NETTAXI INC, S-1/A, 1999-06-25

NETTAXI INC
S-1/A, 1999-06-25
BUSINESS SERVICES, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1999
REGISTRATION NO. 333-78129

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------

NETTAXI, INC.
(Exact Name of Registrant as Specified in Its Charter)

NEVADA 7370 82-0486102
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or) Industrial Classification Identification Number)
Organization Code)

1696 DELL AVENUE
CAMPBELL, CALIFORNIA 95008
(408) 879-9880
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Executive Offices)

ROBERT A. ROSITANO, JR.
DEAN ROSITANO
NETTAXI, INC.
1696 DELL AVENUE
CAMPBELL, CALIFORNIA 95008
(408) 879-9880
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Co-Agents for Service)
-----------------------
COPY TO:
JAMES C. CHAPMAN, ESQ.
ALAN S. GUTTERMAN, ESQ.
ROMIN P. THOMSON, ESQ.
SILICON VALLEY LAW GROUP
50 WEST SAN FERNANDO STREET, SUITE 950
SAN JOSE, CALIFORNIA 95113
(408) 286-6100

<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
--------------------

If any of the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [X]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier Registration Statement for the same
offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier Registration Statement for the same
offering. [ ]

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
--------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.

<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and it is not soliciting an offer to buy these
securities, in any state where the offer or sale is not permitted.

Subject to Completion, June _, 1999

[GRAPHIC OMITED - NETTAXI, INCORPORATED]

INCORPORATED

2,116,448 SHARES

COMMON STOCK
__________________

We have prepared this prospectus to allow RGC International Investors LDC
and Wall Street Trading Group, or their pledgees, donees, transferees or other
successors in interest, to use a "shelf" registration process to sell up to
2,116,448 shares of our common stock which they may acquire upon conversion of
convertible debentures and exercise of investment options and warrants
previously acquired in private placements. We will receive no proceeds from the
sale of these shares, with the exception of the proceeds from the exercise of
the investment options and warrants.

Our common stock is listed on the NASD O-T-C Market Bulletin Board under
the symbol "NTXY." On June 21, 1999, the closing price of our common stock was
$14.562 per share.

__________________

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<PAGE>
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF MATERIAL ISSUES
TO CONSIDER BEFORE PURCHASING OUR COMMON STOCK.

__________________

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The date of this prospectus is _____________, 1999.

2
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS

<S> <C>
Prospectus Summary . . . . . . . . . . . . . . . . . 4
Risk Factors.. . . . . . . . . . . . . . . . . . . . 8
Cautionary Note Regarding Forward-Looking Statements 21
Use of Proceeds. . . . . . . . . . . . . . . . . . . 21
Price Range of Common Stock and Dividend Policy. . . 22
Capitalization . . . . . . . . . . . . . . . . . . . 23
Selected Financial Data. . . . . . . . . . . . . . . 24
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . 25
Business . . . . . . . . . . . . . . . . . . . . . . 37
Management . . . . . . . . . . . . . . . . . . . . . 67
Certain Transactions . . . . . . . . . . . . . . . . 80
Selling Stockholders . . . . . . . . . . . . . . . . 83
Principal Stockholders . . . . . . . . . . . . . . . 85
Description of Capital Stock . . . . . . . . . . . . 87
Shares Eligible for Future Sale. . . . . . . . . . . 96
Plan of Distribution . . . . . . . . . . . . . . . . 98
Legal Matters. . . . . . . . . . . . . . . . . . . . 101
Experts. . . . . . . . . . . . . . . . . . . . . . . 101
Where You Can Find Additional Information. . . . . . 101
Index to Financial Statements. . . . . . . . . . . . F-1
</TABLE>

"Nettaxi," "Netro News," "URL," and "Internet the City" are trademarks and
service marks of Nettaxi. All other trademarks, service marks or tradenames
referred to in this prospectus are the property of their respective owners.

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<PAGE>
PROSPECTUS SUMMARY

Because this is only a summary, it does not contain all of the information
that may be important to you. You should read the entire prospectus, including
"Risk Factors" and our financial statements and the related notes, before
deciding to invest in our common stock.

NETTAXI

We were organized in 1997 to capitalize on a significant opportunity that
exists today through the convergence of the media and entertainment industries
with the vast communications power of the Internet. We are defining a new type
of Internet company -- an e-commerce-based online community and portal to the
Internet -- that is dedicated to providing content-rich communities and an
entry point on the Internet for both consumers and businesses. Our site is
designed to seamlessly integrate content with e-commerce services for consumers
and businesses. Nettaxi.com provides comprehensive information about news,
sports, entertainment, health, politics, finances, lifestyle, and areas of
interest to the growing number of Internet users. Our mission is to establish
our site as an entry point or 'portal' to the Internet by continuing to develop
premium online communities which are both content-rich to our subscribers, the
"citizens" of our communities, and provide easy-to-use e-commerce services to
businesses of all sizes which reside in these communities.

- - a growing database of user profiles;

- - a meta-search engine that enables users to search multiple sites
simultaneously and return the results, including comparative product
pricing and availability, to one-page; and

- - an expansive range of relationships with dynamic e-commerce, technology,
and content partners.

We are now poised to build on our early success by implementing a growth
strategy that, if successful, should make us a major ready-to-use e-commerce
storefront host, and allow us to meet our goal of becoming one of most
frequented community-based portals on the Internet. Our strategic growth plan
includes:

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<PAGE>
- - expansion of our content, products and services;

- - continued development of an expandable infrastructure;

- - widespread distribution of our award-winning Internet training tool to
educate computer users about the Internet and introduce them to our site;

- - continued development of strategic partnerships; and

- - an aggressive acquisition program.

Our principal executive offices are located at 1696 Dell Avenue, Campbell,
California 95008. Our telephone number at this address is (408) 879-9880.

5
<PAGE>
THE OFFERING

Common stock offered by selling 2,116,448 shares(1)
stockholders

Common stock to be outstanding 23,226,448 shares(1)(2)
after this Offering

Use of proceeds Other than the proceeds from the exercise of the investment
rights and the warrants, none of the proceeds from the sale
of the common stock offered by this prospectus will be
received by us. Any proceeds received by us will be utilized
for working capital and general corporate purposes. See "Use
of Proceeds."

O-T-C Market Bulletin Board Symbol: NTXY (3)
__________

(1) Includes all shares issuable, as of May 4, 1999, upon conversion of the
convertible debentures and exercise of the investment rights and the
warrants. See "Selling Stockholders."

(2) Does not include 1,015,000 shares reserved for issuance upon exercise of
outstanding stock options and warrants, other than the warrants which can
be exercised for the common stock offered by this prospectus.

(3) We have filed an application to have our common stock listed on the Nasdaq
National Market. If our application is approved, the common stock will be
traded on the Nasdaq National Market under the symbol "NTXI".

6
<PAGE>
SUMMARY AND SELECTED FINANCIAL DATA

Set forth below are summary statements of operations data for the period
from October 23, 1997 (date of incorporation) to December 31, 1997, the year
ended December 31, 1998 and for the three months ended March 31, 1999, and
summary balance sheet data as of December 31, 1997 and 1998 and as of March 31,
1999. This information should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<TABLE>
<CAPTION>
For the Period from October 23, 1997 (date of incorporation)
to December 31,1997, the Year ended December 31, 1998,
and for the Three Months ended March 31, 1999 (Unaudited)

1997 1998 1999
----------- ------------ ------------
(Unaudited)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
- ------------------------------------------ ----------- ------------ ------------
Net revenues $ 144,900 $ 258,000 $ 280,200
- ------------------------------------------ ----------- ------------ ------------
Gross profit (loss) $ 57,500 $ 18,200 $ (2,900)
- ------------------------------------------ ----------- ------------ ------------
Loss from operations $ (142,100) $(3,082,300) $ (703,800)
- ------------------------------------------ ----------- ------------ ------------
Net loss $ (159,700) $(3,113.600) $ (701,700)
- ------------------------------------------ ----------- ------------ ------------
Net loss available to common shareholders $ (327,200) $(3,127,900) $ (701,700)
- ------------------------------------------ ----------- ------------ ------------
Basic loss per share $ (0.06) $ (0.37) $ (0.05)
- ------------------------------------------ ----------- ------------ ------------
Diluted loss pershare $ (0.06) $ (0.37) $ (0.05)
- ------------------------------------------ ----------- ------------ ------------
WEIGHTED-AVERAGE COMMON SHARES:
- ------------------------------------------ ----------- ------------ ------------
Basic outstanding shares 5,483,500 8,499,781 14,110,000
- ------------------------------------------ ----------- ------------ ------------
Diluted outstanding shares 5,483,500 8,499,781 14,110,000
- ------------------------------------------ ----------- ------------ ------------
BALANCE SHEET DATA:
- ------------------------------------------ ----------- ------------ ------------
Working capital $ (222,900) $ 300,400 $ (519,600)
- ------------------------------------------ ----------- ------------ ------------
Total assets $2,082,300 $ 1,652,700 $ 1,584,200
- ------------------------------------------ ----------- ------------ ------------
Long-term liabilities $ 773,500 $ 5,400 $ 3,600
- ------------------------------------------ ----------- ------------ ------------
Total stockholders' equity $ 973,400 $ 1,332,100 $ 630,400
- ------------------------------------------ ----------- ------------ ------------
</TABLE>

7
<PAGE>
RISK FACTORS

You should consider carefully the following risks before you decide to buy
our common stock. Our business, financial condition or results of operations
could be materially and adversely affected by any of the following risks.

WE HAVE A LIMITED OPERATING HISTORY, HAVE INCURRED LOSSES SINCE INCEPTION, AND
EXPECT LOSSES FOR THE FORESEEABLE FUTURE

We were incorporated in October 1997. Accordingly, we have only a limited
operating history upon which you can evaluate our business and prospects. Since
our inception, we have incurred net losses, resulting primarily from costs
related to developing our Web site, attracting users to our Web site and
establishing the Nettaxi brand. At March 31, 1999, we had an accumulated deficit
of $4,160,000. Losses have continued to grow faster than our revenues during
our limited operating history over the last year and a half. This trend is
reflective of our continued investments in technology and sales and marketing
efforts to grow the business. Because of our plans to continue to invest heavily
in marketing and promotion, to hire additional employees, and to enhance our Web
site and operating infrastructure, we expect to incur significant net losses for
the foreseeable future. We believe these expenditures are necessary to
strengthen our brand recognition, attract more users to our Web site and
generate greater online revenues. If our revenue growth is slower than we
anticipate or our operating expenses exceed our expectations, our losses will be
significantly greater. We may never achieve profitability.

OUR REVENUE GROWTH IN PRIOR PERIODS IS NOT INDICATIVE OF FUTURE GROWTH

We had revenues of approximately $280,000 and $258,000 for the first three
months of calendar year 1999 and for the year ended December 31, 1998,
respectively. Our growth in revenues is not indicative of future trends.
Accurate predictions for future revenue growth are difficult and should be
considered in light with our limited operating history and rapid changes in the
ever evolving Internet market.

OUR FUTURE REVENUES ARE UNPREDICTABLE AND OUR QUARTERLY OPERATING RESULTS MAY
FLUCTUATE SIGNIFICANTLY

Our revenues for the foreseeable future will remain primarily dependent on
the number of customers that we are able to attract to our Web site, and
secondarily on sponsorship and advertising revenues. We cannot forecast with any
degree of certainty the number of visitors to our Web site, the number of
visitors that will become customers, or the amount of sponsorship and
advertising revenues. We also expect that our operating results will fluctuate
significantly from quarter to quarter due to seasonal and cyclical patterns
which may emerge in internet sponsorship and advertising spending.

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<PAGE>
Because of these and other factors, we believe that quarter-to-quarter
comparisons of our results of operations are not good indicators of our future
performance. If our operating results fall below the expectations of securities
analysts and investors in some future periods, then our stock price may decline.

FUTURE CONVERSION OF THE DEBENTURES AND EXERCISE OF THE WARRANTS AND INVESTMENT
OPTIONS MAY SIGNIFICANTLY DILUTE YOUR HOLDINGS

As of May 4, 1999 an aggregate of $5,000,000 principal amount of debentures
were outstanding, which debentures were convertible into shares of our common
stock. Such debentures entitle the holder to exercise investment options to
purchase additional shares of our common stock upon conversion of the
debentures. If fully converted and exercised on May 4, 1999, the debentures and
investment option would be convertible into an aggregate of 995,724 shares of
our common stock, but this number of shares could prove to be significantly
greater in the event of a decrease in the trading price of the common stock due
to required adjustments in the conversion price. Purchasers of our common stock
could therefore experience substantial dilution of their investment upon
conversion of the debentures and exercise of the investment options. In
addition, as of May 4, 1999, warrants to purchase 150,000 shares of common stock
issued to the purchasers of debentures and exercisable over the next five years
at a price of $12.375, as may be adjusted from time to time pursuant to
antidilution provisions contained in the warrant agreement, were outstanding.
The shares of common stock into which the debentures may be converted and the
investment options and the warrants may be exercised are being registered
pursuant to this registration statement. See "Description of Capital
Stock-Warrants amd Debentures"

OUR NEED TO RAISE ADDITIONAL CAPITAL MAY CAUSE OUR STOCKHOLDERS TO EXPERIENCE
SIGNIFICANT DILUTION IN THE FUTURE

It is likely that we will need to raise additional funds in the future in
order to pursue our business objectives. If additional funds are raised through
the issuance of equity or convertible debt securities, the percentage ownership
of our stockholders will be reduced, stockholders may experience additional
dilution and such securities may have rights, preferences and privileges senior
to those of our common stock. This may make an investment in our common stock
less attractive to other investors, thereby weakening the trading market for our
common stock.

OUR PLANNED ONLINE AND TRADITIONAL MARKETING CAMPAIGNS MAY NOT ATTRACT
SUFFICIENT ADDITIONAL VISITORS TO OUR WEB SITE

9
<PAGE>
We plan to pursue aggressive marketing campaigns online and in traditional
media to promote the Nettaxi brand and attract an increasing number of visitors
to our Web site. We believe that maintaining and strengthening the Nettaxi
brand will be critical to the success of our business. This investment in
increased marketing carries with it significant risks, including the following:

- Our advertisements may not properly convey the Nettaxi brand image, or
may even detract from our image. Unlike advertising on our Web site,
which gives us immediate feedback and allows us promptly to adjust our
messages, advertising in print and broadcast media is less flexible.
These advertisements typically take longer and cost more to produce
and consequently have longer run times. If we fail to convey the
optimal message in these advertising campaigns, the impact may be more
lasting and more costly to correct.

- Even if we succeed in creating the right messages for our promotional
campaigns, these advertisements may fail to attract new visitors to
our Web site at levels commensurate with their costs. We may fail to
choose the optimal mix of television, radio, print and other media to
cost effectively deliver our message. Moreover, if these efforts are
unsuccessful, we will face difficult and costly choices in deciding
whether and how to redirect our marketing dollars.

WE MAY FAIL TO ESTABLISH AN EFFECTIVE INTERNAL SALES ORGANIZATION TO ATTRACT
SPONSORSHIP AND ADVERTISING REVENUES

To date, we have relied principally on outside advertising agencies to
develop sponsorship and advertising opportunities. We believe that the growth of
sponsorship and advertising revenues will depend on our ability to establish an
aggressive and effective internal sales organization. Our internal sales team
currently has nine members. We will need to substantially increase this sales
force in the coming year in order to execute our business plan. Our ability to
increase our sales force involves a number of risks and uncertainties, including
competition and the length of time for new sales employees to become productive.
If we do not develop an effective internal sales force, our business will be
materially and adversely affected.

WE RELY HEAVILY ON THIRD PARTIES FOR DEVELOPMENT OF SOFTWARE AND CONTENT AND FOR
ESSENTIAL BUSINESS OPERATIONS AND MAY BE ADVERSELY AFFECTED BY OUR FAILURE TO
MAINTAIN SATISFACTORY RELATIONSHIPS WITH SUCH PARTIES

We depend on third parties for important aspects of our business,
including:

- Internet access;

- development of software for new Web site features;

- content; and

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<PAGE>
- telecommunications.

We have limited control over these third parties, and we are not their only
client. We may not be able to maintain satisfactory relationships with any of
them on acceptable commercial terms. Further, we cannot be sure that the
quality of products and services that they provide may remain at the levels
needed to enable us to conduct our business effectively. Many of our agreements
with technology and content providers are on very favorable terms that do not
include license fees, but instead provide for revenue sharing. We may not be
able to renew these agreements on similar terms.

WE ARE HEAVILY RELIANT ON THIRD PARTIES TO HOUSE AND SERVICE OUR WEB SITE AND
ARE VULNERABLE TO POSSIBLE DAMAGE TO OUR OPERATING SYSTEMS

We maintain substantially all of our computer systems at our Campbell,
California site and the Santa Clara, California site of Exodus Communications.
We are heavily reliant on the ability of Exodus to house and service our Web
site. This system's continuing and uninterrupted performance is critical to our
success. Growth in the number of users accessing our Web site may strain its
capacity, and we rely on Exodus to upgrade our system's capacity in the face of
this growth. Exodus also provides our connection to the Internet. Sustained or
repeated system failures or interruptions of our Web site connection services
would reduce the attractiveness of our Web site to customers and advertisers,
and could therefore have a material and adverse effect on our business.

In addition, our operations are dependent in part on our ability to protect
our operating systems against physical damage from fire, floods, earthquakes,
power loss, telecommunications failures, break-ins or other similar events.
Furthermore, despite our implementation of network security measures, our
servers are also vulnerable to computer viruses, break-ins and similar
disruptive problems. The occurrence of any of these events could result in
interruptions, delays or cessations in service to our users which could have a
material adverse effect on our business, results of operations and financial
condition.

WE ARE GROWING RAPIDLY, AND EFFECTIVELY MANAGING OUR GROWTH MAY BE DIFFICULT

We are currently experiencing a period of significant expansion. In order
to execute our business plan, we must continue to grow significantly. This
growth will strain our personnel, management systems and resources. To manage
our growth, we must implement operational and financial systems and controls and
recruit, train and manage new employees. Some key members of our management have
only recently been hired, including our chief financial officer, controller and
senior director of sales. These individuals have had little experience working
with our management team. We cannot be sure that we will be able to integrate
new executives and other employees into our organization effectively. In
addition, there will be significant administrative burdens placed on our
management team as a result of our status as a public company. If we do not
manage growth effectively, our business, results of operations and financial
condition will be materially and adversely affected.

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<PAGE>
WE DEPEND ON OUR KEY PERSONNEL TO OPERATE OUR BUSINESS, AND WE MAY NOT BE ABLE
TO HIRE ENOUGH ADDITIONAL MANAGEMENT AND OTHER PERSONNEL AS OUR BUSINESS GROWS

Our performance is substantially dependent on the continued services and on
the performance of our executive officers and other key employees, particularly
Robert A. Rositano, Jr., our Chief Executive Officer, and Dean Rositano, our
Chief Operating Officer. The loss of the services of any of our executive
officers could materially and adversely affect our business. Additionally, we
believe we will need to attract, retain and motivate talented management and
other highly skilled employees to be successful. Competition for employees that
possess knowledge of both the Internet industry and our target market is
intense. We may be unable to retain our key employees or attract, assimilate and
retain other highly qualified employees in the future.

INTENSE COMPETITION FROM INTERNET-BASED BUSINESS MAY REDUCE OUR MARGINS AND
MARKET SHARE AND CAUSE OUR STOCK PRICE TO DECLINE

The markets in which we are engaged are new, rapidly evolving and intensely
competitive, and we expect competition to intensify further in the future.
Barriers to entry are relatively low, and current and new competitors can launch
new sites at a relatively low cost using commercially-available software.
Competition could result in price reductions for our products and services,
reduced margins or loss of market share. Consolidation within the online
commerce industry may also increase competition.

We currently or potentially compete with a number of other companies,
including a number of large online communities and services that have expertise
in developing online commerce, and a number of other small services, including
those that serve specialty markets. Many of our potential competitors have
longer operating histories, larger customer bases, greater brand recognition in
other business and Internet markets and significantly greater financial,
marketing, technical and other resources than us. If we fail to compete
effectively, our business will be materially and adversely affected. See
"Business-Competition".

WE MAY NOT BE ABLE TO OBTAIN FURTHER CAPITAL TO PURSUE OUR BUSINESS OBJECTIVES

Given our limited resources and our history of losses from operations, it
is likely that we will need to raise additional funds in order to fund expansion
of our business, to develop new or enhanced services or products, to respond to
competitive pressures or to acquire complementary products, businesses or
technologies. There can be no assurance that additional financing will be
available on terms favorable to us or at all. Our inability to raise
additional capital could have a material adverse effect on our business,
results of operations and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Operations-Liquidity and Capital Resources."

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<PAGE>
WE MAY FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS WITH OTHER WEB
SITES TO INCREASE NUMBERS OF WEB SITE USERS AND INCREASE OUR REVENUES

We intend to establish numerous strategic relationships with popular Web
sites to increase the number of visitors to our Web site. There is intense
competition for placements on these sites, and we may not be able to enter into
these relationships on commercially reasonable terms or at all. Even if we enter
into relationships with other Web sites, they themselves may not attract
significant numbers of users. Therefore, our site may not receive additional
users from these relationships. Moreover, we may have to pay significant fees to
establish these relationships. Our inability to enter into new distribution
relationships and expand our existing ones could have a material and adverse
effect on our business.

WE MAY NOT BE ABLE TO ADAPT AS INTERNET TECHNOLOGIES AND CUSTOMER DEMANDS
CONTINUE TO EVOLVE

To be successful, we must adapt to rapidly changing Internet technologies
and continually enhance the features and services provided on our Web site. We
could incur substantial, unanticipated costs if we need to modify our Web site,
software and infrastructure to incorporate new technologies demanded by our
audience. We may use new technologies ineffectively or we may fail to adapt our
Web site, transaction-processing systems and network infrastructure to user
requirements or emerging industry standards. If we fail to keep pace with the
technological demands of our Web-savvy audience for new services, products and
enhancements, our users may not use our Web site and instead use those of our
competitors.

WE MAY NOT BE ABLE TO PROTECT AND ENFORCE OUR TRADEMARKS, WEB ADDRESSES AND
PROPRIETARY RIGHTS

Our Nettaxi brand and our Web address, www.nettaxi.com, are critical to our
success. We have filed a trademark application for "Nettaxi", among other
trademark applications. We cannot guarantee that any of these trademark
applications will be granted. In addition, we may not be able to prevent third
parties from acquiring Web addresses that are confusingly similar to our
addresses, which could harm our business. See "Business - Intellectual
Property."

WE WOULD LOSE REVENUES AND INCUR SIGNIFICANT COSTS IF OUR SYSTEMS OR MATERIAL
THIRD-PARTY SYSTEMS ARE NOT YEAR 2000-COMPLIANT

We have not devised a Year 2000 contingency plan. The failure of our
internal systems, or any material third-party systems, to be Year 2000-compliant
could have a material and adverse effect on our business, results of operations
and financial condition.

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<PAGE>
To date, we have not incurred any material costs in identifying
or evaluating Year 2000 compliance issues. Most of our costs have related to,
and are expected to continue to relate to, the upgrades or replacements, when
necessary, of software or hardware, as well as costs associated with time spent
by employees in the evaluation process and Year 2000 compliance matters
generally. These expenses are included in our operating and capital
expenditures budget and are not expected to exceed $100,000. However, if these
costs are significantly higher than expected, they could have a material and
adverse effect on our business, results of operations and financial condition.

We may fail to discover Year 2000 compliance problems in our systems that
will require substantial revisions or replacements. In the event that the
operational facilities that support our business, or our Web-hosting facilities,
are not Year 2000 compliant, portions of our Web site may become unavailable and
we would be unable to deliver services to our users. In addition, there can be
no assurance that third-party software, hardware or services incorporated into
our material systems will not need to be revised or replaced, which could be
time-consuming and expensive. Our inability to fix or replace third-party
software, hardware or services on a timely basis could result in lost
revenues, increased operating costs and other business interruptions, any of
which could have a material and adverse effect on our business, results of
operations and financial condition. Moreover, the failure to adequately
address Year 2000 compliance issues in our software, hardware or systems could
result in claims of mismanagement, misrepresentation or breach of contract and
related litigation, which could be costly and time-consuming to defend.

In addition, there can be no assurance that governmental agencies,
utility companies, Internet access companies, third-party service providers and
others outside our control will be Year 2000 compliant. The failure by these
entities to be Year 2000 compliant could result in a systemic failure beyond our
control, including, for example, a prolonged Internet, telecommunications or
electrical failure, which could also prevent us from delivering our services to
our users, decrease the use of the Internet or prevent users from accessing
our services, any of which would have a material and adverse effect on our
business, results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Statements and Results of Operations-Impact
of the Year 2000."

