,612 (22,555) 410 12,647

3 months ended
Reconciliation of segment information 3/31/99 3/31/98

Revenue from customers $ 139,315 $ 114,803
Interest revenue 1,033 1,413
Inter-segment revenues
- -
--------------------------
Total consolidated revenues $ 140,348 $ 116,216
========== =========

</TABLE>

<PAGE>

EXHIBIT LIST
------------

SK #

3.1 Articles of Incorporation to Placer Technology, Inc.*

3.2 Articles of Amendment to Placer Technology, Inc.*

3.3 Articles of Amendment to Placer Technology, Inc. to change name to Xin
Net.*

3.4 Bylawys to Placer Corp. (Xin Net)*

3.5 Articles of Incorporation to Infornet (B.C.) Investment Corp. &
Amendment*

3.6 Articles of Incorporation to Micro Express (Hong Kong) and Amendment
to change name to Infornet Investment, LTD.*

3.7 Articles of Association Placer Technology Corp. (China)*

10.1 Contract Between Xin Hai Technology Development, L.T.D. and Infornet
Investment, L.T.D. dated August 25, 1997*

10.2 Cooperative Joint Venture Contract Placer Technologies/Xin Hai*

10.3 EDUVERSE Non-Exclusive Binding Agreement*

* Previously filed with Form 10SB.

<PAGE>

<ARTICLE> 5

<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-1-1998 JAN-1-1999
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 336,189 394,401
<SECURITIES> 0 0
<RECEIVABLES> 37,376 65,507
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 376,179 474,910
<PP&E> 227,427 245,779
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 604,575 721,647
<CURRENT-LIABILITIES> 45,504 119,926
<BONDS> 0 0
0 0
0 0
<COMMON> 14,075 14,075
<OTHER-SE> 549,996 587,646
<TOTAL-LIABILITY-AND-EQUITY> 604,575 721,697
<SALES> 527,988 139,315
<TOTAL-REVENUES> 527,988 139,315
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 510,555 102,698
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (4,845) (1,033)
<INCOME-PRETAX> 22,278 37,650
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 22,278 37,650
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,278 37,650
<EPS-BASIC> .001 0
<EPS-DILUTED> .001 0

</TABLE>