ACQUISITIONS MAY DISRUPT OR OTHERWISE HAVE A NEGATIVE IMPACT ON OUR BUSINESS

We may acquire or make investments in complementary businesses, products,
services or technologies on an opportunistic basis when we believe they will
assist us in carrying out our business strategy. Growth through acquisitions has
been a successful strategy used by other Internet companies. We do not have any
present understanding, nor are we having any discussions relating to any such
acquisition or investment. If we buy a company, then we could have difficulty in
assimilating that company's personnel and operations. In addition, the key
personnel of the acquired company may decide not to work for us. If we acquire
another company, it could distract our management and employees and increase our
expenses. Furthermore, we may have to incur debt or issue equity securities to
pay for any future acquisitions, the issuance of which could be dilutive to our
existing shareholders.

14
<PAGE>
WE ARE VULNERABLE TO ADDITIONAL TAX OBLIGATIONS THAT COULD BE IMPOSED ON ONLINE
COMMERCE TRANSACTIONS

We do not expect to collect sales or other similar taxes in respect of
transactions engaged in by customers on our Web site. However, various states
or foreign countries may seek to impose sales tax obligations on us and other
e-commerce and direct marketing companies. A number of proposals have been made
at the state and local levels that would impose additional taxes on the sale of
goods and services through the Internet. These proposals, if adopted, could
substantially impair the growth of e-commerce and cause purchasing through our
Web site to be less attractive to customers as compared to traditional retail
purchasing. The United States Congress has passed legislation limiting for three
years the ability of the states to impose taxes on Internet-based transactions.
Failure to renew this legislation could result in the imposition by various
states of taxes on e-commerce. Further, states have attempted to impose sales
taxes on catalog sales from businesses such as ours. A successful assertion by
one or more states that we should have collected or be collecting sales taxes on
the sale of products could have a material and adverse effect on our business.

WE MAY NOT BE ABLE TO TAKE FULL ADVANTAGE OF POTENTIAL TAX BENEFITS FROM OUR NET
OPERATING LOSS CARRYFORWARDS

At December 31, 1998 we had net operating loss carryforwards available to
reduce future taxable income that aggregated approximately $1,227,000 for
Federal income tax purposes. These benefits expire through 2018. Pursuant to a
"change in ownership" as defined by the provisions of the Tax Reform Act of
1986, utilization of our net operating loss carryforwards may be limited, if a
cumulative change of ownership of more than 50% occurs over a three-year period.
We have not determined if an ownership change has occurred. If it has, we may
not be able to take full advantage of potential tax benefits from our net
operating loss carry forwards.

WE ARE DEPENDENT ON THE CONTINUED DEVELOPMENT OF THE INTERNET INFRASTRUCTURE

Our industry is new and rapidly evolving. Our business is highly dependant
on the growth of the internet industry and would be adversely affected if Web
usage and e-commerce does not continue to grow. Web usage may be inhibited for a
number of reasons, including:

- inadequate Internet infrastructure;

- security concerns;

- inconsistent quality of service;

15
<PAGE>
- unavailability of cost-effective, high-speed service;

- imposition of transactional taxes; or

- limitation of third-party service provider's ability and willingness
to invest in new or updated equipment to handle traffic volume.

If Web usage grows, the Internet infrastructure may not be able to support
the demands placed on it by this growth, or its performance and reliability may
decline. We are highly dependant on third-party service providers. Any
interruption experienced by these service providers may have a material impact
on our business. In addition, Web sites, including ours, have experienced a
variety of interruptions in their service as a result of outages and other
delays occurring throughout the Internet network infrastructure. If these
outages or delays frequently occur in the future, Web usage, including usage of
our Web site, could grow slowly or decline. This may have a material impact on
future revenues.

In 1999 and 1998, we experienced several interruptions and degradation of
service as a result of our third-party service provider's inability to deliver
the contractual bandwidth required to handle our traffic volume. These
interruptions result in decreased Web usage volume and therefore impact our
ability to serve advertising impressions for our customers. These interruptions
can materially impact our revenues. We estimate that during the first three
months ended March 31, 1999 the impact of these lost revenues to be
approximately $35,000. We are in the process of obtaining reimbursement for
these interruptions from the third-party service provider.

OUR LONG-TERM SUCCESS DEPENDS ON THE DEVELOPMENT OF THE E-COMMERCE MARKET, WHICH
IS UNCERTAIN

Our future revenues and profits substantially depend upon the widespread
acceptance and use of the Web as an effective medium of commerce by consumers.
Rapid growth in the use of the Web and commercial online services is a recent
phenomenon. Demand for recently introduced services and products over the Web
and online services is subject to a high level of uncertainty. The development
of the Web and online services as a viable commercial marketplace is subject to
a number of factors, including the following:

- e-commerce is at an early stage and buyers may be unwilling to shift
their purchasing from traditional vendors to online vendors;

- insufficient availability of telecommunication services or changes in
telecommunication services could result in slower response times; and

- adverse publicity and consumer concerns about the security of commerce
transactions on the Internet could discourage its acceptance and
growth.

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<PAGE>
ADOPTION OF THE INTERNET AS AN ADVERTISING MEDIUM IS UNCERTAIN

The growth of Internet sponsorships and advertising requires validation of
the Internet as an effective advertising medium. This validation has yet to
fully occur. In order for us to generate sponsorship and advertising revenues,
marketers must direct a significant portion of their budgets to the Internet
and, specifically, to our Web site. To date, sales of Internet sponsorships and
advertising represent only a small percentage of total advertising sales. Also,
technological developments could slow the growth of sponsorships and advertising
on the Internet. For example, widespread use of filter software programs that
limit access to advertising on our Web site from the Internet user's browser
could reduce advertising on the Internet. Our business, financial condition and
operating results would be adversely affected if the market for Internet
advertising fails to further develop.

BREACHES OF SECURITY ON THE INTERNET MAY SLOW THE GROWTH OF E-COMMERCE AND WEB
ADVERTISING AND SUBJECT US TO LIABILITY

The need to securely transmit confidential information, such as credit card
and other personal information, over the Internet has been a significant barrier
to e-commerce and communications over the Web. Any well-publicized compromise of
security could deter more people from using the Web or from using it to conduct
transactions that involve transmitting confidential information, such as
purchases of goods or services. Furthermore, decreased traffic and e-commerce
sales as a result of general security concerns could cause advertisers to reduce
their amount of online spending. To the extent that our activities or the
activities of third-party contractors involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
disrupt our business, damage our reputation and expose us to a risk of loss or
litigation and possible liability. We could be liable for claims based on
unauthorized purchases with credit card information, impersonation or other
similar fraud claims. Claims could also be based on other misuses of personal
information, such as for unauthorized marketing purposes. We may need to spend a
great deal of money and use other resources to protect against the threat of
security breaches or to alleviate problems caused by security breaches.

WE COULD FACE LIABILITY FOR INFORMATION DISPLAYED ON AND COMMUNICATIONS THROUGH
OUR WEB SITE

We may be subjected to claims for defamation, negligence, copyright or
trademark infringement or based on other theories relating to the information we
publish on our Web site. These types of claims have been brought, sometimes
successfully, against Internet companies as well as print publications in the
past. Based on links we provide to other Web sites, we could
also be subjected to claims based upon online content we do not control that is
accessible from our Web site. Claims may also be based on statements made and
actions taken as a result of participation in our chat rooms or as a result of
materials posted by members on bulletin boards at our Web site. We also offer
e-mail services, which may subject us to potential risks, such as:

17
<PAGE>
- - liabilities or claims resulting from unsolicited e-mail;

- - lost or misdirected messages;

- - illegal or fraudulent use of e-mail; or

- - interruptions or delays in e-mail service.

- - These claims could result in substantial costs and a diversion of our
management's attention and resources.

EFFORTS TO REGULATE OR ELIMINATE THE USE OF MECHANISMS WHICH AUTOMATICALLY
COLLECT INFORMATION ON USERS OF OUR WEB SITE MAY INTERFERE WITH OUR ABILITY TO
TARGET OUR MARKETING EFFORTS AND TAILOR OUR WEB SITE OFFERINGS TO THE TASTES OF
OUR USERS

Web sites typically place a tracking program on a user's hard drive without
the user's knowledge or consent. These programs automatically collect data on
anyone visiting a Web site. Web site operators use these mechanisms for a
variety of purposes, including the collection of data derived from users'
Internet activity. Most currently available Web browsers allow users to elect to
remove these mechanisms at any time or to prevent such information from being
stored on their hard drive. In addition, some commentators, privacy advocates
and governmental bodies have suggested limiting or eliminating the use of these
tracking mechanisms. Any reduction or limitation in the use of this software
could limit the effectiveness of our sales and marketing efforts.

WE COULD FACE ADDITIONAL BURDENS ASSOCIATED WITH GOVERNMENT REGULATION OF AND
LEGAL UNCERTAINTIES SURROUNDING THE INTERNET

Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could increase our cost of doing business or
otherwise have a material and adverse effect on our business, results of
operations and financial condition. Laws and regulations directly applicable to
Internet communications, commerce and advertising are becoming more prevalent.
The law governing the Internet, however, remains largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether and how existing laws governing intellectual property,
copyright, privacy, obscenity, libel and taxation apply to the Internet. In
addition, the growth and development of e-commerce may prompt calls for more
stringent consumer protection laws, both in the United States and abroad. We
also may be subject to future regulation not specifically related to the
Internet, including laws affecting direct marketers. See "Business - Government
Regulation."

SHARES ELIGIBLE FOR FUTURE SALE BY OUR CURRENT STOCKHOLDERS MAY ADVERSELY AFFECT
OUR STOCK PRICE

18
<PAGE>
To date, we have had a very limited trading volume in our common stock. As
of May 4, 1999, 1,910,000 shares of our common stock were immediately eligible
for sale in the public market without restriction or further restriction under
the Securities Act, unless purchased by or issued to any "affiliate" of ours, as
that term is defined in Rule 144. However, in addition to the shares that will
be eligible for sale under this prospectus, 11,950,337 shares of our common
stock will become eligible for sale under Rule 144 on October 1, 1999. We may
also shortly file a registration statement to register all shares of common
stock under our stock option plan. After that registration statement is
effective, shares issued upon exercise of stock options, including options for
78,332 shares that were exercisable as of May 4, 1999, will be eligible for
resale in the public market without restriction. If our stockholders sell
substantial amounts of our common stock under Rule 144 or pursuant to the
aforementioned registration statement, the market price of our common stock
could be adversely affected and our ability to raise additional capital at that
time through the sale of our securities could be impaired. See "Shares Eligible
for Future Sale."

ANTI-TAKEOVER PROVISIONS AND OUR RIGHT TO ISSUE PREFERRED STOCK COULD MAKE A
THIRD-PARTY ACQUISITION OF US DIFFICULT

We are a Nevada corporation. Anti-takeover provisions of Nevada law could
make it more difficult for a third party to acquire control of us, even if such
change in control would be beneficial to stockholders. Our articles of
incorporation provide that our board of directors may issue preferred stock
without stockholder approval. The issuance of preferred stock could make it
more difficult for a third party to acquire us. All of the foregoing could
adversely affect prevailing market prices for our common stock.

OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE AS IS TYPICAL OF INTERNET
COMPANIES

The market price of our common stock has been, and is likely to continue to
be, highly volatile as the stock market in general, and the market for
Internet-related and technology companies in particular, has been highly
volatile. Investors may not be able to resell their shares of our common stock
following periods of volatility because of the market's adverse reaction to
volatility. The trading prices of many technology and Internet-related
companies' stocks have reached historical highs within the last 52 weeks and
have reflected valuations substantially above historical levels. During the
same period, these companies' stocks have also been highly volatile and have
recorded lows well below historical highs. We cannot assure you that our stock
will trade at the same levels of other Internet stocks or that Internet stocks
in general will sustain their current market prices.

Factors that could cause such volatility may include, among other things:

- actual or anticipated fluctuations in our quarterly operating results;

- announcements of technological innovations;

19
<PAGE>
- changes in financial estimates by securities analysts;

- conditions or trends in the Internet industry; and

- changes in the market valuations of other Internet companies.

20
<PAGE>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains "forward-looking statements." In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "could," "expects," "plans," "intends," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue" or the negative of such terms
and other comparable terminology.

These forward-looking statements include, without limitation, statements
about:

- - our market opportunity;

- - our strategies;

- - competition;

- - expected activities and expenditures as we pursue our business plan, and

- - the adequacy of our available cash resources.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.

The accompanying information contained in this prospectus, including,
without limitation, the information set forth under the headings "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business" identify important factors that could adversely
affect actual results and performance. All forward-looking statements
attributable to us are expressly qualified in their entirety by the foregoing
cautionary statement. We undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.

USE OF PROCEEDS

Other than the proceeds from the exercise of the investment rights and the
warrants, none of the proceeds from the sale of the common stock offered by this
prospectus will be received by us. The holders of the investment rights and
warrants are not obligated to exercise their rights and warrants, and there can
be no assurance that we will receive any additional proceeds. If, however, all
the investment rights and warrants are exercised, the gross proceeds to us would
be approximately $7,879,861. We currently intend to use the proceeds as
follows:

- - to expand out marketing and promotion campaigns in traditional and online
media;

- - to continue to improve out Internet and systems infrastructure and support;

21
<PAGE>
- - to further develop our online sales force;

- - the balance for working capital and general corporate purposes, including
possible acquisitions of or investment in complementary businesses,
products or technologies.

Pending these uses, the net proceeds will be invested in short-term,
investment grade instruments, certificates of deposit or direct or guaranteed
obligations of the United States.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock has been traded on the NASD O-T-C Market Bulletin Board
under the trading symbol "NTXY" since October 1, 1998. Prior to that date, our
common stock was not actively traded in the public market. The following table
sets forth, for the periods indicated, the high and low closing prices for our
common stock as reported by various Bulletin Board market makers. The quotations
do not reflect adjustments for retail mark-ups, mark-downs, or commissions and
may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
PERIOD LOW CLOSE HIGH CLOSE
- -------------------------------------- ---------- -----------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
Fourth Quarter (from October 1, 1998-
December 31, 1998) $ 4.50 $ 8.75
Fiscal Year Ended December 31, 1999:
First Quarter (January 1, 1999 -
March 31, 1999) $ 6.625 $ 17.625
Second Quarter (through June 21, 1999) $ 11.50 $ 29.50
</TABLE>

On June 21 , 1999, the closing price for our common stock on the Bulletin
Board was $14.562 per share.

To date, no dividends have been declared or paid on any of our capital
stock. We currently intend to retain earnings, if any, to fund the development
and growth of our business and do not anticipate paying cash dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of our board of directors after taking into account various factors,
including our financial condition, operating results, current and anticipated
cash needs and plans for expansion.

22
<PAGE>
CAPITALIZATION

The following table sets forth, as of March 31, 1999, the capitalization of
Nettaxi. This information should be read in conjunction with our Financial
Statements and the related Notes appearing elsewhere in this prospectus.

The following table set forth (A) the capitalization of the Company as of
March 31, 1999, (B) the pro forma capitalization of the Company after giving
effect to the conversion of $5,000,000 of convertible debentures (C) the pro
forma capitalization of the Company after giving effect to the exercise of
warrants, which vest immediately, to purchase 150,000 shares of the Common Stock
at $12.375, issued in connection with the convertible debentures and 125,000
warrants at $8.00 for additional financing.

<TABLE>
<CAPTION>
As of March 31, 1999
--------------------------------------------------------
(A) (B) (C) ProForma
(Unaudited) (Unaudited) (Unaudited) as adjusted
Actual Pro Forma Pro Forma (Unaudited)
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents $ 77,500 $ 5,000,000 $ 1,856,300 $ 6,933,800
------------ ------------ ------------ --------------

Long-term obligations:
Capital lease obligations (including current portion) 10,900 5,000,000 10,900
5% Convertible note payable - (5,000,000) -
------------ ------------ --------------
Total long-term obligations (including current portion) 10,900 - 10,900

Stockholders' equity (net capital deficiency):
Preferred stock, $0.001 par value, 1,000,000 -
shares authorized;
no shares issued or outstanding

Common stock subscribed (95,000) (95,000)

Common stock, $0.001 par value 10,800 400 200 11,400

Additional paid-in capital 4,872,100 4,999,600 1,856,100 11,727,800

Accumulated deficit (4,157,500) - - (4,157,500)

Total stockholders' equity 630,400 5,000,000 1,856,300 7,486,700

Total capitalization $ 641,300 $ 7,497,600
</TABLE>

23
<PAGE>
SELECTED FINANCIAL DATA

SUMMARY AND SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
For the Period from October 23, 1997 (date of incorporation)
to December 31,1997, the Year ended December 31, 1998,
and for the Three Months ended March 31, 1999 (Unaudited)

1997 1998 1999
----------- ------------ ------------
(Unaudited)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
- ------------------------------------------ ----------- ------------ ------------
Net revenues $ 144,900 $ 258,000 $ 280,200
- ------------------------------------------ ----------- ------------ ------------
Gross profit (loss) $ 57,500 $ 18,200 $ (2,900)
- ------------------------------------------ ----------- ------------ ------------
Loss from operations $ (142,100) $(3,082,300) $ (703,800)
- ------------------------------------------ ----------- ------------ ------------
Net loss $ (159,700) $(3,113,600) $ (701,700)
- ------------------------------------------ ----------- ------------ ------------
Net loss available to common shareholders $ (327,200) $(3,127,900) $ (701,700)
- ------------------------------------------ ----------- ------------ ------------
Basic loss per share $ (0.06) $ (0.37) $ (0.05)
- ------------------------------------------ ----------- ------------ ------------
Diluted loss pershare $ (0.06) $ (0.37) $ (0.05)
- ------------------------------------------ ----------- ------------ ------------
WEIGHTED-AVERAGE COMMON SHARES:
- ------------------------------------------
Basic outstanding shares 5,483,500 8,499,781 14,110,000
- ------------------------------------------ ----------- ------------ ------------
Diluted outstanding shares 5,483,500 8,499,781 14,110,000
- ------------------------------------------ ----------- ------------ ------------
BALANCE SHEET DATA:
- ------------------------------------------
Working capital $ (222,900) $ 300,400 $ (519,600)
- ------------------------------------------ ----------- ------------ ------------
Total assets $2,082,300 $ 1,652,700 $ 1,584,200
- ------------------------------------------ ----------- ------------ ------------
Long-term liabilities $ 773,500 $ 5,400 $ 3,600
- ------------------------------------------ ----------- ------------ ------------
Total stockholders' equity $ 973,400 $ 1,332,100 $ 630,400
- ------------------------------------------ ----------- ------------ ------------
</TABLE>

24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of
operations of Nettaxi should be read in conjunction with the Consolidated
Financial Statements and the Related Notes included elsewhere in this
prospectus. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including, but not limited to, those set forth under "Risk Factors" and
elsewhere in this prospectus. See "Cautionary Note Regarding Forward-Looking
Statements."

OVERVIEW

Nettaxi was incorporated in October, 1997 to capitalize on a significant
opportunity that exists today through the convergence of the media and
entertainment industries with the vast communications power of the Internet.
Our website, nettaxi.com, is an online community designed to seamlessly
integrate content with e-commerce services for businesses, providing
comprehensive information about news, sports, entertainment, health, politics,
finances, lifestyle, and areas of interest to the growing number of Internet
users.

Our mission is to establish Nettaxi.com as an entry point or 'portal' to
the Internet by continuing to develop premium online communities which are both
content-rich to our users, and provide easy-to-use e-commerce services to
businesses which reside in these online communities. By successfully achieving
this, we expect to continue to generate substantial revenues through advertising
fees and, once our e-commerce capabilities are launched in the third quarter of
1999, e-commerce revenues and transaction fees through the sales of products
on-line.

We launched our Web site in July, 1998. For the period from inception
through October, 1998 we had minimal sales and our operating activities related
primarily to the development of the necessary computer infrastructure and
initial planning and development of Nettaxi. In addition, we began to assemble
the technical assets required to drive new users to our website, including
Internet the City , the sophisticated interactive Internet training CD-ROM that
connects users to our Website. We implemented numerous modifications to the
award-winning training tool, including principally integrating our "taxicab"
search engine in the main user interface, and creating the mechanism whereby the
user could launch into our website directly from the CD-ROM environment.

During 1998, we continued Website development activities and focused on
recruiting personnel, raising capital and developing programs to attract and
retain subscribers. In 1998, we improved and upgraded our services, and began
active promotion of our brand to increase market awareness. We also began
placing greater emphasis on building advertising revenues and memberships by
expanding our sales force. Since our website was launched, we have become one of
the world's most frequented online communities. Traffic to our online
communities has increased consistently, and growth of the monthly subscriber
base has begun to accelerate. The Nettaxi.com website had over 100 million page
views per month and 182 million ad impressions per month by May 1999 Based on
our current advertising practices, we currently host an average of approximately
1.82 ad impressions per page. Based on unique visitors to our website, PC Data
Online ranked Nettaxi as the 139th most visited website in the world in May
1999.

25
<PAGE>
To date, our revenues have been derived principally from the sale of
advertisements and, to a lesser extent, from CD ROM distribution royalties and
premium account subscription revenues. E-commerce revenues have not been
significant to date, but are expected to increase as we increase the number of
contractual relationships with parties offering e-commerce related products and
services which can be made available to our subscribers and parties looking to
make online sales to our subscribers and other visitors to our site. Advertising
revenues constituted 69% of total revenues for the year ended December 31,1998.
We sell a variety of advertising packages to clients, including banner
advertisements, event sponsorship, and targeted and direct response
advertisements. Currently, our advertising revenues are derived principally
from short-term advertising arrangements, averaging one to two months, in which
we guarantee a minimum number of impressions for a fixed fee. Advertising
revenues are recognized ratably in the period in which the advertisement is
displayed, provided that we have no significant remaining obligations and that
collection of the resulting receivable is probable. Payments received from
advertisers prior to displaying their advertisements on the site are recorded as
deferred revenues and are recognized as revenue ratably when the advertisement
is displayed. To the extent minimum guaranteed impression levels are not met, we
defer recognition of the corresponding revenues until guaranteed levels are
achieved.

In addition to advertising revenues, we derive other revenues primarily
from royalties from the distribution of our CD-ROM tutorial product and our
premium account membership subscriptions. Royalty revenues result from
relationships with computer manufactures that bundle and distribute our CD-ROM
product with their product(s). Our membership programs offer premium services
for a monthly fee, providing additional services such as incremental storage
space and the ability to host limited commercial activity. Although we expect
non-advertising revenues to continue, we expect to continue to derive the
majority of our revenue from the sale of advertising space on our Web site for
the foreseeable future.

Our recent arrangements with our e-commerce partners generally provide us
with a share of any sales resulting from direct links from our site. Revenues
from these programs will be recognized in the month that the service is
provided. Revenues from our share of the proceeds from its e-commerce partners'
sales will be recognized by us upon notification from our partners of sales
attributable to our site. To date, revenues from e-commerce arrangements have
not been material. However, we expect e-commerce derived revenues to become a
more significant portion of our total revenues.

26
<PAGE>
We believe that the popularity of our website continues to validate our
strategy and proven the viability of the technology that we have acquired and
developed since we launched our business in 1997. We are now poised to build on
our early success by implementing a growth strategy that, if successful, should
make us a major ready-to-use e-commerce storefront host, and allow us to meet
our goal of becoming one of the top community-based portals on the Internet.
Our strategic growth plan includes expansion of our products and services,
continued development of an expandable infrastructure, widespread
distribution of our award-winning Internet training tool to educate computer
users about the Internet and introduce them to our website, and continued
development of strategic partnerships. See "Business- Our Strategy."

We incurred net losses of $327,200, $3,127,900 and $701,700 for the
periods from October 23, 1997 the date of incorporation to December 31, 1997,
the year ended December 31, 1998, and the first quarter of fiscal 1999,
respectively. At March 31, 1999, we had an accumulated deficit of $4,157,500 .
The net losses and accumulated deficit resulted from our lack of substantial
revenues and the significant operational, infrastructure and other costs
incurred in the development and marketing of our services. As a result of our
expansion plans and our expectation that our operating expenses, especially in
the areas of sales and marketing, will continue to increase significantly, we
expect to incur additional losses from operations for the foreseeable future. To
the extent that increases in our operating expenses precede or are not
subsequently followed by commensurate increases in revenues, or that we are
unable to adjust operating expense levels accordingly, our business, results of
operations and financial condition would be materially and adversely affected.
There can be no assurance that we will ever achieve or sustain profitability or
that our operating losses will not increase in the future. See "Risk
Factors--We have a history of losses, and we expect losses for the foreseeable
future."

To date, we have entered into business and technology license arrangements
in order to build our website community, provide community-specific content,
generate additional traffic, and provide our subscribers with additional
products and services, including e-commerce tools. In May 1999, we completed the
merger with Plus Net, Inc., which operates a portal website with a web based
email program and a robust search engine that brings back the top ten results of
the most popular Internet search engines. We believe this acquisition also
enhances our electronic commerce and advertising opportunities. See
"Business--Recent Acquisition." We intend to continue to investigate potential
acquisitions and to seek additional strategic alliances with content and
distribution partners. that fall within the scope of our business strategy, and
will serve to increase our subscriber base and overall site traffic.
Acquisitions carry numerous risks and uncertainties and we cannot guarantee that
we will be able to successfully integrate any businesses, products, technologies
or personnel that might be acquired in the future. See "Risk
Factors--Acquisitions may disrupt or otherwise have a negative impact on our
business."

27
<PAGE>
We believe that we may experience seasonality in our business, with use of
the Internet in general and our Nettaxi.com website traffic being somewhat lower
during periods of the year. In particular, we believe that advertising sales in
traditional media, such as television and radio, generally are lower in the
first and third calendar quarters of each year due to the summer vacation period
and post-Winter holiday season slowdown. If similar seasonal patterns emerge in
Internet advertising, our advertising revenues and operating results also may
vary significantly based upon these same patterns. In addition, as traditional
retail sales are generally higher in the fourth calendar quarter of each year
during the winter holiday season, and subsequently lower in the first calendar
quarter of each year, we anticipate that e-commerce revenues may follow a
similar seasonal pattern and that our e-commerce revenues and operating results
also may vary significantly based upon these patterns. See "Risk Factors--Our
future revenues are unpredictable and our quarterly operating results may
fluctuate significantly."

RESULTS OF OPERATIONS

The following table sets forth the statement of operations data for the
periods indicated by each item reflected in our statement of operations. Given
our limited operating history, we believe that an analysis of our cost and
expense categories as a percentage of revenues is not meaningful.

<TABLE>
<CAPTION>
October 23, January 1, January 1, January 1,
To To To To
December 31, 1997 December 31, 1998 March 31, March 31,
1998 1999
------------------- ------------------- ------------ ------------
(Unaudited) (Unaudited)
- ----------------------------------------- ------------------- ------------------- ------------ ------------
<S> <C> <C> <C> <C>
Net revenues $ 144,900 $ 258,000 $ 36,300 $ 280,200
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Cost of revenues $ 87,400 $ 239,800 $ 20,600 $ 283,100
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Gross profit $ 57,500 $ 18,200 $ 15,700 $ (2,900)
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Operating expenses:
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Sales and marketing $ 3,100 $ 745,600 $ 90,600 $ 135,700
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Research and development $ 36,500 $ 634,700 $ 161,700 $ 217,800
- ----------------------------------------- ------------------- ------------------- ------------ ------------
General and administrative $ 160,000 $ 1,053,200 $ 146,600 $ 347,400
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Asset impairment $ - $ 667,000 $ - $ -
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Total operating expenses $ 199,600 $ 3,100,500 $ 398,900 $ (700,900)
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Loss from operations $ (142,100) $ (3,082,300) $ (383,200) $ (703,800)
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Other income (expense):
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Interest income $ - $ 9,800 $ - $ 2,600
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Interest expense $ (17,000) $ (68,800) $ (25,500) $ (500)
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Other income $ - $ 28,500 $ - $ -
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Loss before income taxes $ (159,100) $ (3,112,800) $ (408,700) $ (701,700)
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Income taxes $ (600) $ (800) $ - $ -
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Net loss $ (159,700) $ (3,113,600) $ (408,700) $ (701,700)
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Preferred stock dividend $ (167,500) $ (14,300) $ (14,300) $ -
- ----------------------------------------- ------------------- ------------------- ------------ ------------
Net loss available to common shareholders $ (327,200) $ (3,127,900) $ (423,000) $ (701,700)
- ----------------------------------------- ------------------- ------------------- ------------ ------------
</TABLE>

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FOR THE PERIOD FROM OCTOBER 23, 1997, THE DATE OF INCORPORATION, TO DECEMBER 31,
1997 AND FOR THE YEAR ENDED DECEMBER 31, 1998.

REVENUES. Revenues were $144,900 and $ 258,000 for the period from
October 23, 1997 the date of incorporation to December 31, 1997 and for the
year ended December 31, 1998 respectively. The period to period growth resulted
from an increase in the number of advertisers and the average contract duration
and value, an increase in our Web site traffic and to a lesser extent, increases
in our subscription memberships.

ADVERTISING REVENUES. Advertising revenues were $0.00 or 0% of total
revenues, and $177,200 or 69% of total revenues for the period from October 23,
1997 the date of incorporation to December 31, 1997 and for the year ended
December 31, 1998, respectively. We had deferred revenues of $0 and $47,000,
respectively, attributable to prepaid advertising.

SUBSCRIPTION REVENUES. Our subscription membership revenues were $0.00 or
0% of total revenues, and $6,100 or 2% of total revenues for the period from
October 23, 1997, the date of incorporation, to December 31, 1997 and for the
year ended December 31, 1998, respectively.

CD ROM DISTRIBUTION ROYALTIES. Our CD ROM distribution revenues were
$124,600 or 86% of total revenues, and $61,700 or 24% of total revenues for the
period from October 23, 1997, the date of incorporation, to December 31 1997 and
for the year ended December 31, 1998, respectively.

COST OF REVENUES. Cost of revenues were $87,400 or 60% of total revenues,
and $239,800 or 93% of total revenues for the period from October 23, 1997,
the date of incorporation, to December 31, 1997, and for the year ended
December 31, 1998, respectively. Gross margins were 40% and 7% in 1997 and
1998, respectively. The general decline in gross margins as a percentage
of total revenues was attributable to the growth of the networking
infrastructure resulting in an increase in Internet connection, support and
maintenance charges, equipment costs as well as operations personnel costs.

SALES AND MARKETING EXPENSES. Sales and marketing expenses consisted
primarily of salaries of our sales and marketing personnel, marketing,
promotion, advertising and related costs. Sales and marketing expenses were
$3,100 or 2% of total revenues, and $745,600 or 289% of total revenues for the
period from October 23, 1997, the date of incorporation, to December 31, 1997,
and for the year ended December 31, 1998, respectively. In the first year of
operation, we did not dedicate meaningful funds to sales and marketing
activities. The period to period increase in sales and marketing expenses from
1997 to 1998 was primarily attributable to expansion of our online and print
advertising, public relations and other promotional expenditures as well as
increased sales and marketing personnel and related expenses required to
implement our marketing strategy.

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We expect selling and marketing expenses to increase significantly in
future periods. These increases will be principally related to hiring additional
sales and marketing personnel and increased spending on advertising in a variety
of media to increase brand awareness and attract additional visitors to our Web
site. There can be no assurance that these increased expenditures will result in
increased visitors to our Web site or additional revenues. See
"Business-Marketing and Promotion."

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$36,500 or 25% of total revenues, and $634,700 or 246% of total revenues for the
period from October 23, 1997, the date of incorporation, to December 31, 1997,
and for the year ended December 31, 1998, respectively. The increases in
absolute dollars in product development expenses were primarily attributable to
ongoing updating of the infrastructure and technological development of the
website.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consisted primarily of salaries and related costs for our executive,
administrative, and finance, as well as legal, accounting and other professional
service fees. General and administrative expenses were $160,000 or 110% of total
revenues, and $1,053,200 or 408% of total revenues for the period from October
23, 1997, the date of incorporation, to December 31, 1997, and for the year
ended December 31, 1998, respectively. The period to period increase in general
and administrative expenses was primarily due to increases in the number of
general and administrative personnel and professional services. The increased
salaries reflect the highly competitive nature of hiring in the internet
software marketplace. We expect general and administrative expenses to grow as
we hire additional personnel and incur additional expenses related to the growth
of our business and our operations as a public company.

ASSET IMPAIRMENT. In November, 1997, we purchased rights to a software
application valued at $1,740,000. In 1998 we experienced several functional
problems with portions of the purchased technology due to those components
incompatibility with subsequent releases of upgraded versions of its operating
system. Following attempts to make it compatible, we decided in December, 1998
not to spend additional monies on these components but to replace them. We
determined that 50% of the purchased technology was incompatible with its
operating system and therefore was not technologically viable. In December, 1998
we recorded an impairment charge of purchased technology with a net book value
of $667,000. See Note 4 to Consolidated Financial Statements.

OTHER INCOME. In 1998 we realized a gain of $28,500 from the disposal of
capital equipment.

INTEREST EXPENSE. Interest expense, net was $17,000, and $59,000, for the
period from October 23, 1997, the date of incorporation, to December 31, 1997,
and for the year ended December 31, 1998, respectively. The increase in interest
expense for the year ended December 31, 1998 was primarily due to the
convertible promissory note which accrued interest over nine months in 1998
versus two months in 1997. See Note 6 to Consolidated Financial Statements

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INCOME TAXES. At December 31, 1998 we had net operating loss carryforwards
available to reduce future taxable income that aggregate approximately
$1,227,000 for Federal income tax purposes. These benefits expire through 2018.
Pursuant to a "change in ownership" as defined by the provisions of the Tax
reform Act of 1986, utilization of of our net operating loss carryforwards may
be limited, if a cumulative change of ownership of more than 50% occurs over a
three-year period. We have not determined if an ownership change has occurred.

FOR THE QUARTERS ENDED MARCH 31, 1998 AND MARCH 31, 1999.

REVENUES. Revenues were $36,300 and $ 280,200 for the three months ended
March 31, 1998 and 1999, respectively. The period to period growth resulted from
an increase in our Web site traffic and corresponding available ad impressions,
the number of advertisers and, to a lesser extent, increased royalty and sales
revenues from our CD-ROM product.

ADVERTISING REVENUES. Advertising revenues were $0 or 0% of total
revenues and $199,300 or 71% of total revenues for the three months ended March
31, 1998 and 1999, respectively. We had deferred advertising revenues of $0
and $42,000 for the three months ended March 31, 1998 and 1999, respectively,
attributable to prepaid advertising.

ROYALTY AND SALES REVENUES. Our royalty and sales revenues from the
bundling and distribution of our CD-ROM product were $32,000 or 88% of total
revenues and $66,600 or 24% of total revenues for the three months ended March
31, 1998 and 1999, respectively. This increase resulted from larger volumes of
both the bundled distribution of our CD-ROM product and the stand-alone sales of
this product.

COST OF REVENUES. Cost of revenues were $20,600, or 57% of revenues, and
$283,100, or 101% of revenues, for the three months ended March 31, 1998 and
1999, respectively. Our year over year percentage increase in cost of revenue in
comparison to net revenues was higher as a result of our investment in equipment
and technology to support future growth of the internet traffic volume to our
website and communities. Gross margins were 43% and 0% in 1998 and 1999,
respectively. The general decline in gross margins as a percentage of
total revenues was attributable to the growth of the networking infrastructure
resulting in an increase in Internet connection, support and maintenance
charges, and new equipment costs.

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SALES AND MARKETING EXPENSES. Sales and marketing expenses consisted
primarily of salaries of our sales and marketing personnel, marketing,
promotion, advertising and related costs. Sales and marketing expenses were
$90,600 or 250% of total revenues, and $135,700 or 48% of total revenues for the
three months ended March 31, 1998 and 1999, respectively. The quarter over
quarter increase in sales and marketing expenses from 1998 to 1999 was primarily
attributable to increased sales and marketing personnel, expansion of our online
and print advertising, and an increase in public relations and other promotional
expenditures and related expenses required to implement our marketing strategy.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
include product development personnel salaries, consulting fees, expenses
related to the development, testing and upgrades to our web site and expenses
related to the editorial content and community management and support to our web
site. Product development expenses were $161,700 or 446% of total revenues, and
$217,800 or 78% of total revenues for the three months ended March 31, 1998 and
1999, respectively. The increases in absolute dollars in product development
expenses were primarily attributable to increased staffing to support ongoing
updating of the infrastructure and technological development of the website
features and content.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consisted primarily of salaries and related costs for our executive,
administrative, and finance personnel, facilities cost, as well as legal,
accounting and other professional service fees. General and administrative
expenses were $146,600 or 404% of total revenues, and $347,400 or 124% of total
revenues for the three months ended March 31, 1998 and 1999, respectively. The
period over period increased general and administrative expenses were primarily
due to increased professional services and insurance, and increased general and
administrative personnel to support the growth of our operations. The increased
salaries reflect the highly competitive nature of hiring in the internet
software marketplace. Costs for professional services and insurance are related
to us operating as a public company such as directors' and officers' liability
insurance, investor relations programs and professional service fees. We
expect general and administrative expenses to grow as we hire additional
personnel and incur additional expenses related to the growth of our business
and our operations as a public company.

INTEREST EXPENSE. Interest expense was $25,500, and $500, for the three
months ended March 31, 1998 and 1999, respectively. The interest expense for the
three months ended March 31, 1998 was primarily due to the convertible
promissory note that was converted into common stock in September 1998. See
Note 6 to Consolidated Financial Statements

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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have primarily financed our operations through the
private placement of our common and preferred stock, through which we raised
$100,500 and $1,208,700 in 1997 and 1998, respectively. As of December 31,
1998, we had approximately $465,800 in cash and cash equivalents.

Net cash used in operating activities was $51,000 and $665,800 for the
period from October 23, 1997, the date of incorporation, to December 31, 1997,
and for the year ended December 31, 1998, respectively. We had significant
negative cash flows from operating activities in each fiscal and quarterly
period to date. Net cash used in operating activities resulted primarily from
our net operating losses, adjusted for non-cash items, and a higher level of
accounts receivable due to the time lag between revenue recognition and the
receipt of payments from advertisers, which were partially offset by
increases in accounts payable, accrued expenses, and deferred revenues.

Net cash used in investing activities was $0.00 and $124,600 for the period
from October 23, 1997, the date of incorporation, to December 31, 1997 and for
the year ended December 31, 1998, respectively. Net cash used in investing
activities was primarily related to the purchase of property and equipment in
connection with the build out of our infrastructure.

Net cash provided by financing activities was $100,500 and $1,206,700 for
the period from October 23 1997, the date of incorporation, to December 31,
1997, and for the year ended December 31, 1998, respectively. Net cash
provided by financing activities in 1998 consisted primarily of net proceeds
from the issuance of our common and preferred stock.

As of December 31, 1998, our principal commitments consisted of obligations
outstanding under capital and operating leases. In 1998, we acquired $14,700 of
equipment under a capital lease, and $159,200 of computers and equipment for
cash.

Our capital requirements depend on numerous factors, including market
acceptance of our services, the amount of resources we devote to investments in
our Web site, the resources we devote to marketing and selling our services and
our brand promotions and other factors. We have experienced a substantial
increase in our capital expenditures and operating lease arrangements since
inception consistent with the growth in our operations and staffing, and we
anticipate that this will continue for the foreseeable future. Additionally, we
will continue to evaluate possible investments in businesses, products and
technologies, and plans to expand our sales and marketing programs and conduct
more aggressive brand promotions.

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<PAGE>
We believe that we will be able to meet our near term cash requirements
through lease lines of credit, bank financing, and from the proceeds received in
a $5,000,000 convertible debt financing that was successfully completed in April
1999. Our long-term liquidity needs will also be met through the above
financing strategies coupled with additional debt and equity financing currently
in negotiation. There can be no assurance that financing will be available in
amounts or on terms acceptable to us, if at all, and our failure to secure
adequate financing may prevent us from pursuing our business objectives. See
"Risk Factors--We may not be able to obtain further capital to pursue our
business objectives."

IMPACT OF THE YEAR 2000

Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems may therefore recognize a date using "00" as the year 1900 rather than
the year 2000. As a result, computer systems and/or software used by many
companies and governmental agencies may need to be upgraded to comply with Year
2000 requirements or risk system failure or miscalculations causing disruptions
of normal business activities.

STATE OF READINESS. The third-party vendor upon which we materially rely
is Exodus Communications, which houses and services our Web equipment and
provides our connection to the Internet. We have sought confirmation from
Exodus that its system is Year 2000 compliant and Exodus has informed us that
its system is Year 2000 compliant.

In addition, we plan to seek verification from other key vendors,
distributors and suppliers that they are Year 2000 compliant or, if they are not
presently compliant, to provide a description of their plans to become so. To
the extent that vendors fail to provide certification that they are Year 2000
compliant by September 1999, we will seek to terminate and replace these
relationships with those who are Year 2000 compliant. Until our vendors,
distributors and suppliers have provided verification of their compliance, we
will not be able to completely evaluate whether our systems will need to be
revised or replaced.

We are conducting an internal assessment of all material information
technology and non-information technology systems at our headquarters for Year
2000 compliance. Until we complete the assessment, we will not know whether
these systems are or will be Year 2000 compliant by September 1999.

To date, we have not yet incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our costs have related to, and
are expected to continue to relate to, the upgrades or replacements, when
necessary, of software or hardware, as well as costs associated with time spent
by employees in the evaluation process and Year 2000 compliance matters
generally. These expenses are included in our operating and capital
expenditures budget and are not expected to exceed $100,000. However, if these
costs are significantly higher than expected, they could have a material and
adverse effect on our business, results of operations and financial condition.

34
<PAGE>
RISKS. There can be no assurance that we will not discover Year 2000
compliance problems in our systems that will require substantial revisions or
replacements. In the event that the operational facilities that support our
business, or our Web-hosting facilities, are not Year 2000 compliant, we may be
unable to deliver goods or services to our customers and portions of our Website
may become unavailable. In addition, there can be no assurance that
third-party software, hardware or services incorporated into our material
systems will not need to be revised or replaced, which could be time-consuming
and expensive. Our inability to fix or replace third-party software, hardware or
services on a timely basis could result in lost revenues, increased operating
costs and other business interruptions, any of which could have a material and
adverse effect on our business, results of operations and financial condition.
Moreover, the failure to adequately address Year 2000 compliance issues in our
software, hardware or systems could result in claims of mismanagement,
misrepresentation or breach of contract and related litigation, which could be
costly and time-consuming to defend.

In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies and others outside our control will be
Year 2000-compliant. The failure by these entities to be Year 2000-compliant
could result in a systemic failure beyond our control, including, for example, a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from delivering our services to our users, decrease the use of the
Internet or prevent users from accessing our services, any of which would have a
material and adverse effect on our business, results of operations and financial
condition.

CONTINGENCY PLAN. As discussed above, we are engaged in an ongoing Year
2000 assessment and do not currently have a contingency plan to deal with the
worst case scenario that might occur if technologies on which we depend are not
Year 2000-compliant and fail to operate effectively after the Year 2000. The
results of our Year 2000 compliance evaluation and the responses received from
distributors, suppliers and other third parties with which we conduct business
will be taken into account in determining the need for and nature and extent of
any contingency plans.

If our present efforts to address the Year 2000 compliance issues discussed
above are not successful, or if distributors, suppliers and other third parties
with which we conduct business do not successfully address such issues, our
users could seek alternate suppliers of our products and services. Any material
Year 2000 problem could require us to incur significant unanticipated expenses
to remedy and could divert our management's time and attention, either of which
could have a material and adverse effect on our business, operating results and
financial condition. See "Risk Factors--We would lose revenues and incur
significant costs if our systems or material third-party systems are not Year
2000-compliant."

This is a Year 2000 readiness disclosure statement within the meaning of
the Year 2000 Information and Readiness Disclosure Act (P.L. 105-271); however,
the disclosures made herein do not affect our liabilities under the federal
securities laws.

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<PAGE>
EFFECTS OF INFLATION

Due to relatively low levels of inflation in 1997 and 1998, inflation has
not had a significant effect on our results of operations since inception.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 131, "Disclosure About Segments of an Enterprise and Related Information,"
which is effective for fiscal years beginning after December 15, 1997. SFAS
No.131 requires that public companies report information about operating
segments in their annual financial statements and in subsequent condensed
financial statements of interim periods issued to shareholders. This statement
also requires that public companies report information about their products and
services, the geographic areas in which they operate and their major customers.
Reportable operating segments are determined based on the management approach,
as defined by SFAS No. 131. The management approach is based on the way that the
chief operating decision-maker organizes the segments within an enterprise for
making operating decisions and assessing performance. We have determined that
we do not have any separately reportable business segments.

In February 1998, the FASB issued SFAS No. 132, Employer's Disclosure about
Pension and Other Post retirement Benefits, which standardized the disclosure
requirements for pension and other post retirement benefits. The adoption of
SFAS No. 132 had no impact on the Company's current disclosures.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No.133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999.
Historically, we have not used derivatives and therefore this new pronouncement
is not applicable.

In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) No. 98-1, Software for Internal Use, which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 13, 1998. We do not expect that the
adoption of SOP 98-1 will have a material impact on its consolidated financial
statements.

36
<PAGE>
BUSINESS

OUR BUSINESS

We were organized in 1997 to capitalize on a significant opportunity that
exists today through the convergence of the media and entertainment industries
with the vast communications power of the Internet. We are defining a new type
of Internet company -- an e-commerce-based online community and portal to the
Internet -- that is dedicated to providing content-rich communities and an
entry point on the Internet for both consumers and businesses. Our site is
designed to seamlessly integrate content with e-commerce services for
businesses. Nettaxi.com provides comprehensive information about news, sports,
entertainment, health, politics, finances, lifestyle, and areas of interest to
the growing number of Internet users. Our mission is to establish our site as
an entry point or 'portal' to the Internet by continuing to develop premium
online communities which are both content-rich to our subscribers, the
"citizens" of our communities, and provide easy-to-use e-commerce services to
businesses of all sizes which reside in these communities.

While we have incurred significant losses since our site was launched,
traffic to our online community has increased consistently, and growth of our
monthly subscriber base has begun to accelerate. Our site has become one of the
Internet's busiest sites, growing quickly to over 100 million page views per
month and 182 million ad impressions per month by May 1999. A visit by a user to
a page on our Web site represents one page view and each advertisement that
appears on that page to which a visitor is exposed is called an ad impression.
Our estimate of the total number of ad impressions per month is based on the
fact that under our current ad practices we host an average of 1.82 ad
impressions per page. Based on unique visitors to our site, PC Data Online
ranked Nettaxi.com as the 139th most visited site in the world in May 1999.
Web21, a online service directory which compiles an objective listing of top Web
sites called "100hot", ranked our site as the 15th "most popular" site on the
Web during this same month. Along the way, we have created or acquired a number
of powerful assets, including:

- - a growing database of user profiles;

- - a meta-search engine that enables users to search multiple sites
simultaneously and return the results, including comparative product
pricing and availability, to one-page; and

- - an expansive range of relationships with dynamic e-commerce, technology,
and content partners.

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<PAGE>
INDUSTRY BACKGROUND

THE INTERNET

GROWTH OF THE INTERNET AND E-COMMERCE. The Internet has rapidly become
significant global medium for communications, entertainment, news, information
and commerce. Commercialization of the Internet began in the mid-1980s, with
e-mail providing the primary means of communication. However, it was the
Internet's World Wide Web, which provided a means to link text and pictures,
that led to the blossoming of e-commerce and sparked the explosive growth of the
Internet in the 1990s. Today, at least 100 million people in 135 countries send
and receive information, and purchase products and services, through the
Internet. According to International Data Corporation, a provider of market and
strategic information for the information technology industry, the domestic
Internet subscriber base will grow to 174.5 million by 2001, up from 50.2
million in 1997.

GROWTH OF ONLINE ADVERTISING AND DIRECT MARKETING. The Web has become an
attractive medium for advertisers, offering a level of targetability,
flexibility, interactivity and measurability not available in traditional media.
The Web enables advertisers to demographically target their messages to specific
groups of consumers as well as to change their advertisements frequently in
response to market factors, current events and consumer feedback. Moreover,
advertisers can track more accurately the effectiveness of their advertising
messages by receiving reports of the number of advertising "impressions"
delivered to consumers and the resulting "click-through" rate to their Web
sites. Jupiter Communications, Inc., a media research firm focusing on the
Internet industry, estimates that the amount of Internet advertising in the U.S.
will grow from approximately $1.8 billion in 1998 to $7.7 billion by 2002, a
compound annual growth rate of 42%.

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<PAGE>
THE INTERNET AS A MARKETING TOOL. Over 50 million companies and households
around the world use the Internet as a communications link through e-mail,
interactive advertisement, bulletin boards, research and online discussion
groups. At its most basic level, the Internet serves as a seemingly endless
catalog of marketing messages and advertising platforms presented in an
interactive fashion. Companies like IBM, Apple, AT&T, Microsoft and Lotus are
investing millions of dollars to develop new state-of-the-art tools and services
aimed at helping companies expand electronic business through the Internet.

Business is rapidly adopting the Internet as the means through which it can
efficiently and economically conduct marketing, research and customer support.
With the number of users growing monthly at an estimated rate of 10%, or one
million users, the Internet is the fastest growing global telecommunications
network in the world. Large and small companies are embracing the Internet as a
fundamental communication tool used to conduct daily business. By the year
2000, a projected 60% of large companies and 30% of midsize companies around the
world will use the Internet or its equivalent for marketing and business
purposes.

ADVANTAGES OF THE INTERNET FOR CONTENT COMPANIES. The Internet offers
content providers significant and attractive economic mechanisms that combine
cost advantages with practices that are conducive to revenue generation or
premiums. Significantly, the Internet provides information dissemination at a
materially lower cost than do other forms of media, notably, both printed paper
and private networks. The Internet also offers the potential for easier access
to content, which can expand market coverage. We believe that by using
the unique capabilities of the Internet to enrich the convenience, utility,
time, or entertainment value of content, Internet content providers can garner
significant and even premium revenues.

The Internet also enables providers to change and enhance the form and mass
delivery of content so that information is dynamic, interactive, real-time, and
personalized, as opposed to static, passive and bland as traditional media is
trending. The ability to personalize content on a mass scale promises to offer
compelling utility to subscribers as well as a mechanism for providers to
sustain those same subscribers. Otherwise static information can be made to
come alive by using the multiple forms of media, such as hyper-text, audio, and
graphics, that are all made possible through the Internet.

THE NEED FOR ONLINE COMMUNITIES

As the Internet continues to grow, users seek from the Web the same
opportunity for expression, interaction, sharing, support and recognition they
seek in the everyday world. To date, a typical Internet user's experience
surfing the Web has been essentially one-way-searching and viewing Web sites
containing professionally created content on topics of general interest such as
current events, sports, finance, politics and weather. However, the Web in
general does not provide a context for users to publish, promote, search and
view personal Web pages. As a result, users publishing personal Web sites have
had limited means of attracting visitors to their sites or interacting with or
receiving recognition from visitors. Internet search and navigational sites
serve a valuable function for users seeking to navigate the Internet for
aggregated Web content; however, these sites are not primarily focused on
providing a platform for publishing and aggregating the rapidly increasing
volume of personalized content created by users or enabling such users to
interact with each other--unique characteristics that distinguish the Internet
from traditional print, radio and television media.

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<PAGE>
Similarly, Web users engaged in passive browsing are increasingly seeking
ways of interacting and communicating with other individuals with similar
interests and accessing unique, personalized content. While users are generally
able to obtain relevant professionally created content through traditional
navigational sites such as Web directories and search engines, the source of
such content is usually the media and not fellow Web users. Often, the most
relevant content for a user is generated by other users who share an interest in
what is published; however, most Web sites are not dedicated to providing a
platform for aggregating and accessing user-created content.

An important response to the perceived needs of Internet users, and the
weaknesses of traditional Web navigational or content sites, has been the
emergence of community Web sites. Community sites provide a single online
destination where like-minded users can interact and quickly find pertinent
information, products and services related to their particular interests or
needs. Community sites generally offer free services including access to e-mail
accounts, chat rooms, message boards, news and entertainment. Through these
features, online communities seek to establish a close relationship with their
audience and evolve over time according to the interests of their members. As a
result, we believe that users tend to be loyal to and spend more time online at
community sites.

Online communities also provide advertisers and businesses an attractive
means of promoting and selling their products and services. According to Jupiter
Communications, the amount of advertising dollars spent on the Web is expected
to increase 67% annually over the next three years, reaching approximately $4.3
billion by 2000. According to International Data Corporation, worldwide commerce
revenue on the Internet is expected to increase from approximately $32
billion in 1998 to approximately $130 billion in 2000. To date, advertisers and
businesses have typically used traditional navigational sites and professionally
created content sites to promote their products and services online. However,
online communities allow advertisers and businesses to reach highly targeted
audiences within a more personalized context, thus providing the opportunity to
increase advertising efficiency and improve the likelihood of a successful
sale.

USER DEMOGRAPHICS

The demographics of the Internet population clearly suggest that the
Internet has grown from a novelty exploited by computer technologists to an
accepted and growing communications, marketing, and commerce platform. IDC
Research summarizes the rapid growth of online users as follows:

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- - By December 2001, 39% of online users will buy goods and services over the
Internet as compared to 25% in December 1996.

- - The amount of commerce conducted over the World Wide Web is expected to
grow from $2.6 billion in 1996 to more than $220 billion in 2001.

In a recent study, Jupiter Communications found that, in 1997, 45% of Web
users were women, a sizable increase from the 5% in 1994. Women using the Web
are projected to outnumber men within three years.

OUR SOLUTION

Nettaxi was born of the vision of co-founders Robert and Dean Rositano,
veterans of the internet service provider industry. Even before founding
Nettaxi, they recognized that there was an enormous market for learning tools
targeted to beginner-level Internet users, and they were actively involved with
the development of the Ques Mega Web Directory. In 1994, they co-founded
Simply Interactive, Inc. to develop and market sophisticated, interactive Web
learning tools for this vast untapped marketplace. In connection with a
substantial early-stage financing of that company, which entailed the merger of
Simply Interactive with another early-stage enterprise software development
company, the management control and focus of the combined entity shifted away
from Web learning tools. As a result of this shift in focus, Robert and Dean
left Simply Interactive to continue pursuit of their vision.

The founders believed that to survive and thrive in the increasingly
crowded Internet industry, they needed to develop a website with a completely
unique persona. To accomplish this, they set out to create a comprehensive
theme-oriented website, targeted to the rapidly-growing "family" and home-based
business markets, which would provide up-to-date premium content, ready-to-use
e-commerce storefront services, and the ability to purchase an expanding variety
of goods and services, all within a single integrated web community. Their goal
was to position their new website not only as an entry point to the Internet,
but also as an attractive, premium online destination, in contrast to merely
acting as a web junction point, for content and e-commerce services, and to
generate substantial revenues through monthly subscriptions, banner advertising,
and e-commerce transaction fees.

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Nettaxi launched its new online community in October 1997. Immediately
recognizing the value of developing and acquiring the tools necessary to drive
new users to the website, the founders acquired the assets of Simply Interactive
in November 1997, including the rights to Internet the City(tm), the
sophisticated interactive Internet training CD-ROM that the Rositanos had
developed while at Simply Interactive. Upon acquiring these rights, the Company
moved quickly to implement numerous modifications to the award-winning training
tool, including principally:

- - integrating the Nettaxi "taxicab" in the main user interface;

- - developing and integrating promotional information regarding the Nettaxi
website community, including its free services, features and benefits; and

- - creating the mechanism whereby users could launch into the Nettaxi
community website directly from within the CD-ROM environment.

Since launching our website in October 1997, we have been engaged primarily
in continued development and enhancement of our online website community, and
building traffic to the website. To these ends, we have been actively pursuing
corporate partnering relationships in several areas that are key to the
successful implementation of our strategy, including co-marketing, content, and
technology. Thus far, we have been successful in securing several co-marketing
relationships whereby Nettaxi bundles its CD-ROM product with products of major
hardware and software manufacturers, including Apple Computer and Pinex
Computers. In addition, the Company has entered into agreements with eCharge,
InfoSpace.com, Cybereps, and other companies for important service enhancements
to our community website.

As traffic to our site began to build significantly, we launched our
advertising sales campaign in July 1998. Since then, as traffic to our
community has continued to grow consistently and prove its stability, growth in
advertising revenues, as well as growth of our monthly subscribers base has
begun to accelerate. Nettaxi.com has become one of the Internet's busiest sites,
growing quickly to over 100 million page views per month and 182 million ad
impressions per month by May 1999. Based on unique visitors to our site, PC
Data Online ranked Nettaxi.com as the 139th most visited site in the world in
May 1999. Web21, a online service directory which compiles an objective listing
of top web sites called "100hot", ranked our site as the 15th "most popular"
site on the Web during this same month.

We believe that the success of our site confirms the original vision of the
founders that we can deliver a powerful new model with the capability to
generate substantial economic returns. By integrating ready-to-use e-commerce
capabilities with thematic community-based content and e-commerce websites, we
are creating a number of powerful assets:

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USER PROFILE DATABASE. A substantial database of user profiles, according
to their interests, which enables us to offer large, highly targeted audiences
to our advertisers, and command the higher advertising rates that
demographically segmented audience profiles dictate.

WEBSITE TRAFFIC DRIVER. The ability to drive traffic to Nettaxi subscriber
websites, via our search engine, which first searches and lists Nettaxi's
premium providers' and subscribers' websites, then scours the World Wide Web for
additional search matches. We believe this feature will drive customers to
Nettaxi community e-commerce sites, thereby propelling transaction processing
fees and drawing new e-commerce business to our community.

EXPANDED STRATEGIC RELATIONSHIPS. Opportunities to develop an expanded
range of strategic relationships, by virtue of being able to match premium
content providers with consumer bases. We believe that such a combination not
only increases the variety of revenue-generating e-commerce services we offer to
subscribers, but also helps keep us at the forefront of new developments in
products and services that will attract additional subscribers, retain, current
subscribers, and encourage subscription "upgrades."

POSITIVE PUBLIC PERCEPTION. The goodwill, trust, and loyalty of both
parents and children by providing a site on the World Wide Web where parents can
feel comfortable about their children's participation, and where children can
enjoy their own privacy. We believe that providing parents with filtering
technologies that make adult-content sites "invisible" to underage users will
attract family subscribers and many of their friends and relatives.

OUR STRATEGY

OUR STRATEGIC GROWTH PLAN

We are poised to build on our early success by implementing a growth
strategy that, if successful, should make us a major ready-to-use e-commerce
storefront host, and one of the top community-based portals on the Internet. Our
strategic growth plan includes the following principal components:

EXPAND OUR PRODUCTS AND SERVICES. We have identified a variety of
distinctive -- even unique -- services and products that we intend to develop
through in-house research and development, strategic alliances, licensing, or
outright acquisition. These products and services have been selected based on
our belief that, by helping users gain more value from the Web, we will attract
new subscribers, retain current subscribers, and encourage subscribers to
"upgrade" to one of our premium, paid subscription accounts. We intend to offer
our subscribers an expanded and distinctive range of services that extend beyond
the typical portal's e-mail, chat, search engines, shopping, and financial,
sports, and general news offerings, such as ready-to-use e-commerce storefront
business services, two types of e-mail protocols, and a customizable search
engine that not only drives traffic to subscriber web pages, but also offers the
capability to make selected websites visible/invisible.

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DEVELOP AN EXPANDABLE INFRASTRUCTURE. Integral to implementation of our
concept is its development of an Internet-centered database system that allows
us to serve information and facilitate e-commerce transactions on behalf of its
members' websites. We are currently engaged in developing an infrastructure
that will allow us to realize our goal of providing to a vast base of consumers
with similar interests, as well as to subscribed small to medium size
businesses, the opportunity to meet and share information, products, and
services in thematic environments that are tailored to their respective
interests.

The basic components of our technology infrastructure are substantially in
place and operational. We are currently developing our ready-to-use e-commerce
capabilities in association with Media Lane Group, an e-commerce technology
provider, and anticipate launching such services in mid 1999. We are designing
the components of our operational infrastructure to be scalable to accommodate
the substantial transaction volume that we anticipate as we build our online
community of subscribers, or "citizens", vendors and information.

INCREASE TARGETED DISTRIBUTION OF OUR CONNECTED CD-ROM. A key component of
our growth plan, and an integral competitive advantage that we have over other
virtual communities and portals, is our proprietary interactive Internet CD-ROM
product. The professionally produced CD-ROM features an animated, cyber-cabbie
named "URLtm," who takes users wherever they wish to go. During the tour, URL
explains and demonstrates how features such as e-mail, chat rooms, search
engines, websites, etc., work. The CD-ROM also acts as a "front end" for our
website by allowing users to actually connect to it.

We plan aggressive promotion of our site through targeted distribution of
our CD-ROM product to the consumer marketplace. With our targeted approach to
distribution, we allow users with specific interests to connect to communities
which address their interests. We have established an agreement with Apple
Computer whereby Apple bundles the CD-ROM with its K-12 curriculum bundle and as
an optional upgrade to its iMac computer. In the future, we plan to offer the
CD-ROM to numerous computer software and hardware manufacturers, as well as
other types of manufacturers, for bundling with their respective products.

We are also exploring other promotional strategies based on our CD-ROM
product such as the customized version we are developing with eBay to
familiarize users with eBay's services. By providing this educational CD-ROM
tool to potentially millions of novice and intermediate computer and Internet
users, and directly introducing them to our website, we believe that we will
generate both awareness of, and loyalty to, our communities.

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EXPAND OUR BUSINESS DEVELOPMENT AND TECHNOLOGY RELATIONSHIPS. We have
established formal relationships with providers of premium content, including
InfoSpace.com, Inc., Lycos and Netopia. These relationships, and the continued
development of new relationships, will provide us with:

- - Premium content for news, sports, travel, politics, health, lifestyle, and
other information categories;

- - Exclusive relationships with providers of proprietary information content;

- - Ready-to-use e-commerce sales and fulfillment services through strategic
relationships with technology and fulfillment companies; and

- - The deployment of a customer service organization keenly focused on
satisfying demand and creating customer loyalty.

In addition, we have retained the services of a marketing communications
company with extensive experience in successfully launching Internet-related
products and services, to provide public relations and marketing services,
including guidance on both strategic communications and tactical implementation
issues.

PURSUE OUR ACQUISITION STRATEGY. An important element of our strategic
growth plan is its proposed acquisition program. We will continue to
investigate opportunities to acquire niche content-based website operators that
lend themselves to integration with a community-oriented site. In this area, we
are focusing on companies that have developed a significant and loyal user base,
however by themselves, have limited growth and revenues potential.

We will also seek to identify companies that can significantly extend
functions of our operational infrastructure and/or add strategic proprietary
technology that management deems critical to maintaining our competitive
position. In this regard, we have recently completed the merger with Plus Net,
Inc. See "Recent Acquisition."

OUR GOALS

We believe that the current structure and future developments of the
Nettaxi website offer us a strong variety of sources for garnering significant
revenue. These sources include:

- - E-COMMERCE Direct Nettaxi sales of products, including products linked
to events in subscribers' Remind Me files, and products
targeted to users and subscribers on the basis of their
interests and patterns of activity when surfing Nettaxi.com;

Transaction processing fees from credit card and eCharge
processing services;

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Support Service Fees, where applicable, for providing
specific business services that support the e-commerce
activities of Nettaxi subscribers;

Percentage splits with subscribers of the list price of
goods sold through their e-commerce storefronts in Nettaxi
communities; and

Sales commissions negotiated with vendors for products sold
directly by Nettaxi and through Nettaxi subscriber
e-commerce storefronts.

- - ADVERTISING Spot and banner advertising can be sold at premium prices to
advertisers, by virtue of offering them large, highly
targeted audiences that are demographically segmented, as
well as the opportunity to rotate and keep "fresh" the ads
presented to a viewer;

- - SUBSCRIPTION
FEES Premium service account monthly subscription fees;

- - CD ROM
DISTRIBUTION
ROYALTIES Co-branding and licensing of our CD-ROM product to select
third parties;

In order to realize its strategic initiatives, we will seek to accomplish
the following principal goals:

DEVELOP INFRASTRUCTURE, BUILD PREMIUM CONTENT, LAUNCH E-COMMERCE. Over the
next 12 months, we are looking to further develop our managerial and technical
infrastructure, enhance the quality and depth of our content by developing new
relationships with premium content providers, develop and customize e-commerce
systems to meet our requirements, establish relationships with fulfillment
operations to support our e-commerce services, and launch our e-commerce
products and services.

REFINE OFFERING AND EXPAND DEMAND. Once our initial strategic goals have
been accomplished, we are looking to refine our offering of products and
services and expand demand by enhancing consumer services through call center
automation and e-mail service and deploying an aggressive marketing campaign to
create real excitement about our site. We also hope to raise additional capital
for brand development and expansion of our operations.

GAIN SIGNIFICANT SHARE AND CONSOLIDATE COMPETITORS. Within two to three
years, we hope to gain significant share and consolidate our competitive
position by acquiring strategic online community companies and continue an
aggressive plan of infrastructure expansion.

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RECENT ACQUISITION

In May, 1999, we completed the merger with Plus Net, Inc. Plus Net was
founded in 1998 and has licensed a wide range of Internet related tools to
generate revenue opportunities. Plus Net operates a website on the World Wide
Web with a robust search engine that brings back the top ten results of the
web's most popular search engines and return results within a specific subject
category, while enhancing electronic commerce and advertising opportunities.
Plus Net also has recently launched an e-commerce processing engine which is
compatible with interfaces enabling the acceptance of online credit card
transactions and the processing of these transactions with banking institutions.
The Plus Net e-commerce capabilities also support one-click buying opportunities
and programs designed to prevent credit card fraud. These features will
accelerate our R&D efforts, and will enrich the Internet experience of our
subscribers. We intend to implement and integrate the services offered by Plus
Net throughout 1999. The Plus Net merger also provides us with access to a large
pool of potential subscribers and provides us with an opportunity to
substantially increase the citizenship base within our community.

OUR WEB SITE AND SERVICES

OUR WEBSITE

The Nettaxi.com website, at http://www.nettaxi.com, is structured as a
virtual "urban" environment, populated by subscribers referred to as "citizens",
that is divided into broad "zones," which are further divided into thematic
"communities," and from there into "streets" and "homes."

When users first arrive at Nettaxi.com, they are in the broad "urban"
environment, where they find links to the "zones," which include categories such
as:

- Member Services, Registration, and Communities;
- "community" information links such as Message Boards, and
- links to premium content such as Sports Scores, Weather, Stock
Quotes, or Travel.

Clicking on one of the links -- for example, Communities -- takes users to
the next level, where they can choose from an extensive list of categories, or
"communities." Choosing one community, such as the Arena District theemed to
sports events and activities, takes users to a list of subcategories, or
"streets," such as the basketball-oriented Hoops Avenue. Once on the "street,"
users can select to visit any of the various "homes," which are the individual
web pages of our subscribers.

Clicking on a premium content link in the "urban" environment follows a
similar pattern, but may differ in the number and types of category and
subcategory levels, depending on the content they offer. The premium content
links lead to the special web pages of our major content providers and strategic
partners, as opposed to subscriber pages.

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NETTAXI'S "TAXI"

A key distinguishing characteristic of our site is that users in a hurry to
get somewhere will be able to "step into" a "taxi" -- a specially configured
search engine -- which they will find waiting in all areas and levels of our
environment. Users simply type in a "destination" such as "sports," and they are
immediately whisked first to our main sports areas which include the relevant
premium content provider's website, followed by the Top 10 subscriber sports
"homes," and then on to other sports sites, including those on the rest of the
web. As a result, the search engine has the ability to drive traffic to
e-commerce sites in our community, including premium content providers' sites,
thereby propelling transaction processing fees and drawing new e-commerce
business to the community. In addition, our search engine provide greater value
to our users since it presents small, manageable groups of "destination" choices
in response to a search, as opposed to an overwhelming volume of listings turned
up by most other search engines.

We are exploring the possibility of eventually serving content to users
based on their preferences, which will be determined by tracking their
activities, using special software from Net Perceptions, as they surf through
our overall website. The result will be content that is automatically and
seamlessly customized to a user's interests and tastes so that, for example, two
different users with differing interests who take a "taxi" using the same search
term might arrive at separate destinations or, if at the same destination, are
likely to be offered some differences in content, based on their patterns of
activity.

CONTENT

A key component of our current and future plans is the continued
development of partnerships with providers of premium content in a variety of
categories. To date, we have established formal relationships with several
premium content providers in a variety of categories, including the following:

- LYCOS. We have recently made an affiliation with Lycos, one of the
most popular hubs on the Web, to offer personalized start pages called
"MyNettaxi" from our website. Under our agreement with Lycos, it will
provide its suite of Web applications including search, comprehensive
directories, personal homepages, email, communities and popular
shopping functions in the form of a co-branded personal start page. My
Nettaxi enables end users to customize their start pages with
information such as news, stock prices, weather, sports scores and
more from Lycos.com and hotbot.

- BIG NETWORK.COM. We have entered into a co-marketing agreement with
Big Network.com which will provide our subscribers with immediate
access to the BigNetwork.com suite of classic board and card games
including chess, checkers, backgammon, reversi, spades, morph and
more. The agreement will also allow our subscribers to interact in
real-time with the 200,000 registered members of BigNetwork.com. This
arrangement also allows our subscribers to embed Java-based games into
their own Web sites. For those subscribers who have developed and
integrated their own personal Web pages into our community, they will
be able to create an interactive gaming environment suited to the
specific needs of their visitors.

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- INFOSPACE.COM, INC., We have a content distribution agreement with
Infospace.com, an aggregator of a broad range of content services,
including sports scores, late-breaking news, weather, concerts, public
record searches, phone/address searches, classified ads, and daily
horoscopes, for syndication to Internet portals and destination sites.

- IWOMAN. We have a co-branding agreement with iWoman, a provider of an
online community dedicated to providing information geared primarily
to the interests of women. Under our agreement, we co-brand and cross
promote our site with theirs in order to increase traffic.

- PI GRAPHIX. We have a linking agreement with PI Graphix, a provider of
an online community with e-commerce capabilities and extensive
graphics capabilities under which we have linked and co-branded our
site with theirs in order to increase traffic.

- NETOPIA, INC. We have an agreement with Netopia, a provider of next
generation products including web site services and high-speed DSL
connectivity, under which Netopia provides us with technology that
enhances our ability to provide services to our subscribers.

We are also working to identify and develop a selection of exclusive
relationships with provider of proprietary information content, particularly
individuals and organizations with archives and databases that could be easily
rendered into digital format. We believe that a carefully developed selection
of such databases, and the exclusive nature of their availability, would act as
a powerful attractant to the type and volume of subscribers that our advertisers
find desirable.

Our subscribers also provide personal or entrepreneurial/commercial
content that is available on our website. We offer each of its subscribers -
free of charge -- 10 megabytes of server space to use for a home page and
e-mail. In addition, subscribers have access to free, easy-to-use website
design software to build their "home" web home page, and they can designate the
community and street where they would like to have their home located.

E-MAIL SERVICES

Nettaxi.com's e-mail services surpass those of other portals and
full-featured internet service providers by being available though both Post
Office Protocol (POP) and the Web (IMAP). To the best of our knowledge, ours is
the only service today to simultaneously offer subscribers both types of e-mail
access for free. Nettaxi's e-mail service also allows its Citizens and small
businesses to offer a free Web-based email service with a unique domain name,
e.g., [email protected], giving the domain name free promotion with every email sent.
There's no software for the user to download and all mail and maintenance are
provided by Nettaxi, with no added inconvenience to the webmaster. The look
and feel can be customized to look like the Citizens home page.

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POP e-mail is the type most commonly used by internet service providers.
Its advantages for users are that messages are sent and received quickly and
with more privacy, because they do not stay resident on a server for any length
of time. Its greatest disadvantage is that e-mail messages, once delivered to a
user, are generally no longer available for download again, so that a user who
downloads e-mail to a home computer, for example, will generally not be able to
download the same mail at a later time to another computer, such as one at work.

IMAP, or web-based e-mail, most commonly used by portal services, allows
users to retrieve e-mail messages from any location -- home, office, airport
kiosk, public library -- which offers access to the Internet and a specific
website. Sending and receiving messages may be a bit slower than POP services,
but messages are stored on a server, can be retrieved multiple times, and remain
available until they are either specifically deleted by the user, or a set
amount of time has passed.

Subscribers to all levels of our services will have both POP and IMAP
e-mail capabilities, and a distinct @nettaxi.com address or @ their own custom
domain name.

"REMIND ME" SERVICE

As a special feature, Nettaxi.com will offer its subscribers Remind Me, a
service that functions like an electronic datebook. Subscribers can enter their
important dates and appointments, with requests to be reminded of them at
specified times, which can be as far ahead as a month or a few hours. Remind Me
is structured to allow users to specify the type of event being listed, such as
a birthday or anniversary, by simply entering important dates and their
corresponding event. Keywords in these fields trigger Remind Me to suggest
event-appropriate products and/or services. Some of these will be available at
no charge to subscribers, e.g., electronic greeting cards and virtual flowers.
Others will be available for purchase or subscription directly through us or
through our subscriber "storefronts" and advertiser sites, driving traffic to
both, and offering us opportunities for generating revenues through transaction
processing and other fees, where appropriate.

E-COMMERCE SERVICES

One of the key features that we offer subscribers is the chance to become
on-the-spot entrepreneurs. We are currently developing its ready-to-use
e-commerce capabilities in association with Media Lane Group, an e-commerce
technology provider, and anticipate launching such services in mid 1999. Media
Lane Group has extensive experience in technology architecture design, with
clients that include E-Trade, Music Blvd., and other sites. Our Premium Service
accounts will include access to a wide variety of special business services
aimed at providing subscribers who wish to launch an online business with a
ready-to-use e-commerce storefront. The services can be available as a bundle
customized to meet each Premium Service subscriber's sourcing, order processing,
account management, billing, stock balancing, and fulfillment needs, and will be
provided either as part of the subscription fee, or on a per transaction basis,
at reasonable rates. We will be able to package and provide these services
through strategic relationships established with selected vendors with proven
experience in their respective commercial and fulfillment service fields.

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COMMERCIAL WEBSITE HOSTING. Premium Service account subscribers will be
provided with commercial website hosting services, on top-of-the-line servers
with redundant capabilities, to maintain an online presence 24 hours a day, 7
days a week. Hosting services will include full commerce capability, including
major credit card and eCharge services, for secure online transactions, driving
traffic to the site, and a variety of other commerce-related services, such as
sourcing and fulfillment. Routine maintenance of the website, including
verification of links and other related functions, is included in the
subscription fee.

WHOLESALE SUPPLY OF PRODUCTS. As part of our ready-to-use e-commerce
business services, we intend to offer subscribers sourcing services to provide
them with the products they are marketing at wholesale prices and on a
Just-In-Time (JIT) basis, eliminating the need for warehousing. Through
negotiating with vendors and forging strategic alliances, we will be able to
provide subscribers with the convenience of access to a group of reputable,
quality suppliers identified as appropriate to their business, and the ability
to source products at wholesale and discounted price levels normally reserved
for large commercial enterprises. These services will be on an optional per
transaction, or contract volume basis. We benefit by receiving a pre-negotiated
commission/transaction fee from the wholesale vendor for each sale.

CREDIT CARD AND ECHARGE PROCESSING. We have entered into a merchant
services agreement with eCharge, a financial transaction company specializing in
Internet billing and collections. Under the agreement, we act as an agent
for eCharge in the sale of their innovative billing system to end users. We
have developed a modified version of echogram's billing system that can be
offered as option functionality for end users who choose to install the
product. We will offer our Premium Service subscribers the ability to include
major credit card and eCharge billing services on their website, for secure
online transactions, and to simplify and concentrate billing transactions for
subscribers. Credit card services include verifying the validity of customer
card accounts, approving transactions, billing, tracking customer payments,
and passing payment amounts back to the subscriber. Customers enrolled in
eCharge programs can have their purchases charged to their telephone bills, with
the eCharge account servicers taking care of the account verification,
approval, billing, payment tracking, and passing payment amounts to the
subscriber. We benefit by receiving a pre-negotiated transaction fee from the
credit card or eCharge service.

The merger with Plus Net will also enhance our e-commerce ability. Plus
Net has recently launched e-commerce processing operations which is compatible
with interfaces enabling the acceptance of online credit card transactions and
the processing of these transactions with banking institutions. The Plus Net
e-commerce capabilities also support programs designed to prevent credit card
fraud. See "Recent Acquisition."

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INTERNET THE CITY CONNECTED CD ROM

It is a well-recognized truism that technology, and personal computers
particularly, are typically not used to their fullest potential. Paradoxically,
while vast arrays of information and services are already available to
proficient Internet users, prospective or neophyte users typically postpone or
limit their usage due to their lack of understanding and experience in
navigating the Internet. While it is true that 42.9% of U.S. households owned
personal computers in 1998, less than half of those households are active
Internet users. Furthermore, trends indicate that the remaining 57.1% of
households still "unwired" are steadily joining the ranks of computer users and
potential Internet users.

The Company's Internet training CD-ROM was born from management's
conviction that an enormous untapped opportunity to capture the novice user lies
in effectively initiating and tutoring this huge market in a one-on-one,
interactive, entertaining way. The CD-ROM, called Internet the City is a
comprehensive, interactive training tool that enables new and intermediate users
to learn about and begin using the many powerful capabilities and features of
the Internet.

The professionally produced CD-ROM features an animated cyber-cabbie --
URLtm -- who takes users wherever they wish to go. During the tour, URLtm
explains and demonstrates how features such as e-mail, chat rooms, search
engines, websites, etc., work and can actually connect the user to our website.

The CD-ROM, with its "front end" connection feature, is a key component of
the Company's marketing and promotions plan. ITC serves as vehicle to drive
users to our website in a manner that is far more efficient than traditional
means of advertising and promotion. The CD-ROM is expected to undergo a major
update in 1999, and we intends to explore a variety of options for establishing
co-branding and sponsorship partner opportunities for promoting and distributing
ITC.

We currently have an agreement with Media Technology Services to provide
CD-ROM duplication and packaging services and deliver the packaged CD-ROMs to
our distribution partners, as to us directly for distribution to our Premium
Service account subscribers and others. At this time, the two largest
distributors are Apple Computers, which bundles the CD-ROM with its K-12
curriculum bundle and as an optional upgrade to its iMac computer, and Fountain
Technologies, which bundles the CD-ROM with computer systems from its Quantex
Microsystems and Pionex Technologies subsidiaries. With our targeted approach to
distribution, we potentially allow users of specific interests to connect to a
community which addresses their interests.

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CUSTOMER ACCOUNT PLANS

We adhere to the principle that providing excellent customer service is
integral to attracting and, more importantly, retaining subscribers. To that
end, we have focused on the development and deployment of a customer service
organization keenly focused on satisfying demand and creating customer loyalty.

To provide subscribers, or "citizens," with choices that suit their
individual needs, we offer both free and premium services, on a tiered basis
similar to the way that cable systems do. Premium accounts are configured from
a large menu of options, to attract subscribers and address the needs and
desires of particular segments of online users.

BASIC FREE CITIZEN ACCOUNT. Like most portals, we offer a free basic
service package - the Free Citizen account -- to attract a large number of
subscribers. We benefit through providing a broad variety of subscriber
webpages and a substantial database of user profiles, which enables us to offer
large, highly targeted audiences to its advertisers, and command the higher
advertising rates that demographically segmented audience profiles dictate.

Nettaxi's basic Free Citizen account offers the following package of
features and services:

- - A four page Virtual Office;

- - MyNettaxi, personal start page;

- - 10 Megs of Disk Space;

- - Web Stats - for analyzing who is coming to their site and when;

- - E-mail service for one personal e-mail account with a [email protected]
address;

- - Remind Me service, an electronic datebook;

- - Web hosting services for a free website - for personal or entrepreneurial
use -- with a www.nettaxi.com/citizens/userID web address (URL), located in
the subscriber's community of choice;

- - FTP space presented as an "outbox";

- - Child Protection Tools;

- - Special discounts on selected Nettaxi merchandise; and

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- - Access to chat sessions, message boards, and shopping, as well as premium
content such as weather, sports scores, stock quotes, services such as
travel arrangements and packages, introductions to people who share common
interests, and more.

Each free, basic account is allotted 10MB for use. Subscribers are
provided with free, easy-to-use software for designing and building their web
page, tips and techniques for making their websites attractive and exciting to
visit, and our search engine to drive traffic to their website.

PREMIUM ACCOUNTS. Our Premium accounts are especially attractive to
entrepreneurs who would like to establish an e-commerce storefront on a
ready-to-use basis. Citizens can build Premium accounts from a menu of options,
allowing them the ability to pick and choose which items they are interested in.
Option can be added for additional fees. In addition to the services which are
provided to Free Service account subscribers, Premium account holders are
provided with the following options:

- - Nettaxi Virtual Office, which allows users to build and maintain their own
virtual office, including their own message boards, chat rooms, calendar
and task manager, address book, etc. Users can build their virtual office
through and easy-to-use Web-based interface;

- - E-mail service for unlimited e-mail accounts, each with a distinct
@nettaxi.com address or @ your own domain,and customized look and feel;

- - Ready-to-use e-commerce malls loaded with product;

- - Commerce capability, including major credit card and eCharge services, for
secure online transactions;

- - Access to Nettaxi-sponsored advertising and banner ads, and other
cross-promotion opportunities;

- - Unique Domain name;

- - Disk space for Web page hosting;

- - Child Protection Features such as AVS;

- - Web Statistics for analyzing who is coming to their site and when; and

- - Free Plane Tickets with a 3 month premium subscription.

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Subscribers are provided with professional website services for the initial
website's design and launch, to showcase the products and/or services in an
effective manner, as well as free, easy-to-use software for updating the site at
any time. In addition, subscribers are provided with special tips and
techniques for making their websites attractive and exciting to visit, as well
as mechanisms to drive traffic to their website, including our search engine and
strategically placed, highly visible links to the site from other desirable web
locations. Subscribers wishing to have their own domain are charged a one-time
fee to register the domain with InterNIC for a two-year period.

CUSTOMER ASSISTANCE

To maintain Nettaxi.com as a portal that truly serves its subscribers and
reflects their interests and needs, we invite and encourage subscribers and
visitors to send in their comments and suggestions. We track visitor and
subscriber activities, and carefully monitor the nature and content of their
comments, as part of its strategy for continuing product refinement and
development.

Regardless of the type of account selected, subscribers have access to free
online help at any time by simply clicking on our Help icon and by visiting the
Message Boards, where they can review information posted by other subscribers,
or post a query of their own. Subscribers can also find information on billing
matters, special promotions, upcoming events, etc., quickly and easily on the
Nettaxi.com home page.

If they are unable to find what they are looking for, or if the information
they find is confusing, subscribers can send in queries, to which we will
actively and promptly respond with appropriate information or guidance. We are
also currently in the process of establishing and deploying
subscriber-to-subscriber support services, which are provided by online
volunteers in exchange for free account upgrades or other premiums.

ADVERTISING

ADVERTISING SALES AND DESIGN

We seek to distinguish ourselves from our competition through the creation
of unique advertising and sponsorship opportunities that are designed to build
brand loyalty for our corporate sponsors by seamlessly integrating their
advertising messages into our content. Through our close relationship with our
subscribers, we have the ability to deliver advertising to specific targets
within our site's theme content areas, allowing advertisers to single out and
effectively deliver their messages to their respective target audiences. For
example, an advertiser can target its message solely to women with an interest
in recreation and sports. We believe that such sophisticated targeting is a
critical element for capturing worldwide advertising budgets for the Internet.
Additionally, we intend to expand the amount and type of demographic information
our site collects from our members, which will allow us to offer more specific
data to our advertising clients.

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We intend to build a direct sales organization of professionals dedicated
to maintaining close relationships with advertisers and advertising agencies
nationwide. We also intend to enter into arrangements with a number of
third-party advertising sales representatives pursuant to short-term agreements
that in general may be terminated by either party, without notice or penalty.
The sales organization would consult regularly with advertisers and agencies on
design and placement of their Web-based advertising, provide customers with
advertising measurement analysis and focus on providing a high level of customer
service and satisfaction.

Currently, advertisers and advertising agencies enter into short-term
agreements, on average one to two months, pursuant to which they receive a
guaranteed number of impressions for a fixed fee. Advertising on our site
currently consists primarily of banner-style advertisements that are prominently
displayed at the top of pages on a rotating basis throughout our online
community, including members' personal Web sites. From each banner
advertisement, viewers can hyperlink directly to the advertiser's own website,
thus providing the advertiser an opportunity to directly interact with an
interested customer. Our standard cost per thousand impressions ("CPM") depends
upon a number of factors including the location of the advertisement, its size
and the extent to which it is targeted for a particular audience. Discounts
from standard CPM rates may be provided for higher volume, longer-term
advertising contracts.

We intend to increase our advertising revenues by focusing on a number of
key strategies, including expanding our advertising customer base, increasing
the CPM charged to advertisers by continuing to improve our ability to target
advertisements to demographically distinct groups, increasing page views,
increasing the average size and length of our advertising contracts, increasing
the number of our direct sales representatives, and continuing to invest in
improving advertising serving and advertising targeting technology.

We also intend to offer special sponsorship and promotional advertising
programs, including contests, sampling and couponing opportunities to build
brand awareness, generate leads and drive traffic to an advertiser's site. We
also intend to sell sponsorships of special interest pages where topically
focused content is aggregated on a permanent area within a neighborhood.

ADVERTISING CUSTOMERS

Recently we have begun to successfully attract both mass market consumer
product companies as well as technology-related businesses advertising on the
Internet. Due to our advantages as a community Web site, we believe that we are
well positioned to capture a portion of the growing number of consumer product
and service companies seeking to advertise online. The following is a
representative list of advertising clients in various industries:

Intel eBay Biz Travel
Auto Connect INS Web NextCard
Prodigy Free Shop Big Star
Ynot Tu Cows Bell South
Hot100 Garden.com

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For the first three months ended March 31, 1999 and for the year ended
December 31, 1998, advertising revenues represented 71% and 69%,
respectively, of our net revenues.

BANNER ADVERTISING FOR SUBSCRIBERS

To help support and drive traffic to the e-commerce storefronts of our
Platinum Service account subscribers, and expand co-branding opportunities, we
intend to offer special cross-promotion opportunities, including periodic
Nettaxi-sponsored advertising and banner ads at a variety of locations
throughout our website. The banners will be of the same high quality as those
sold at premium prices to outside advertisers. Placement of the banner ads will
be determined by a variety of factors, including appropriateness of location,
opportunities for co-branding, and eventually even the activity patterns of
visitors and subscribers to our website.

We intend to implement special software from Net Perceptions on our
website in the immediate future. The software allows us to track a user surfing
through the overall website, follow the user's patterns of activity, present ads
that are targeted and relevant to the user's interests, and recommend particular
products or services, based on the user's activity profile.

In addition, the software will be able to track the particular banner and
other advertising to which the user has been exposed while visiting our site.
This will provide us with a record of the number and type of ad views accessed
by users over a specified period of time, useful for determining rates for
outside advertisers wishing to have a presence on our website. It will also
provide us with the opportunity to rotate the particular ads it presents to a
user to keep the ads "fresh" and appropriate in context. Eventually, we hopes
to expand our activity tracking functions to include serving content to users
based on their preferences. The result will be content that is customized for a
user, automatically and seamlessly.

We have also licensed ad management software from Accipiter Technology, and
written some custom code to extend the software's capabilities. The software
tracks how many ads are served on the website, which areas and which pages to
which they were served, and how many people have "clicked" on them. The
software allows us to manage its ad selection and placement by providing an
accurate ad count on both a real-time and a compiled-over-a-specified-time
basis, information crucial to billing an advertiser. The software also provides
advertisers with the ability to audit their ad performance on our website on a
real-time basis. We provide a user ID and password to the advertiser, who can
then come onto the website and track their ads at any time.

MARKETING AND PROMOTION

During its early stages, our direct sales program has been managed by our
executive management and implemented at the regional level by independent sales
representatives. As we broaden our marketing activities, we plan to expand our
sales and marketing organization to accommodate such increased activities. We
intend to recruit a Vice President of Marketing to manage our overall sales and
marketing efforts, and will also be looking to hire Regional Marketing Managers
to assume responsibility for generating the projected banner advertising sales
revenue in their respective regional markets. Among other things, Regional
Marketing Managers will oversee the activities of independent sales
representative organizations, promote our website as a successful advertising
medium to media companies and advertising agencies in their respective regions,
close and manage key account customers in the region, and management and
implement sales and promotional program with corporate marketing partners in the
region.

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We intend to support our internal sales efforts with a combination of
in-house and independent sales representatives. In early 1999, we appointed The
Adsmart Network, a majority-owned subsidiary of CMGI, Inc. Under the agreement,
Adsmart utilizes Nettaxi's advertising inventory to provide publishers with a
full advertising sales solution. In addition, Adsmart Sponsorships complements
the site-specific sales divisions by developing unique, customized
beyond-the-banner advertising methods that help advertisers build brand
awareness and qualified site traffic. We also have entered into a similar
agreement with Flycast Communications and intend to continue expanding our
advertising reach.

We have also entered into an agreement with assistance from independent
sales representatives. In late 1998, we appointed Cybereps and Unique Media
Services, both are ready-to-use advertising sales and marketing organizations,
as our independent sales representatives. Both organizations specialize in
representing a number of websites and other Internet-related properties and will
provide us with assistance in developing and marketing our banner advertising
sales program. In addition, Cybereps is providing us with a dedicated
sales representative to create customized advertising and marketing campaigns
that are designed not only to increase advertising revenues, but to ultimately
create a branded image. Our agreement with Cybereps and Unique Media Services
enables us to continue our arrangements with other firms that specialize in
bundling various web properties based on category, for co-marketing and
promotional programs.

We will continue to seek formal strategic marketing alliances with major
national or international companies that already have widespread distribution or
coverage within our target markets, which include the consumer marketplace and
corporate advertisers.

Our marketing and promotion strategy will also include aggressive
advertising and promotional programs on a targeted, national scale, and will
stage these programs as capacity is increased to handle user traffic. Specific
components of our ongoing advertising, promotional and public relations
activities will include direct mail, trade print media advertising, and trade
show participation.

PROMOTIONAL PROGRAMS. A key component of our growth plan is the aggressive
promotion of our site through widespread free distribution of our Internet the
City CD-ROM to the consumer marketplace. We have entered into co-marketing
relationships whereby we bundle our Internet the City CD-ROM training product
with products of major hardware and software manufacturers, including Apple
Computer and Pinex Computers, a subsidiary of Fountain Technologies. We also
plan to offer the CD-ROM to numerous computer software and hardware products
manufacturers for bundling with their respective products.

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We have entered into an agreement with eBay, an online trading community,
under which we will develop a customized version of our instructional CD-ROM
product designed to familiarize end users with the services of eBay. This
product is expected to include basic Internet tutorials, a Nettaxi tour and
step-by-step interactive instructions on how to register on eBay, how to place a
bid and how to list an item for sale on the eBay site. Both companies will
finance development of the product and market and distribute it upon completion.
We will receive cash payments based on the number of new customers who use the
CDROM to join eBay.

LINKING AGREEMENTS. We are continuously looking for opportunities to
connect our website through links with other sites in a way that will increase
the number of visitors to, and potential new subscribers for, our community. We
have entered into a linking and promotion agreement with PI Graphix, which
provides e-commerce systems and related information services on its own website.
Under the agreement, our websites are linked and we work with PI Graphix to
develop methods of increasing cross traffic between the sites. Our agreement
with PI Graphix permits us to allow end users to post three-dimensional
descriptions of the products they wish to sell on our website.

ADVERTISING PROGRAMS. We plan to invest in online advertising to drive
traffic to our site by placing advertisements on selected high volume sites, as
well as purchasing targeted keywords on several popular search engines such as
Yahoo!, Excite, Lycos, Infoseek and others. We also plan to advertise in
traditional media such as print, radio and broadcast, on a selective, highly
targeted basis, to increase the awareness of our site.

PUBLIC RELATIONS SUPPORT. By virtue of its broad appeal and
"entrepreneurial" focus, we anticipate that a targeted public relations campaign
will yield material results in building both national and targeted local and
regional awareness for Nettaxi. We recently appointed The Benjamin Group to
assist us in crafting our image and positioning in the marketplace, and to
develop and execute periodic public relations campaigns in coordination with the
introduction of our new products, services, technologies, and partnerships. The
Benjamin Group has extensive experience in successfully launching
Internet-related products and services, and will assist us not only by providing
public relations services, but also by providing guidance on both strategic
communications and tactical implementation issues.

TRADE PUBLICATIONS. An effective and extreme inexpensive method of
bolstering awareness of the Nettaxi brand is editorial inclusion in trade
publications that target the various industry groups with which we seek to do
business. We believe that several factors make us a prime candidate for
editorial coverage in trade publications for the Internet industry, as well as
the general media. They include:

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- - The uniqueness of our integration of online community with premium content
and ready-to-use e-commerce services;
- - The uniqueness of our "entrepreneurial" focus; and
- - The substantial growth of traffic to our online community website.

Through our focused public relations efforts, we will seek out high-impact
editors and reporters at publications that serve the Internet industry. We will
also seek to place articles and columns written by our staff and management in
various publications. This will serve to enhance our credibility and establish
and promote our management and staff as experts.

OPERATIONS AND INFRASTRUCTURE

ADMINISTRATIVE OPERATIONS

To provide its subscribers with the most efficient, flexible, and
innovative services possible, our administrative operations combine in-house and
outsourced services and functions. Our strategy is to keep our in-house staff
small, with a focus on core competencies in technical and R&D areas, and to
outsource other functions and projects on an as-needed basis.

Internal functions currently include account management, traffic
management, website service updates, and other network functions that rely on
UNIX shell scripts; the continued development and updating of the Internet the
City CD-ROM to add to its capabilities and increase co-branding opportunities;
and establishing and managing strategic alliances and partnerships with premium
content providers, product vendors, and other appropriate parties. We intend
to further develop our in-house production facilities to support the development
of original content, including interactive content for our site and specialty
content for our advertisers and media partners.

Outsourced functions include providing and maintaining network hardware and
Internet connections, providing premium content for our site and providing
subscribers with selected e-commerce business services, including credit card
and eCharge billing services, and managing an extensive product database and
tracking its related customer activities.

INFRASTRUCTURE & SYSTEMS

The development of an infrastructure with an Internet-centered network and
database system that allows us to serve information and facilitate e-commerce
transactions on behalf of our subscribers' websites is integral to the
implementation of our web community and ready-to-use e-commerce storefront
concept. to accommodate the substantial transaction volume that we anticipate as
we build our online community of subscribers, or "citizens", vendors, and
information. At this time, the basic components of our technology
infrastructure are substantially in place and operational.

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Our UNIX-based electronic network for Nettaxi.com operates on a 100 Mbps
Ethernet backbone, with two Cisco Systems Ethernet switches that prevent
collisions on the network. Traffic direction for the web servers is handled by
Cisco's LocalDirector software, which tracks server load conditions in real time
and sends traffic to the most appropriate server to spread around and balance
the load. The network is comprised primarily of Sun Microsystems high-capacity
servers, and include a mix of Enterprise, Ultra 1, Ultra 5, and SPARC 20
models, all running the newest version of Sun's Solaris operating environment
for network systems. These servers collectively provide approximately 90
Gigabytes of hard drive space for subscriber capacities.

In addition, the network currently includes NT servers to handle
registration and selected other database functions, using Microsoft's SQL
database software. However, we have embarked on an ambitious program to shift
our database functions over to a 3-tier database connectivity architecture that
relies heavily on Web Objects technology - database connectivity software
licensed from Apple Computer--to provide more robust and easier-to-use
capabilities for subscription registration, browsing through our communities,
and subscriber personalization of web pages, and to allow us to track and
extract user profile and activity data more easily and in more detail.

SERVER MAINTENANCE

Our electronic network is located both at our facility and at the Exodus
Communications Internet Data Center in Santa Clara, California. Exodus
Communications, a provider of server hosting, Internet connectivity,
collaborative systems management, and Internet technology services, operates
Internet Data Centers in several US locations, as well as in London, and
includes several major Internet companies among its clients.

Through its network co-location agreement with Exodus, we are provided with
a secure location for its network servers, multiple high-speed Internet
connections, and access to 24-hour-a-day, 7-day-a-week technical support
personnel and services. Exodus also provides critically important routing,
redundancy, and maintenance services for the network and its Internet
connections, as well as a back-up power supply capable of continuing network
operations for up to a week in the event of a power failure.

COMPETITION

The markets in which we are engaged are new, rapidly evolving and intensely
competitive, and we expect competition to intensify further in the future.
Barriers to entry are relatively low, and current and new competitors can launch
new sites at a relatively low cost using commercially-available software. We
currently or potentially compete with a number of other companies for users,
advertisers and electronic commerce marketers, including a
number of large online communities and services that have expertise in
developing online commerce, and a number of other small services, including
those that serve specialty markets.

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Other companies that are primarily focused on creating Internet online
communities include Tripod and AngelFire, subsidiaries of Lycos; GeoCities which
has been acquired by Yahoo, theGlobe.com, Xoom.com and Alloy Online and, in
the future, Internet communities may be developed or acquired by companies
currently operating Web directories, search engines, shareware archives,
content sites, Internet Service Providers and other entities, which may have
more resources than ours.

In addition, we currently and in the future face competition from
traditional media companies, a number of which, including Disney, CBS, CNN/Time
Warner and NBC, have recently made significant acquisitions or investments in
Internet companies.

Furthermore, we compete for users and advertisers with other content
providers and with thousands of Web sites operated by individuals, the
government and educational institutions. Such providers and sites include AOL,
Angelfire, CNET, CNN/Time Warner, Excite, Hotmail, Infoseek, Lycos,
Microsoft, Netscape, Switchboard, Xoom, ESPN.com and ZDNet.com and Yahoo!

We believe that the following are the principal competitive factors for
companies seeking to create online communities on the Internet:

- - community cohesion and interaction;

- - customer service;

- - brand recognition;

- - Web site convenience and accessibility;

- - price;

- - quality of search tools; and

- - system reliability.

Once our e-commerce functions become fully operational, we will also be
competing with companies in the online commerce market. This market is new,
rapidly evolving and intensely competitive. Current and new competitors can
launch new Web sites at relatively low cost. The products and services that
might be offered through our site will compete with other retailers and direct
marketers, some of which may specifically target our potential customers. We
anticipate that we will compete with various mail-order and Web-based retailers;
various traditional retailers, either in their physical or online stores;
various online service providers that offers products of interest to our
potential customers, including AOL, Microsoft, and other providers mentioned
above; and e-commerce Web sites, such as Amazon.com, Etoys and CDnow.

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We believe that the following are the principal competitive factors in the
online commerce market:

- - brand recognition;

- - quality of site content;

- - merchandise selection;

- - convenience;

- - price;

- - customer service; and

- - reliability and speed of fulfillment.

Many of our current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition in other business
and Internet markets and significantly greater financial, marketing, technical
and other resources than us. In addition, other online services may be acquired
by, receive investments from or enter into other commercial relationships with
larger, well-established and well-financed companies as use of the Internet and
other online services increases. Therefore, our competitors with other revenue
sources may be able to devote greater resources to marketing and promotional
campaigns, adopt more aggressive pricing policies and devote substantially more
resources to Web site and systems development than us or may try to attract
traffic by offering services for free. Increased competition may result in
reduced operating margins, loss of market share and diminished value of our
brand.

While we have similarities to the typical portals, we distinguish ourselves
by providing host-type services such as premium and even proprietary content,
thematic communities for subscribers, Remind Me electronic calendar services,
and a customizable search engine that also acts as a mechanism for driving
traffic to subscriber and premium content provider sites. A key factor that
sets us apart from other portals is our offer to subscribers of ready-to-use
e-commerce capabilities, including full hosting of a subscriber's domain,
e-commerce storefront building and launching services, sourcing and fulfillment
services, and billing services. However, there can be no assurance that we will
be able to compete successfully against current and future competitors. Further,
as a strategic response to changes in the competitive environment, we may, from
time to time, make pricing, service or marketing decisions or acquisitions that
could have a material adverse effect on our business, results of operations and
financial condition. New technologies and the expansion of existing technologies
may increase the competitive pressures on us by enabling our competitors to
offer a lower-cost service. Certain Web-based applications that direct Internet
traffic to certain Web sites may channel users to services that compete with us.
Any and all of these events could have a material adverse effect on our
business, results of operations and financial condition.

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INTELLECTUAL PROPERTY

We currently have pending applications before the United States Patent and
Trademark Office for trademark and service mark protection for "Nettaxi", as a
brand name for our website, "Internet the City", the Company's CD-ROM training
product, "URL", the Company's animated guide character, and the Nettaxi
"taxicab". Once these applications are approved, protection will be available
for the periods prescribed by law.

We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our future success and rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions to establish and protect our proprietary rights in
products and services. We have entered into confidentiality and invention
assignment agreements with our employees and contractors, and nondisclosure
agreements with our suppliers and strategic partners in order to limit access to
and disclosure of our proprietary information. There can be no assurance that
these contractual arrangements or the other steps taken by us to protect our
intellectual property will prove sufficient to prevent misappropriation of our
technology or to deter independent third-party development of similar
technologies. While we intend to pursue registration of our trademarks and
service marks in the U.S. and internationally, effective trademark, service
mark, copyright and trade secret protection may not be available in every
country in which our services are made available online.

We also rely on technologies that we license from third parties, such as
the suppliers of key database technology, the operating system and specific
hardware components for our products and services. These licenses extend for
various terms and are subject to satisfaction of conditions laid out in the
specific licensing agreements. There can be no assurance that these third-party
technology licenses will continue to be available to us on commercially
reasonable terms. The loss of such technology could require us to obtain
substitute technology of lower quality or performance standards or at greater
cost, which could materially adversely affect our business, results of
operations and financial condition.

Although we do not believe that we infringe the proprietary rights of third
parties, there can be no assurance that third parties will not claim
infringement by us with respect to past, current or future technologies. See
"Legal Proceedings." We expect that participants in our markets will be
increasingly subject to infringement claims as the number of services and
competitors in our industry segment grows. Any such claim, whether meritorious
or not, could be time-consuming, result in costly litigation, cause service
upgrade delays or require us to enter into royalty or licensing agreements. Such
royalty or licensing agreements might not be available on terms acceptable to us
or at all. As a result, any such claim could have a material adverse effect upon
our business, results of operations and financial condition.

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GOVERNMENT REGULATION

Our company, operations and products and services are all subject to
regulations set forth by various federal, state and local regulatory agencies.
We take measures to ensure our compliance with all such regulations as
promulgated by these agencies from time to time. The Federal Communications
Commission sets standards and regulations regarding communications and related
equipment.

There are currently few laws and regulations directly applicable to the
Internet. It is possible that a number of laws and regulations may be adopted
with respect to the Internet covering issues such as user privacy, pricing,
content, copyrights, distribution, antitrust and characteristics and quality of
products and services. The growth of the market for online commerce may prompt
calls for more stringent consumer protection laws that may impose additional
burdens on those companies conducting business online. Tax authorities in a
number of states are currently reviewing the appropriate tax treatment of
companies engaged in online commerce, and new state tax regulations may subject
us to additional state sales and income taxes.

Several states have also proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues, including some recently proposed changes, could create uncertainty in
the marketplace that could reduce demand for our products and services or
increase the cost of doing business as a result of
litigation costs or increased service delivery costs, or could in some other
manner have a material adverse effect on our business, results of operations and
financial condition. In addition, because our services are accessible worldwide
and we facilitate sales of goods to users worldwide, other jurisdictions may
claim that we are required to qualify to do business as a foreign corporation
in a particular state or foreign country. Our failure to qualify as a foreign
corporation in a jurisdiction where it is required to do so could subject us to
taxes and penalties for the failure to qualify and could result in our
inability to enforce contracts in such jurisdictions. Any such new legislation
or regulation, or the application of laws or regulations from jurisdictions
whose laws do not currently apply to our business, could have a material
adverse effect on our business, results of operations and financial condition.

LEGAL PROCEEDINGS

GeoCities has made a written demand that we cease and desist in our use of
the marks WALLSTREET and CAPITOL HILL in connection with our services claiming
that our use infringes upon GeoCities' trademark rights. GeoCities has applied
for Federal registration of the marks. To resolve this matter, we filed a
complaint against GeoCities in April 1999 in the United States District Court
for the Northern District of California seeking declaratory relief that our use
of the marks does not infringe upon the rights of GeoCities. We believe that we
have rights to use the marks and intend to protect our rights to do so. We
cannot assure you, however, that the results of the litigation will be favorable
to us. An adverse result of the litigation could have a material adverse effect
on our business and results of operations.

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EMPLOYEES

As of May 31, 1999, we had 20 employees, including:

- - 2 in customer support;

- - 7 in product development;

- - 8 in sales, marketing and business development; and

- - 3 in administration.

We believe that our future success will depend in part on our continued ability
to attract, integrate, retain and motivate highly qualified technical and
managerial personnel, and upon the continued service of our senior management
and key technical personnel. The competition for qualified personnel in our
industry and geographical location is intense, and there can be no assurance
that we will be successful in attracting, integrating, retaining and motivating
a sufficient number of qualified personnel to conduct our business in the
future. From time to time, we also engage independent contractors to support our
research and development, marketing, sales and support and administrative
organizations. We have never had a work stoppage, and no employees are
represented under collective bargaining agreements. We consider our relations
with our employees to be good.

FACILITIES

Our headquarters are currently located in a leased facility in Campbell,
California, consisting of approximately 8,600 square feet of office space to
accommodate management, operations, and research and development functions,
which is under a lease that expires in April 2002. We also lease 580 square
feet of office space in Las Vegas, Nevada which we use for general
administrative purposes. This lease was entered into on May 27, 1999 and has a
one year term and we have an option to renew it for an additional two years. We
believe that our current facilities are adequate for our present needs.

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

Our directors, executive officers and other key employees, and their ages,
as of June 21, 1999 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --- -----------------------------------------------------
<S> <C> <C>

Robert A. Rositano, Jr.(1) 30 Chief Executive Officer, Secretary and Director
- -------------------------- --- -----------------------------------------------------
Dean Rositano(1) 27 President and Director
- -------------------------- --- -----------------------------------------------------
Glenn Goelz 41 Vice President, Chief Financial Officer and Treasurer
- -------------------------- --- -----------------------------------------------------
Melanie McCarthy 44 Vice President of E-Commerce
- -------------------------- --- -----------------------------------------------------
Brian Stroh 29 Vice President of Information Services
- -------------------------- --- -----------------------------------------------------
Andrew Garroni (2) (3) 44 Director
- -------------------------- --- -----------------------------------------------------
Ron R. Goldie 48 Director
- -------------------------- --- -----------------------------------------------------
Roger Thornton (2) (3) 34 Director
- -------------------------- --- -----------------------------------------------------
Steven S. Antebi 55 Director
- -------------------------- --- -----------------------------------------------------
<FN>
(1) Robert A. Rositano, Jr. and Dean Rositano are brothers.
(2) Member of Compensation Committee
(3) Member of Audit Committee
</TABLE>

Each director holds his office until the next annual meeting on the
stockholders and until his successor is elected and qualified. Executive
officers are appointed by and serve at the pleasure of our board of directors.

Robert A. Rositano, Jr. Mr. Rositano Jr. co-founded Nettaxi Online
Communities, Inc. a Delaware corporation ("Nettaxi-Delaware"), in October, 1997.
He has served as Chief Executive Officer and Secretary of Nettaxi since the
reorganization with Swan Valley and prior to that served in the same capacities
with Nettaxi-Delaware from its inception. He has over seven years of experience
in the internet service provider and Internet industry. In February 1995, he
co-founded Simply Interactive, Inc. ("Simply Interactive"), an Internet/intranet
software company, and served as Executive Vice President in the areas of Inside
Sales, Customer Service and Product Development until he co-founded
Nettaxi-Delaware. In January 1994, he co-founded Digital Data Express, a company
focused on beginner level Internet users, and served as Chief Executive Officer
until February 1995 when Digital Data Express was acquired by Simply
Interactive. From 1992 to 1994, Mr. Rositano was hired on as the third employee
at Netcom On-line Communications in 1992 and served as a senior sales and
account manager until 1993.

Dean Rositano. Mr. Rositano co-founded Nettaxi-Delaware in October, 1997.
He has served as President of Nettaxi since the reorganization with Swan Valley
and prior to that served in the same capacities with Nettaxi-Delaware Vice
President of Technology until he co-founded Nettaxi-Delaware. While at Simply
Interactive, he assembled a digital production studio and produced the Internet
the City CD-ROM in a three month time frame on three platforms, Windows 3.1,
Windows 95, and Macintosh. In January 1994, he co-founded Digital Data
Express and served as President and Chief Executive Officer until February
1995 when Digital Data Express was acquired by Simply Interactive. At Digital
Data Express, Mr. Rositano co-produced and directed the world's first Internet
training video "Introduction to the Internet."

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<PAGE>
Glenn Goelz. Mr. Goelz was appointed Vice President, Chief Financial
Officer and Treasurer in April, 1999. He has 19 years of broad financial
experience across several high technology fields. Prior to joining Nettaxi, he
was a principal of his own consulting firm specializing in strategic business
and financial consulting to multinational firms and Internet start-up companies.
From August 1997 to January, 1999 Mr. Goelz served as the Vice President of
Finance and Operations for Pictra, Inc., a photo e-commerce start-up company.
From April 1996 to July 1997, he served in various capacities with Simply
Interactive, including Vice-President-Controller and Chief Financial Officer.
From April of 1995 to April 1996, Mr. Goelz served as the Worldwide Controller
at Logitech, Inc., a worldwide provider of computer mice and senseware. Prior to
this, Mr. Goelz served as the Corporate Controller at Auspex Systems, Inc. a
provider of high performance data servers from 1993 to 1995. Mr. Goelz earned
his Bachelor's degree in Business and Economics, with a concentration in
accounting, from Lehigh University.

Melanie McCarthy. Ms. McCarthy was appointed Vice President of E-Commerce
in March, 1999. During her 22-year career, she has defined and implemented the
e-commerce strategies of several organizations. During its 1997-1998 term Ms.
McCarthy served as Chairperson for the Marketing Council of the Association of
Interactive Media in Washington, D.C. and sat on the Capital Hill Internet
Advisory Board. In 1997 she founded Product Partners, Inc., an online retail
company, and served as Chief Executive Officer until January 1999. From 1992 to
1996, Ms. McCarthy served as Vice President of Home Shopping Network's first
interactive effort, HSN Interactive, and negotiated the inclusion of HSN
Interactive on Compuserve, Prodigy, AOL and MSN. She recently served as
chairperson for the Interactive Marketing Council of the Association for
Interactive Media in Washington, D.C., and sat on the Capitol Hill Internet
Advisory Board. Ms. McCarthy earned her Bachelor's degree in Science from the
University of Maryland, and has completed course work toward a graduate degree
in Computer Science at the University of Texas.

Brian Stroh. Mr. Stroh was appointed Vice President of Information
Services in October, 1997. He has close to four years of experience in the
internet service provider and Internet industry. From December 1995 to June
1996 he was head of Customer Service of a customer service, inside sales
department which grew to eight employees. He assisted in the development of a
robust call center and customer database. He also served in a managerial
role, assisting in the development of the second edition to Ques Mega Web
Directory. Mr. Stroh earned his Bachelor's degree from the University of
Colorado at Boulder.

68
<PAGE>
Andrew Garroni. Mr. Garroni has served as a director since completion of
our merger with Plus Net in May 1999. Under the terms of our merger agreement
with Plus Net, Mr. Garroni was appointed as a member of the board of directors.
Mr. Garroni has over 20 years experience in the development and management of
start-up entertainment companies. He currently serves as Executive Producer of
Showtime's movie series "Naked City," a position he has held since January,
1998. From 1990 to September, 1998 he served as President of Axis Films
International, Inc. supplying films to cable television networks such as Home
Box Office, Showtime Networks and DBS providers like Direct TV. He began his
career in New York as a principal partner in the motion picture Production
Company Cinerex Associates, Inc. whose clients included Twentieth Century Fox
and Orion Pictures. While in New York, he helped create Magnum Motion Pictures
and Magnum Entertainment. Mr. Garroni has a Bachelor's degree in Marketing from
Fairleigh Dickinson University.

Ron R. Goldie. Mr. Goldie has served as a director since completion of
our merger with Plus Net in May 1999. Under the terms of our merger agreement
with Plus Net, Mr. Goldie was appointed as a member of the board of directors.
From March 1990 to December 1995 he was a senior partner at the law firm of
Jeffer, Mangels, Butler and Marmaro. From March 1996 to February 1997 he was a
senior partner at Coudert Brothers. From February 1997 to March 1998 he was a
senior partner at Stroock and Lavan. In March, 1999 he became a senior member
of the corporate department of Mitchell Silberberg and Knupp, a ninety year old
Los Angeles based law firm. Mr. Goldie specializes in business planning and
transactions ranging from local to international matters. The practice
includes a range from mergers and acquisitions, securities practice,
secured and asset based lending transactions, advising regarding structure
and development and general and corporate business matters. Mr. Goldie Received
his Bachelor's degree and Law degree from the University of Southern California,
and was admitted to the California Bar in 1975.

Roger Thornton. Mr. Thornton has served as a director since March, 1999. He
has ten years of industry experience and has served as the Principal Consultant
and Capital Fund Partner for Media Lane Development Group, a Silicon Valley
based technology firm focused on the e-commerce marketplace since October, 1996.
As one of that firm's founding members, he consults on business strategy, system
architecture and engineering management for numerous Internet companies. Mr.
Thornton was a Product Manager with Apple Computer from February 1993 to
December 1995. He served as Marketing Development Manager for Sun Micro Systems
from December 1995 to November 1996. Mr. Thornton has designed and implemented
several of the earliest commercially deployed Web-based applications for such
companies and institutions as E*TRADE, Music Blvd., Stanford University,
InfoWorld Magazine, Bay Networks, Knight Ridder and Intellimatch. Previously he
has held engineering and marketing management positions in several technology
firms, including CenterLine Software Inc., Taligent Inc., an Apple Computer/IBM
joint venture, and JavaSoft, A Sun Microsystems company. Mr. Thornton received
his Bachelor's degree in Engineering and Master's degree in Engineering from San
Jose State University in 1988 and 1993, respectively.

69
<PAGE>
Steven S. Antebi. Mr. Antebi has served as a director since May, 1999.
Since 1998, Mr. Antebi has been the Manager of Fontenelle LLC, a personal
holding company specializing in telecommunications and Internet investments.
Since 1994, he has also been the general partner of Maple Partners, a California
partnership with investments in equities. Since 1992, he has been the managing
partner of JLA Partners, a venture capital partnership specializing in late
stage development companies. Mr. Antebi is also President and Chairman of the
board of directors of Novante Communications, a Nevada corporation which invests
in debt and equity marketable securities. From March 1973 through June 1991, Mr.
Antebi was employed by Bear Stearns & Co. Inc., and from 1986 through 1991,
served as a Managing Director. From 1991 to 1993, Mr. Antebi was employed by
Drake Capital.

EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS

EXECUTIVE EMPLOYMENT AGREEMENTS. On August 1, 1998 Nettaxi-Delaware
entered into executive employment agreements with Robert A. Rositano, Jr. and
Dean Rositano, and these agreements continued in effect after the reorganization
with Swan Valley. Pursuant to the terms of their individual executive
employment agreements, Robert A. Rositano, Jr. is to perform the duties
Chief Executive Officer and serve as a member of the board of directors, and
Dean Rositano is to perform the duties of President and serve as a member of the
board of directors. Each executive employment agreement provides for an annual
base salary of $125,000 which may be increased by the board of directors, in
its discretion. The base salary also is to increase by ten percent per annum,
which increase shall be cumulative for each year. Under the executive
employment agreements, each executive is also eligible for annual bonus
compensation in the minimum amount of $50,000 up to a maximum amount equal to
the base salary then payable. The board of directors is to determine the amount
of the annual bonus based upon performance targets established by the board of
directors. Under the executive employment agreements, Robert A. Rositano, Jr.
and Dean Rositano each received warrants to purchase up to 883,952 shares of
the common stock of Nettaxi-Delaware. The Warrants were to vest over three years
and vesting was accelerated upon the reorganization with Swan Valley. Robert A.
Rositano, Jr. and Dean Rositano each exercised their warrants in September,
1998. They have each been granted registration rights with respect to shares of
common stock issued upon exercise of the warrants and they have each waived any
such rights with respect to this registration statement. Each executive is
eligible to receive three weeks paid vacation for the first year of employment
and four weeks per year thereafter. They are also eligible to participate in
the health, life insurance, medical, retirement and other benefit programs
which we may offer from time to time. Each executive receives a car allowance
in an amount not to exceed $600 per month plus insurance and costs of repair and
may be reimbursed for other reasonable expenses incurred during the course of
performing their duties.

The term of the executive employment agreements is four years and they are
automatically renewed for successive periods of one year unless terminated prior
to such renewal. We may terminate either executive at any time with or without
cause. The term "cause" is defined in the executive employment agreements as:

- - conviction or plea of no contest to a felony;

70
<PAGE>
- - willful gross misconduct materially injurious to Nettaxi;
- - willful and material failure to substantially perform duties other than a
failure resulting from disability;
- - violation of the agreement's covenant not to compete; or
- - disclosure of material confidential information without prior written
consent.

If and executive is terminated without cause, he is to receive severance pay
equal to:

- - the base salary for the remainder of the term;
- - minimum bonus plus any pro rata bonus in excess of the minimum bonus;
- - pre payment of all automobile allowance for the remaining period of the
term; and
- - continued coverage for life, health and disability insurance for the
remainder of the term.

The above amounts shall be due in one lump sum payment three days following the
termination of his employment without cause. If there is a "change in
control" with respect to Nettaxi, the executives may terminate their executive
employment agreements and be entitled to severance in the amount of three years
of annual benefits to be realized in accordance with the terms of the executive
employment agreements, payable in one lump sum. "Change in control" is defined
in the executive employment agreements as:

- - any change of equity such that more than 50% of the outstanding shares of
our outstanding shares are transferred to a third party;
- - debt ownership such that more than 50% of our outstanding shares are
transferred to a third party; or
- - a sale of 70% or more of our assets.

The executive employment agreements also contain covenants restricting the
disclosure of our confidential information, the solicitation of our employees or
agents and the ability of the executives to engage in competing activities with
us.

In the course of the previous year, as a result of our limited human
resources both Robert A. Rositano and Dean Rositano have performed other
responsibilities not necessarily within the scope of the definition of their
positions under the executive employment agreements.

GLENN GOELZ. As of April 1, 1999 we have entered into an Employment
Agreement with Mr. Glenn Goelz. Under the agreement, Mr. Goelz is employed as
Chief Financial Officer of the Company and is expected to perform the duties
consistent with the position including the management of the financial
operations of the Company and the hiring of personnel. Mr. Goelz receives a
base salary of $125,000 until August 1, 1999 at which time the base salary will
increase to $150,000. He is also eligible for annual bonus compensation in the
minimum amount of $50,000 up to a maximum amount equal to the base salary then
payable. The board of directors is to determine the amount of the annual bonus
based upon performance targets established by the board of directors. He also is
to receive options to purchase up to 250,000 shares of our common stock, which
vest over three years, under our 1998 Stock Option Plan. He receives three weeks
paid vacation for the first year of employment and four weeks per year
thereafter. He is also eligible to participate in the health and other benefit
programs which we may offer from time to time.

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<PAGE>
The term of Mr. Goelz's agreement is three years and automatically renews
for successive periods of one year unless terminated prior to such renewal. We
may terminate him at any time with or without cause. The term "cause" is
defined in the executive employment agreements as:

- - conviction or plea of no contest to a felony;
- - willful gross misconduct materially injurious to Nettaxi;
- - willful and material failure to substantially perform duties other than a
failure resulting from disability; or
- - disclosure of material confidential information without prior written
consent.

Mr. Goelz is eligible to receive severance pay if he is terminated without cause
or if the Company experiences a change in control and he elects to terminate the
agreement. The severance payment would be:

- - the base salary for the remainder of the term;
- - minimum bonus plus any pro rata bonus in excess of the minimum bonus; and
- - continued coverage for health and other benefits for the remainder of the
term.

Additionally, the vesting of all options to purchase common stock of the Company
would be accelerated immediately. The severance payment would be due in one
lump sum three days following the termination of his employment. "Change in
control" is defined in the employment agreement as:

Mr. Goelz's employment agreements also contains covenants regarding the
assignment of inventions, restricting the disclosure of our confidential
information, the solicitation of our employees or agents and the ability of Mr.
Goelz to engage in competing activities.

BOARD COMMITTEES

The Compensation Committee of the board of directors determines the
salaries and incentive compensation of our officers and provides recommendations
for the salaries and incentive compensation of our other employees. The
compensation committee also administers our 1998 Stock Option Plan. The current
members of the Compensation Committee are Messrs. Thornton and Garroni. Prior to
May 3, 1999, we did not have a Compensation Committee or any other committee of
the board of directors that performed any similar functions.

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<PAGE>
The Audit Committee of the board of directors reviews, acts on and reports
to the board of directors with respect to various auditing and accounting
matters, including the selection of our independent auditors, the scope of the
annual audits, fees to be paid to the auditors, the performance of our
independent auditors and our accounting practices. The current members of the
audit committee are Messrs. Thornton and Garroni.

The board of directors does not have a nominating committee.

DIRECTORS' COMPENSATION

Directors who are also employees of Nettaxi receive no compensation for
serving on the board of directors. With respect to directors who are not
employees, we intend to reimburse such directors for all travel and other
expenses incurred in connection with attending meetings of the board of
directors and any committees of the board of directors. Non-employee directors
are also eligible to receive grants of non-qualified stock options under our
1998 Stock Option Plan, and we intend to establish a non-employee director stock
option plan which will provide for initial option grants of a fixed number of
shares to non-employee directors and successive annual option grants to such
non-employee directors covering an additional fixed number of shares to provide
us with an effective way to recruit and retain qualified individuals to serve as
members of the board of directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

We did not have a Compensation Committee or other committee of the board of
directors performing similar functions during the fiscal years ending December
31, 1997 and 1998. Messrs. Robert A. and Dean Rositano are each officers of
Nettaxi and, as members of the board of directors, participated in deliberations
of the board of directors relating to the compensation of our executive
officers. As indicated above, the board of directors established a Compensation
Committee as of May 3, 1999.

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<PAGE>
EXECUTIVE COMPENSATION

COMPENSATION SUMMARY

The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by or paid to our Chief Executive
Officer and President (collectively, the "Named Executives") during the year
ended December 31, 1998:

SUMMARY COMPENSATION TABLE(1)(2)

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
- ----------------------- ----------- ------------- ----------------------
<S> <C> <C> <C>
NAME AND SALARY ($) BONUS ($) (4) NUMBER OF SECURITIES
PRINCIPAL POSITION UNDERLYING WARRANTS/
OPTIONS (#)
- ----------------------- ----------- ------------- ----------------------
Robert A. Rositano, Jr. $95,917 (3) -- 1,012,347
Chief Executive Officer
- ----------------------- ----------- ------------- ----------------------
Dean Rositano $95,917 (3) -- 1,012,347
President
- ----------------------- ----------- ------------- ----------------------
<FN>
(1) Information set forth herein includes services rendered by the Named
Executives while employed by Nettaxi-Delaware prior to the reorganization with
Swan Valley and by Nettaxi following the reorganization with Swan Valley. No
other executive officer or employee received compensation in excess of $100,000
during this period.

(2) The columns for "Other Annual Compensation" "Restricted Stock Awards"
"LTP Payouts" and "All other Compensation" have been omitted because there is no
compensation required to be reported.

(3) For each Named Executive, includes $93,000 in cash compensation and
16,574 shares of common stock issued to each of the Named Executives in
February, 1998 in lieu of salary earned in 1998 having an ascribed value of
$2,198 as determined by the board of directors.

(4) Pursuant to their Executive Employment Agreements, each of the Named
Executives is eligible for annual bonus compensation in the minimum amount of
$50,000 up to a maximum amount equal to the base salary then payable. See
"Employment Agreements and Termination of Employment and Change of Control
Arrangements." The first bonus payment is not due until August 1999 and the
amount of the bonus earned by the Named Executives for the first bonus period,
including a portion of 1998, will not be determined until August 1999.
Accordingly, no entry has been made in the table for bonus compensation
attributable to the year ended December 31, 1998.
</TABLE>

74
<PAGE>
WARRANT AND OPTION GRANTS IN LAST YEAR

The following table sets forth information concerning warrants and options
granted to the Named Executives during 1998.

WARRANT AND OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998(1)

<TABLE>
<CAPTION>
NAME Number of % of Total Exercise Expiration Potential Realizable Value at Assumed
Securities Warrants/ Price Per Date(6) Annual Rates of Stock Price Appreciation
Underlying Options Share for Option Term (7)
Warrants/ Granted to ($/SH)
Options Employees
Granted (#) (2) IN 1998 (5)
--------- --------- ---------
0% 5% 10%
--------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert A. 88,395(3) 3.3% $ 0.0396 3/08 $ 31,504 $ 55,657 $ 87,299
Rositano,
Jr.
- ---------
883,952 33.0% $ 0.0396 8/08 $315,040 $556,572 $872,991
--------------- ----------- ----------- ----------- --------- --------- ---------
40,000(4) 1.5% $ 0.88 10/08 $ 3,200 $ 16,928 $ 47,808
--------------- ----------- ----------- ----------- --------- --------- ---------
Dean 88,395(3) 3.3% $ 0.0396 3/08 $ 31,504 $ 55,657 $ 87,299
Rositano

883,952 33.0% $ 0.0396 8/08 $315,040 $556,572 $872,991
--------------- ----------- ----------- ----------- --------- --------- ---------
40,000(4) 1.5% $ 0.88 10/08 $ 3,200 $ 16,928 $ 47,808
--------------- ----------- ----------- ----------- --------- --------- ---------
<FN>
(1) No SARs were granted to either of the Named Executives during 1998.

(2) Each warrant and option represents the right to purchase one share of our common stock.

(3) These warrants became fully vested upon completion of the reorganization with Swan
Valley.

(4) These options vest in twelve equal quarterly installments commencing three months after
the date of grant.

(5) In 1998, we granted officers, employees and consultants warrants and options to purchase
an aggregate of 2,679,298 shares of our Common Stock.

(6) Options may terminate before their expiration dates if the optionee's status as an
employee or consultant is terminated or upon the optionee's death or disability.

(7) Amounts represent hypothetical gains that could be achieved for the respective warrants
and options if exercised at their end of their respective terms. The 0%, 5% and 10% assumed
annual rates of compounded stock price appreciation are mandated by rules of the SEC and do not
represent our estimate or projection of the future prices of the common stock. Actual gains, if
any, on any exercises of warrants and options are dependent upon the future performance of the
Common Stock and overall stock market conditions. The amounts reflected in the table may not
necessarily be achieved.
</TABLE>

75
<PAGE>
WARRANT AND OPTION EXERCISES AND YEAR-END OPTION VALUES

The following table sets forth information with respect to the Named
Executives concerning their exercise of warrants during 1998 and exercisable and
unexercisable stock options held by them as of December 31, 1998.

AGGREGATE WARRANT AND OPTION EXERCISES IN 1998 AND YEAR END OPTION VALUES (1)

<TABLE>
<CAPTION>
NAME Shares Value Number of Unexercised Value of Unexercised In-the-
Acquired On Realized Options at Year End(#) Money Options at Year
EXERCISE(#) (2)($) End ($)(3)
-------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ------------- ------------ ---------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. 972,347 $ 346,544 3,333 36,667 $ 25,397 $ 279,402
Rositano, Jr.
- ------------- ------------ ---------- ----------- ------------- ------------ --------------
Dean Rositano 972,347 $ 346,544 3,333 36,667 $ 25,397 $ 279,402
- ------------- ------------ ---------- ----------- ------------- ------------ --------------
<FN>
(1) No SARs were owned or exercised by any of the Named Executives during 1998.

(2) There was no public trading market for our common stock at the time these warrants were
exercised. The amounts shown as the value realized by the Named Executives on the exercise of the
warrants is based on a value of $0.396 per share, the fair market value on the date of
exercise as determined by our board of directors, less the exercise price of $0.0396. As
authorized by our board of directors, each of the Named Executives exercised their warrants by
delivery of promissory notes in favor of the Company which bear interest at the rate of 8% per
annum and are secured by the shares.

(3) Based on a per share fair market value of our common stock equal to $8.50 at December 31,
1998, the Closing Price for our common stock on that date as reported by various market makers
for our common stock on the Over-The-Counter Market Bulletin Board.
</TABLE>

EMPLOYEE BENEFIT PLANS

1998 STOCK OPTION PLAN. Our 1998 Stock Option Plan was adopted by the
board of directors, and ratified and approved by our stockholders, as of
September 29, 1998. The following description of our 1998 Stock Option Plan is
a summary and qualified in its entirety by the text of the plan, which is filed
as an exhibit to the registration statement of which this prospectus is a part.

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<PAGE>
The purpose of the 1998 Stock Option Plan is to enhance our profitability
and stockholder value by enabling us to offer stock based incentives to
employees, directors and consultants. The 1998 Stock Option Plan authorizes the
grant of options to purchase shares of Common Stock to employees, directors and
consultants of Nettaxi and its affiliates. Under the 1998 Stock Option Plan, we
may grant incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986 and non-qualified stock options. Incentive stock
options may only be granted our employees.

The number of shares available for options under the 1998 Stock Option Plan
is 3,000,000. The 1998 Stock Option Plan is administered by the Compensation
Committee of the board. Subject to the provisions of the 1998 Stock Option
Plan, the Compensation Committee has authority to determine the employees,
directors and consultants of Nettaxi who are to be awarded options and the
terms of such awards, including the number of shares subject to such option,
the fair market value of the common stock subject to options, the exercise price
per share and other terms.

Incentive stock options must have an exercise price equal to at least 100%
of the fair market value of a share on the date of the award and generally
cannot have a duration of more than 10 years. If the grant is to a stockholder
holding more than 10% of our voting stock, the exercise price must be at least
110% of the fair market value on the date of grant. Terms and conditions of
awards are set forth in written agreements between Nettaxi and the respective
option holders. Awards under the 1998 Stock Option Plan may not be made after
the tenth anniversary of the date of its adoption but awards granted before that
date may extend beyond that date.

If the employment with Nettaxi of the holder of an incentive stock option
is terminated for any reason other than as a result of the holder's death or
disability or for "cause" as defined in the 1998 Stock Option Plan, the holder
may exercise the option, to the extent exercisable on the date of termination of
employment, until the earlier of the option's specified expiration date and 90
days after the date of termination. If an option holder dies or becomes
disabled, both incentive and non-qualified stock options may generally be
exercised, to the extent exercisable on the date of death or disability, by the
option holder or the option holder's survivors until the earlier of the
option's specified termination date and one year after the date of death or
disability.

As of June 21, 1999, no shares had been issued as the result of the
exercise of options previously granted under the 1998 Stock Option Plan,
1,015,000 shares were subject to outstanding options and 1,985,000 shares were
available for future grants. The exercise prices of the outstanding options
ranged from $0.80 to approximately $15.00. The options under the 1998 Stock
Option Plan vest over varying lengths of time pursuant to various option
agreements that we have entered into with the grantees of such options.

We have not registered the 1998 Stock Option Plan, or the shares subject to
issuance thereunder, pursuant to the Securities Act of 1933 (the "Securities
Act"). Absent registration, such shares, when issued upon exercise of
options, would be "restricted securities" as that term is defined in Rule 144
under the Securities Act. See "Shares Eligible for Future Sale."

77
<PAGE>
Optionees have no rights as stockholders with respect to shares subject to
option prior to the issuance of shares pursuant to the exercise thereof.
Options issued to employees under the 1998 Stock Option Plan shall expire no
later than ten years after the date of grant. An option becomes exercisable at
such time and for such amounts as determined at the discretion of the board of
directors or the Compensation Committee at the time of the grant of the option.
An optionee may exercise a part of the option from the date that part first
becomes exercisable until the option expires. The purchase price for
shares to be issued to an employee upon his exercise of an option is determined
by the board of directors or the Compensation Committee on the date the option
is granted. The purchase price is payable in full in cash, by promissory
note, by net exercise or by delivery of shares of our Common Stock when the
option is exercised. The 1998 Stock Option Plan provides for adjustment as to
the number and kinds of shares covered by the outstanding options and the
option price therefor to give effect to any stock dividend, stock split, stock
combination or other reorganization of or by Nettaxi.

PRE-REORGANIZATION WARRANTS. Prior to the reorganization with Swan Valley,
Nettaxi-Delaware granted warrants to purchase an aggregate of 2,399,298 shares
of Nettaxi-Delaware's common stock for the same purposes, and on substantially
the same terms and conditions, as options to be granted under the 1998 Stock
Option Plan. See "Certain Transactions--Stock Transactions by Nettaxi Online
Communities, Inc." As of the reorganization with Swan Valley, all such warrants
had been exercised by the holders thereof and are no longer outstanding.

401(K) PLAN. Effective June 1, 1999 we instituted the Nettaxi 401(k)
Savings Plan (the "401(k) Plan"). Eligible employees may begin making deferrals
under the 401(k) Plan. The 401(k) Plan is intended to be a qualified plan under
Internal Revenue Code Section 401(a), with a cash or deferred option governed by
Section 401(k) of the Internal Revenue Code. Employees may elect to defer their
eligible current compensation up to the statutorily and 401(k) Plan prescribed
limits and have the amount of such deferral contributed to the 401(k) Plan.
Contributions to the 401(k) Plan are invested in the investment funds described
in the 401(k) Plan. The 401(k) Plan is filed as an exhibit to the registration
statement of which this prospectus is a part.

KEY MAN INSURANCE

We do not currently have any key man insurance. We do intend to purchase
key man insurance on the lives of the Named Executives in the near future.

INDEMNIFICATION AGREEMENTS

We intend to enter into indemnification agreements with our directors and
officers. These agreements will provide, in general, that we shall indemnify and
hold harmless such directors and officers to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement, and expenses incurred
in connection with, or in any way arising out of, any claim, action or
proceeding against, or affecting, such directors and officers resulting from,
relating to or in any way arising out of, the service of such persons as our

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<PAGE>
directors and officers. Currently, directors and officers are entitled to the
benefits of the limitation of liability provided under our charter documents and
the laws of the State of Nevada. See "Description of Capital Stock--Limitation
of Liability and Indemnification."

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<PAGE>
CERTAIN TRANSACTIONS

STOCK TRANSACTIONS BY NETTAXI ONLINE COMMUNITIES, INC.

ISSUANCES TO FOUNDERS. Nettaxi-Delaware was formed in October 1997 Robert A.
Rositano, Jr. and Dean Rositano. At the time of formation, each of them was
issued 1,288,044 shares of Nettaxi-Delaware common stock in consideration of
their efforts in establishing Nettaxi-Delaware and developing its initial
business strategy.

On February 12, 1998, Robert A. and Dean Rositano were each issued an
additional 66,297 shares of Nettaxi-Delaware common stock in lieu of salary
compensation earned by them between October 1997 and January 1998 in the amount
of $11,667.

In March 1998, Robert A. and Dean Rositano were each issued warrants to
purchase 88,395 shares of Nettaxi-Delaware common stock. On August 1, 1998, they
were each issued warrants to purchase 883,952 shares of Nettaxi-Delaware common
stock pursuant to the executive employment agreements. See
"Management--Employment Agreements and Termination of Employment and Change of
Control Arrangements." All the warrants issued to Robert A. and Dean Rositano
were exercised in September 1998. See "Management--Executive Compensation."

During 1998, Robert A. and Dean Rositano transferred 129,435 and 137,012
shares, respectively, of Nettaxi-Delaware common stock by gift to individuals.

All the shares of Nettaxi-Delaware Common Stock held by Robert A. and Dean
Rositano and their donees were converted into shares of Nettaxi common stock in
the reorganization with Swan Valley described below.

SSN PROPERTIES, LLC. In October 1997, Nettaxi-Delaware purchased the
assets of Simply Interactive from SSN Properties LLC pursuant to an asset
purchase agreement. The purchase price for the assets was $2,000,000.
$1,020,000 was paid pursuant to a convertible interest bearing promissory note
and the remainder of the purchase price was paid by the issuance of 2,475,066
shares of Nettaxi-Delaware common stock. In September 1998, SSN Properties
converted its promissory note with accrued interest in exchange for 2,792,763
shares of Nettaxi-Delaware common stock. In September, 1998 Nettaxi-Delaware
also issued 176,790 shares of its Nettaxi-Delaware common stock to SSN
Properties in exchange for the cancellation of a $70,000 accounts payable to SSN
Properties. All the shares of Nettaxi-Delaware common stock held by SSN
Properties were converted into shares of Nettaxi common stock in the
reorganization with Swan Valley described below. In April, 1999 a pro rata
distribution of the shares of common stock held by SSN Properties was made to
all of its members.

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<PAGE>
Robert Rositano, Sr., father of Robert A, and Dean Rositano, is a managing
member of SSN Properties.

NETTAXI-DELAWARE PRIVATE OFFERINGS. From October 1997 to September 1998
Nettaxi-Delaware conducted a private offering of its common stock. Pursuant to
that offering, a total of 506,378 shares of Nettaxi-Delaware common stock were
sold for total cash consideration of $200,500.

From October 1997 to September 1998 Nettaxi-Delaware conducted a private
offering of its Series A Preferred Stock. Pursuant to that offering, a total of
367,215 shares of Nettaxi-Delaware Series A Preferred Stock were sold for
total cash consideration of $109,050. The Series A Preferred Stock was
convertible on a one-for-two basis into Nettaxi-Delaware common stock. In
September, 1998, the outstanding shares of Series A Preferred Stock were
converted into 734,438 shares of Nettaxi-Delaware common stock.

All the shares of Nettaxi-Delaware common stock issued to investors in the
private offerings were converted into shares of Nettaxi common stock in the
reorganization with Swan Valley described below.

REORGANIZATION WITH SWAN VALLEY

In September 1998, Nettaxi-Delaware entered into the reorganization with
Swan Valley with a non-operating public company, Swan Valley Snowmobiles, Inc.,
a Nevada corporation incorporated in October 1995 ("Swan Valley"). From its
incorporation, Swan Valley engaged in the business of snowmobile repair. During
the first half of 1997, Swan Valley determined that this line of business was no
longer feasible and discontinued its operations. Under the Reorganization
Agreement, the Nettaxi-Delaware stockholders received approximately 2.53 shares
of Common Stock of Swan Valley in exchange for each of their shares of
Nettaxi-Delaware common stock, and Nettaxi-Delaware became a wholly-owned
subsidiary of Swan Valley. An aggregate of 12,000,000 shares were issued to
the former Nettaxi-Delaware stockholders in the reorganization with Swan Valley
and the Nettaxi-Delaware stockholders owned approximately 85% of Swan Valley
immediately after the reorganization. As part of the reorganization, all of the
executive officers and directors of Swan Valley resigned and the executive
officers and directors of Nettaxi-Delaware became the executive officers and
directors of Swan Valley which changed its name to Nettaxi, Inc. Immediately
prior to the reorganization, Swan Valley completed a limited public offering of
its common stock which yielded gross proceeds of $1,000,000 that was available
to Nettaxi once the reorganization was completed.

OFFERING OF DEBENTURES AND WARRANTS

On March 31,1999, we entered into a Securities Purchase Agreement with RGC
International Investors pursuant to which RGC International Investors was
issued convertible debentures in the principal amount of $5,000,000 and
received warrants to purchase 150,000 shares of our common stock. The
convertible debentures bear interest at the rate of 5% per annum from the date
of issuance and mature on March 31, 2004. The debentures are convertible into
shares of our common stock and include a purchase option that permits holders to
acquire additional shares of our common stock at the time that the debentures
are converted. The warrants may be exercised at any time during the five-year
period following their issuance at an exercise price of $12.375 per share. See
"Description of Capital Stock--Warrants and Debentures."

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OTHER AGREEMENTS

We have entered into a consulting agreement with Fontenelle LLC, a
financial services provider of which one of our directors, Steven S. Antebi is a
manager. Under the agreement, Fontenelle is to provide services we request in
connection with the financial planning, capital structure, continued development
of our business plan and the evaluation of financing alternatives for us. In
exchange for its services, Fontenelle is to receive option to purchase up to
150,000 shares of our common stock under our 1998 Stock Option Plan. The
underlying shares of common stock are to have registration rights that do not
effect this registration statement. The agreement provides that Fontenelle is an
independent contractor and includes provisions regarding the assignment of
inventions, prohibiting the disclosure of confidential information and the
solicitation of our employees. The term of the agreement is two years.

As described above, in October 1998, each of Robert A. Rositano and Dean
Rositano were granted options to purchase up to 40,000 shares of our common
stock under the 1998 Stock Option Plan and Glenn Goelz was granted options to
purchase up to 250,000 shares of common stock under the 1998 Stock Option Plan.
As described above, we have entered into employment agreements and other
compensation arrangements with our officers.

We believe that all of the transactions set forth above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. We intend that all future transactions, including loans, between us and
our officers, directors, principal stockholders and their affiliates will be
approved by a majority of the board of directors, including a majority of the
independent and disinterested outside directors on the board of directors, and
be on terms no less favorable to us than could be obtained from unaffiliated
third parties.

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SELLING STOCKHOLDERS

This prospectus relates to the offering by the selling stockholders for
resale of shares of our common stock acquired by them upon conversion of
convertible debentures and exercise of warrants which the selling stockholders
received in private placement and other transactions. See "Description of
Capital Stock -- Warrants and Debentures." All of the shares of common stock
offered by this prospectus are being offered by the selling stockholders for
their own accounts.

The following table sets forth information with respect to the common stock
beneficially owned by the selling stockholders as of the date of this
prospectus, including shares obtainable under convertible debentures and/or
warrants convertible or exercisable within 60 days of such date. The selling
stockholders provided us the information included in the table below. To our
knowledge, each of the selling stockholders has sole voting and investment power
over the shares of common stock listed in the table below. No Selling
Stockholder, to our knowledge, has had a material relationship with us during
the last three years, other than as an owner of our common stock or other
securities.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF COMMON BENEFICIAL OWNERSHIP OF COMMON
STOCK PRIOR TO THE OFFERING STOCK AFTER THE OFFERING
- -------------------- -------------------------- ---------------------
SELLING NUMBER OF NUMBER OF NUMBER OF PERCENT OF
STOCKHOLDER SHARES SHARES TO BE SHARES CLASS
SOLD UNDER
THIS PROSPECTUS
- -------------------- --------- --------------- --------- ----------
<S> <C> <C> <C> <C>
RGC International 1,991,448 1,991,448 -- --
Investors (1)(2)(3)
- -------------------- --------- --------------- --------- ----------
Wall Street Trading 125,000 125,000 -- --
Group(1)
- -------------------- --------- --------------- --------- ----------
<FN>
(1) The number of shares set forth in the table represents an estimate
of the number of shares of common stock to be offered by the selling
stockholders. We have assumed the sale of all of the common stock offered
under this prospectus will be sold. However, As the selling stockholders can
offer all, some or none of their shares of common stock, no definitive estimate
can be given as to the number of shares that the selling stockholders will hold
after this offering.

(2) The number of shares of common stock beneficially owned by RGC
International Investors consists of an estimated 1,691,448 shares issuable upon
conversion of debentures and exercise of investment options and an estimated
300,000 shares issuable upon exercise of warrants. This estimate is based on
the conversion rate of the convertible debentures in effect on May 4, 1999. See
"Description of Capital Stock--Warrants and Debentures". This number is our
good faith estimate of the maximum number of shares we may issue upon
conversion of debentures and exercise of investment options and warrants.
However, the actual number of shares of common stock issuable upon conversion of
the debentures and exercise of the warrants is indeterminate, is subject to
adjustment and could be materially more than such estimated number depending on

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factors which cannot be predicted by us at this time, including, among other
factors, the future market price of our common stock and the issuance of our
securities at prices below the then-market price of our common stock. The number
of shares to be issued upon conversion of the debentures is based upon a formula
set forth in the debentures based upon the trading price of our common stock,
and is subject to adjustment as set forth in the debentures. The number of
shares to be issued upon exercise of the warrants is based upon an exercise
price of $12.375 per share, subject to adjustment as set forth in the warrants.
The actual number of shares of common stock offered hereby, and included in
the registration statement of which this prospectus is a part, includes such
additional number of shares of common stock as may be issued or issuable upon
conversion of the debentures or exercise of the warrants by reason of any stock
split, stock dividend or similar transaction involving Rule 416 under the
Securities Act. The debentures and warrants contain provisions which limit the
number of shares of common stock into which the debentures are convertible and
the warrants are exercisable. Under these provisions, the number of shares of
common stock into which the debentures are convertible and the warrants are
exercisable on any given date, together with any additional shares of common
stock held by RGC International Investors, will not exceed 4.99% of our then
outstanding common stock.

(3) RGC International Investors is a party to an investment management
agreement with Rose Glen Capital Management, L.P., a limited partnership of
which the general partner is RGC General Partner Corp. Messrs. Wayne Bloch,
Gary Kaminsky and Steven Katznelson own all of the outstanding capital stock of
RGC General Partner Corp. and are parties to a shareholders agreement pursuant
to which they collectively control RGC General Partner Corp. Through RGC
General Partner Corp., these individuals control Rose Glen Capital Management,
L.P. These individuals disclaim beneficial ownership of our common stock owned
by RGC International Investors.
</TABLE>

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<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of our common stock as of June 21, 1999, and as adjusted to reflect
the sale of the shares of common stock offered by This prospectus, by:

- each person, or group of affiliated persons, who we know beneficially
owns 5% or more of our common stock;

- each of our directors and executive officers; and

- all of our directors and executive officers as a group.

The percentages of total shares of common stock set forth below assume that
only the indicated person or group has exercised options and warrants which are
exercisable within 60 days of June 21, 1999 and do not reflect the percentage
of common stock which would be calculated if all other holders of currently
exercisable options or warrants had exercised their securities. See footnote 1
below.

Unless otherwise indicated in the footnotes to the table, (1) the following
individuals have sole vesting and sole investment control with respect to the
shares they beneficially own and (2) unless otherwise indicated, the address of
each beneficial owner listed below is c/o Nettaxi, Inc., 1696 Dell Avenue,
Campbell, California.

<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF
BENEFICIALLY OWNED (1) CLASS
EXECUTIVE OFFICERS AND DIRECTORS:
- --------------------------------------------- ---------------------- -----------
<S> <C> <C>

Robert A. Rositano, Jr. (2) (3) 2,021,287 9.57%
- --------------------------------------------- ---------------------- -----------
Dean Rositano (3) (4) 2,126,260 10.1%
- --------------------------------------------- ---------------------- -----------
Glenn Goelz(5) 20,833 *
- --------------------------------------------- ---------------------- -----------
Melanie McCarthy(6) 4,166 *
- --------------------------------------------- ---------------------- -----------
Brian Stroh(7) 113,784 *
- --------------------------------------------- ---------------------- -----------
Roger Thornton 15,153 *
- --------------------------------------------- ---------------------- -----------
Andrew Garroni 75,000 *
- --------------------------------------------- ---------------------- -----------
Ron R. Goldie 50,000 *
- --------------------------------------------- ---------------------- -----------
Steven S. Antebi 0 *
- --------------------------------------------- ---------------------- -----------
All directors and executive officers as a 4,426,483 20.9%
group (9 Persons)(8)
- --------------------------------------------- ---------------------- -----------
OTHER 5% STOCKHOLDERS:
- --------------------------------------------- ---------------------- -----------
Robert A. Rositano, Sr. (9) 2,882,080 13.7%
- --------------------------------------------- ---------------------- -----------
Janice Rose Rositano-Battistella, 1,839,268 8.7%
Trustee of the Janice Rose Rositano-
Battistella Trust (10)
- --------------------------------------------- ---------------------- -----------
John J. Gallagher (11) 1,080,000 5.1%
- --------------------------------------------- ---------------------- -----------
<FN>

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<PAGE>
* Less than one percent.

(1) Beneficial ownership is determined in accordance with rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock options or warrants
held by that person that are currently exercisable or exercisable within 60 days
of June 21, 1999 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of each other
person.

(2) Robert A. and Dean Rositano are brothers.

(3) Includes 10,000 shares of common stock subject to options that are
currently exercisable. Excludes 30,000 shares of common stock subject to options
that will not be exercisable within 60 days of June 21, 1999.

(4) Includes 10,000 shares of Common Stock subject to options that are
currently exercisable. Excludes 30,000 shares of common stock subject to
options that will not be exercisable within 60 days of June 21, 1999.

(5) Includes 20,833 shares of Common Stock subject to options that will
be exercisable within 60 days of June 21, 1999. Excludes 229,167 shares of common
stock subject to options that will not be exercisable within 60 days of June 21,
1999.

(6) Includes 4,166 shares of common stock subject to options that are
currently exercisable. Excludes 45,834 shares of common stock subject to options
that will not be exercisable within 60 days of June 21, 1999.

(7) Includes 7,500 shares of common stock subject to options that are
currently exercisable. Excludes 22,500 shares of common stock subject to options
that will not be exercisable within 60 days of June 21, 1999.

(8) See footnotes (2), (3), (4), (5) and (6) above.

(9) Shares were received as part of a pro-rata distribution to the members of
SSN Properties, LLC in April 1999. Mr. Rositano is a managing member of SSN
Properties and the father of Robert A. Rositano, Jr. and Dean Rositano. Mr.
Rositano's address is 14836 Three Oaks Court, Saratoga, California 95070.

(10) Shares were received as part of a pro rata distribution to the members of
SSN Properties, LLC in April 1999. Ms. Rositano-Battistella is the mother of
Robert A. Rositano, Jr. and Dean Rositano. Ms. Rositano-Battistella's address is
143 El Altillo Court, Los Gatos, California 95030.

(11) John J. Gallagher's address is 316 W. 20th Street, Manhattan Beach,
California 90266.
</TABLE>

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following description of our securities and various provisions of our
Articles of Incorporation and our Bylaws are summaries. Statements contained in
this prospectus relating to such provisions are not necessarily complete, and
reference is made to the Articles of Incorporation and Bylaws, copies of which
have been filed with the SEC as exhibits to our registration statement of which
this prospectus constitutes a part, and provisions of applicable law. Our
authorized capital stock consists of 50,000,000 shares of common stock, par
value $.001 per share, of which 21,110,000 shares were issued and outstanding
as June 21, 1999, and 1,000,000 shares of Preferred Stock, par value $.001, of
which no shares were issued and outstanding as of June 21, 1999. As of June 21,
1999, we estimated that there were approximately 347 holders of record of our
common stock.

COMMON STOCK

The holders of outstanding shares of common stock are entitled to share
ratably in dividends declared out of assets legally available therefor at such
time and in such amounts as the board of directors may from time to time
lawfully determine. Each holder of common stock is entitled to one vote for each
share held. Cumulative voting in elections of directors and all other matters
brought before stockholders meetings, whether they be annual or special, is not
provided for under the Company's Articles of Incorporation or Bylaws. However,
cumulative voting rights in the election of our directors currently applies
under California law. California Corporations Code Section 2115 requires us to
provide our stockholders cumulative voting rights in the election of directors
because the average of our property factor, payroll factor and sales factor
deemed to be in California during our latest fiscal year was almost 100%, and
over 60% of our outstanding voting securities are held of record by persons
having addresses in California, and our securities do not currently qualify as a
national market security on NASDAQ. California Corporations Code Section 2115 is
discussed in greater detail below. The common stock is not entitled to
conversion or preemptive rights and is not subject to redemption or assessment.
Upon liquidation, dissolution or winding up of Nettaxi, any assets legally
available for distribution to stockholders as such are to be distributed ratably
among the holders of the common stock at that time outstanding. The common
stock presently outstanding is fully paid and nonassessable. As described below,
the board of directors is authorized, without further stockholder approval, to
issue Preferred Stock. Such an issuance could potentially effect the rights and
preferences of holders of common stock. See "Anti-Takeover Effects Of Various
Provisions Of Nevada Law And Nettaxi's Certificate Of Incorporation And
Bylaws". Other than by the issuance of Preferred Stock by the board of
directors, the rights of security holders may not be modified otherwise than by
a vote of a majority or more of the shares outstanding.

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<PAGE>
PREFERRED STOCK

The board of directors is authorized, without further stockholder approval,
to issue from time to time up to an aggregate of 1,000,000 shares of Preferred
Stock. The Preferred Stock may be issued in one or more series and the board of
directors may fix the rights, preferences and designations thereof. No shares
of Preferred Stock are currently outstanding and we have no present plans to
issue any shares of Preferred Stock. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of our outstanding voting stock. See "Anti-Takeover Effects of
Various Provisions of Nevada Law and Nettaxi's Certificate of Incorporation and
Bylaws."

WARRANTS AND DEBENTURES

WALL STREET TRADING GROUP WARRANTS. In March 1999, we issued warrants to
Wall Street Trading Group to purchase up to 125,000 shares of our common stock.
The warrants issued to Wall Street Trading Group may be exercised at any time
during the two-year period following their issuance at an exercise price of
$8.00 per share. The warrants contain provisions for the adjustment of the
exercise price under circumstances set forth therein, including stock dividends,
stock splits, reorganizations, reclassifications, combination and other
dilutive issuances of securities. As described below, we have agreed to
register under the Securities Act the resale of the Common Stock to be issued
upon exercise of the warrants held by Wall Street Trading Group.

RGC INTERNATIONAL INVESTORS DEBENTURES AND WARRANTS. On March 31, 1999,
we entered into a Securities Purchase Agreement with RGC International
Investors under which we agreed to issue convertible debentures in the amount of
$5,000,000 and warrants to purchase 150,000 shares of our common stock. The
debentures bear interest at a rate of 5% per annum commencing on the date of
issuance and mature on March 31, 2004. The debentures are convertible at the
option of the holder into that number of shares of our common stock equal to
the principal amount of the debentures to be converted including all accrued
interested, divided by the conversion price specified in the debentures. The
conversion price is the lesser of a "variable" or "fixed" conversion price. The
variable conversion price is based on the trading price of our common stock over
a fixed period prior to conversion of the debentures, and the fixed conversion
price is $11.88, subject to adjustment as provided under the terms of the
debentures. In addition, at the time that a holder converts all or any
portion of the debentures, such holder has an "investment option" which gives
the holder a right to purchase one additional share of common stock for every
share of common stock issuable as a result of such conversion at an exercise
price equal to the applicable conversion price.

As of May 4, 1999, the $5,000,000 principal amount of the convertible
debentures, plus an amount equal to 5% of such principal amount accrued since
March 31, 1999, could be converted into common stock at a conversion price of
$11.88 per share. Accordingly, as of May 4, 1999, conversion of the entire
principal amount of the convertible debentures and accrued interest thereon,
would yield 422,862 shares of common stock. In addition, as of May 4, 1999, RGC
International Investors's election to fully exercise its option to purchase
additional shares of common stock would yield an additional 422,862 shares of
common stock, resulting in the issuance of an aggregate of 845,724 shares to RGC
International Investors as of that date. Based upon the interest rate and the
conversion price of $11.88, which is subject to downward adjustment as described
above, the number of shares of common stock issuable upon conversion of the
debentures will increase by approximately 58 shares daily until conversion, as
will the number of shares subject to the purchase option.

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<PAGE>
If the debentures have not been converted or redeemed on March 31, 2004,
they will automatically convert into shares of common stock as of that date.
Upon the occurrence of events specified in the Securities Purchase Agreement,
the holders of 50% of the debentures may elect to have us redeem the debentures
at a premium to their purchase price. These events include, but are not limited
to:

- Failure by us to issue shares of our common stock upon conversion of
the debentures;

- Failure by us to transfer to the converting debenture holders stock
certificates for shares of our common stock upon conversion of
the debentures; and

- Failure by us to keep the specified number of shares of our common
stock reserved for issuance upon conversion of the debentures.

The occurrence of other specified events results in a mandatory redemption
by us of the debentures at a premium even without the election of the holders of
the debentures. These mandatory redemption events include, but are not limited
to, our making an assignment for the benefit of our creditors or our bankruptcy,
insolvency, reorganization or liquidation.

The premium payable by us upon any required redemption of the debentures is
based upon a formula set forth in the debentures which takes into account the
trading price of our common stock at the time of the redemption; provided,
however, that in no event would the redemption price be less than 120% of the
sum of the then-outstanding principal amount of the debentures and all accrued
and unpaid interest thereon at the time of the redemption.

The warrants issued to RGC International Investors may be exercised at
any time during the five-year period following their issuance at an exercise
price of $12.375 per share.

The foregoing has been a brief description of some of the terms of the
debentures and warrants. For a more detailed description of the rights of the
holders of the debentures and warrants, prospective investors are directed to
the actual form of debenture that has been filed as an exhibit to the
registration statement of which this prospectus is a part.

As described below, we have agreed to register under the Securities Act,
the resale of the common stock to be issued upon conversion of the debentures or
exercise of the warrants held by RGC International Investors.

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<PAGE>
REGISTRATION RIGHTS

RGC INTERNATIONAL INVESTORS. Under a Registration Rights Agreement with
RGC International Investors entered into on March 31, 1999, we agreed to
register the shares of common stock issuable to RGC International Investors
upon conversion of their debentures and exercise of their warrants. This
prospectus is part of the Registration Statement intended to satisfy this
obligation. The Registration Agreement requires us to file a registration
statement with respect to the shares within a specified period of time and to
have the registration statement be declared effective within a specific period
of time. We must also keep the registration statement effective until all of the
securities offered have been sold. We are responsible for the payment of all
fees and costs associated with the registration of the securities, except that
we are not responsible for fees generated by RGC International's counsel in
excess of $30,000. We are required to indemnify and hold harmless each investor
and its representatives and RGC International Investors and its agents or
representatives against:

- - any untrue statement of a material fact in a registration statement;
- - any untrue statement or alleged untrue statement contained in any
preliminary prospectus if used prior to the effective date of the
registration statement; or
- - any violation or alleged violation of the Securities Act or the Exchange
Act. Specific procedures for carrying out such indemnification are set
forth in the Agreement.

Under the Registration Agreement, RGC International Investors also has the
right to include all or a part of its common stock in a registration filed by
us for purposes of a public offering in the event that we fail to satisfy our
other obligations as to the registration of the common stock acquired by RGC
International Investors.

BAYTREE CAPITAL. On September 3, 1998, Nettaxi-Delaware engaged Baytree
Capital Associates to provide financial and business consulting in connection
with the reorganization with Swan Valley. In consideration of such services,
Baytree was issued 200,000 shares of our common stock in October 1998 and
granted registration rights with respect to such shares. Specifically, we must
register the shares held by Baytree upon receipt of a registration request
after April 1, 1999. Baytree also has piggyback registration rights for their
shares, but has waived the right to have such shares included in this
prospectus.

WALL STREET TRADING GROUP. Wall Street Trading Group is entitled to
registration rights with respect to the 125,000 shares of our common stock that
Wall Street Trading Group may receive upon exercise of warrants previously
issued to Wall Street Trading Group. Subject to various and customary
exceptions, if we propose to register shares of our common stock, Wall Street
Trading Group is entitled to notice of the registration and are entitled to
include their shares of common stock in the registration at our expense. This
prospectus is part of the registration statement intended to satisfy our
obligations to Wall Street Trading Group with respect to the registration.

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PLUS NET. Under the terms of the merger between us and Plus Net,
shareholders of Plus Net were granted piggyback registration rights with respect
to the shares of our common stock which they received in the merger. Generally,
they receive registration rights on a pro rata basis with our other
shareholders. The registration rights do not have any impact or effect with
respect to the registration statement of which this prospectus is a part.

EXECUTIVE OFFICERS. Pursuant to their executive employment agreements,
Robert A. Rositano, Jr. and Dean Rositano were granted registration rights
with respect to the registration of their shares of common stock. Each of them
have waived any registration rights they may have with respect to the
Registration Statement of which this prospectus is a part.

ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF NEVADA LAW AND NETTAXI'S
ARTICLES OF INCORPORATION AND BYLAWS

We are incorporated under the laws of the State of Nevada and are therefore
subject to various provisions of the Nevada corporation laws which may have the
effect of delaying or deterring a change in the control or management of
Nettaxi.

Nevada's "Combination with Interested Stockholders Statute," Nevada
Revised Statutes 78.411-78.444, which applies to Nevada corporations like us
having at least 200 stockholders, prohibits an "interested stockholder" from
entering into a "combination" with the corporation, unless specific
conditions are met. A "combination" includes:

- - any merger with an "interested stockholder," or any other corporation which
is or after the merger would be, an affiliate or associate of the
interested stockholder;

- - any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of assets, in one transaction or a series of transactions, to an
"interested stockholder," having:

- an aggregate market value equal to 5% or more of the aggregate market
value of the corporation's assets,

- an aggregate market value equal to 5% or more of the aggregate market
value of all outstanding shares of the corporation, or

- representing 10% or more of the earning power or net income of the
corporation;

- - any issuance or transfer of shares of the corporation or its subsidiaries,
to the "interested stockholder," having an aggregate market value equal to
5% or more of the aggregate market value of all the outstanding shares of
the corporation,

- - the adoption of any plan or proposal for the liquidation or dissolution of
the corporation proposed by the "interested stockholder,"

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<PAGE>
- - transactions which would have the effect of increasing the proportionate
share of outstanding shares of the corporation owned by the "interested
stockholder," or

- - the receipt of benefits, except proportionately as a stockholder, of any
loans, advances or other financial benefits by an " interested
stockholder."

An "interested stockholder" is a person who

- - directly or indirectly owns 10% or more of the voting power of the
outstanding voting shares of the corporation;

- - an affiliate or associate of the corporation which at any time within three
years before the date in question was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the then outstanding
shares of the corporation.

A corporation to which the statute applies may not engage in a
"combination" within three years after the interested stockholder acquired its
shares, unless the combination or the interested stockholder's acquisition of
shares was approved by the board of directors before the interested stockholder
acquired the shares. If this approval was not obtained, then after the
three-year period expires, the combination may be consummated if all the
requirements in the Articles of Incorporation are met and either:

- - the board of directors of the corporation approves, prior to such person
becoming an "interested stockholder," the combination or the purchase of
shares by the "interested stockholder" or the combination is approved by
the affirmative vote of holders of a majority of voting power not
beneficially owned by the "interested stockholder" at a meeting called no
earlier than three years after the date the "interested stockholder" became
such; or

- - the aggregate amount of cash and the market value of consideration other
than cash to be received by holders of common shares and holders of any
other class or series of shares meets the minimum requirements set forth in
Sections 78.411 through 78.443, inclusive, and prior to the consummation of
the combination, except in limited circumstances, the "interested
stockholder" will not have become the beneficial owner of additional voting
shares of the corporation.

Nevada's "Control Share Acquisition Statute," Nevada Revised Statute
(S)78.378-78.379, prohibits an acquiror, under some circumstances, from
voting shares of a target corporation's stock after crossing threshold ownership
percentages, unless the acquiror obtains the approval of the target
corporation's stockholders. The Control Share Acquisition Statute only applies
to Nevada corporations with at least 200 stockholders, including at least 100
record stockholders who are Nevada residents, and which do business directly or
indirectly in Nevada. While we do not currently exceed these thresholds, we may
well do so in the near future. In addition, although we do not presently "do
business" in Nevada within the meaning of the Control Share Acquisition Statute,

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<PAGE>
we may do so in the future. Therefore, it is likely that the Control Share
Acquisition Statute will apply to us in the future. The statute specifies three
thresholds: at least one-fifth but less than one-third, at least one-third but
less than a majority, and a majority or more, of all the outstanding voting
power. Once an acquiror crosses one of the above thresholds, shares which it
acquired in the transaction taking it over the threshold or within ninety days
become "Control Shares" which are deprived of the right to vote until a majority
of the disinterested stockholders restore that right. A special stockholders'
meeting may be called at the request of the acquiror to consider the voting
rights of the acquiror's shares no more than 50 days, unless the acquiror agrees
to a later date, after the delivery by the acquiror to the corporation of an
information statement which sets forth the range of voting power that the
acquiror has acquired or proposes to acquire and other information concerning
the acquiror and the proposed control share acquisition. If no such request for
a stockholders' meeting is made, consideration of the voting rights of the
acquiror's shares must be taken at the next special or annual stockholders'
meeting. If the stockholders fail to restore voting rights to the acquiror or
if the acquiror fails to timely deliver an information statement to the
corporation, then the corporation may, if so provided in its articles of
incorporation or bylaws, call some of the acquiror's shares for redemption. Our
Articles of Incorporation and Bylaws do not currently permit us to call an
acquiror's shares for redemption under these circumstances. The Control Share
Acquisition Statute also provides that the stockholders who do not vote in favor
of restoring voting rights to the Control Shares may demand payment for the
"fair value" of their shares. This amount is generally equal to the highest
price paid in the transaction subjecting the stockholder to the statute.

Provisions of our Bylaws which are summarized below may affect potential
changes in control of Nettaxi. The board of directors believes that these
provisions are in the best interests of stockholders because they will encourage
a potential acquiror to negotiate with the board of directors, which will be
able to consider the interests of all stockholders in a change in control
situation. However, the cumulative effect of these terms maybe to make it more
difficult to acquire and exercise control of Nettaxi and to make changes in
management more difficult.

The Bylaws provide the number of directors of Nettaxi shall be established
by the board of directors, but shall be no less than one. Between stockholder
meetings, the board of directors may appoint new directors to fill vacancies or
newly created directorships. A director may be removed from office by the
affirmative vote of 66-2/3% of the combined voting power of the then
outstanding shares of stock entitled to vote generally in the election of
directors.

The Bylaws further provide that stockholder action may be taken at a
meeting of stockholders and may be effected by a consent in writing if such
consent is signed by the holders of the majority of outstanding shares, unless
Nevada law requires a greater percentage.

We are not aware of any proposed takeover attempt or any proposed attempt
to acquire a large block of our common stock.

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<PAGE>
The provisions described above may have the effect of delaying or deterring
a change in the control or management of Nettaxi.

APPLICATION OF CALIFORNIA GENERAL CORPORATION LAW

Although we are incorporated in Nevada, our headquarters is in the State of
California. Section 2115 of the California General Corporation Law ("Section
2115") provides that provisions of the California General Corporation Law shall
be applicable to a corporation organized under the laws of another state to
the exclusion of the law of the state in which it is incorporated, if the
corporation meets tests regarding the business done in California and the
number of its California stockholders.

An entity such as us can be subject to Section 2115 if the average of the
property factor, payroll factor and sales factor deemed to be in California
during its latest full income year is more than 50 percent and more than
one-half of its outstanding voting securities are held of record by persons
having addresses in California. Section 2115 does not apply to corporations
with outstanding securities listed on the New York or American Stock Exchange,
or with outstanding securities designated as qualified for trading as a national
market security on NASDAQ, if such corporation has at least 800 beneficial
holders of its equity securities. Since the average of our property factor,
payroll factor and sales factor deemed to be in California during our latest
fiscal year was almost 100%, and over 60% of our outstanding voting securities
are held of record by persons having addresses in California, and our securities
do not currently qualify as a national market security on NASDAQ, we are subject
to Section 2115.

During the period that we are subject to Section 2115, the provisions of
the California General Corporation Law regarding the following matters are made
applicable to the exclusion of the law of the State of Nevada:

- - general provisions and definitions;
- - annual election of directors;
- - removal of directors without cause;
- - removal of directors by court proceedings;
- - filling of director vacancies where less than a majority in office were
elected by the stockholders
- - directors' standard of care;
- - liability of directors for unlawful distributions;
- - indemnification of directors, officers and others;
- - limitations on corporate distributions of cash or property;
- - liability of a stockholder who receives an unlawful distribution;
- - requirements for annual stockholders meetings;
- - stockholders' right to cumulate votes at any election of directors;
- - supermajority vote requirements;
- - limitations on sales of assets;
- - limitations on mergers;
- - reorganizations;

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<PAGE>
- - dissenters' rights in connection with reorganizations
- - required records and papers;
- - actions by the California Attorney General; and
- - rights of inspection.

Pursuant to our agreements with RGC International Investors, we intend to
take appropriate action to qualify our common stock as a national market
security on NASDAQ. If such qualification becomes effective, and the other
conditions for exemption from Section 2115 can be satisfied, we would no
longer be subject to Section 2115. There can be no assurance that all the
conditions from exemption, including successful completion of the
qualification of our common stock as a national market security on NASDAQ, will
be satisfied.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

We believe that provisions of our Articles of Incorporation and Bylaws will
be useful to attract and retain qualified persons as directors and officers.
Our Articles of Incorporation limit the liability of directors and officers to
the fullest extent permitted by Nevada law. This is intended to allow our
directors and officers the benefit of Nevada's corporation law which provides
that directors and officers of Nevada corporations may be relieved of monetary
liabilities for breach of their fiduciary duties as directors, except under
circumstances which involve acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or the payment of unlawful
distributions.

We have obtained officer and director liability insurance with respect to
liabilities arising out of certain matters, including matters arising under the
Securities Act.

There is no pending litigation or proceeding involving a director, officer,
associate or other agent of Nettaxi as to which indemnification is being sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification by any director, officer, associate, or other agent.

TRANSFER AGENT AND REGISTRAR

Interwest Transfer Co., Inc. is the transfer agent and registrar for our
capital stock.

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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

On May 4, 1999, 21,110,000 shares of our common stock were outstanding, and
630,000 shares of common stock were subject to options granted under our 1998
Stock Option Plan. See "Management--Employee Benefit Plans." In addition,
2,116,448 shares of common stock were issuable upon conversion or exercise of
the convertible debentures and warrants held by the selling stockholders, and
50,000 shares of Common Stock were issuable upon exercise of outstanding
warrants held by parties other than the selling stockholders. Of the outstanding
shares, 1,910,000 shares of common stock are immediately eligible for sale in
the public market without restriction or further registration under the
Securities Act, unless purchased by or issued to any "affiliate" of ours, as
that term is defined in Rule 144, described below. All other outstanding shares
of our common stock are "restricted securities" as such term is defined under
Rule 144, in that such shares were issued in private transactions not involving
a public offering and may not be sold in the absence of registration other than
in accordance with Rule 144, 144(k) or 701 promulgated under the Securities Act
or another exemption from registration.

In general, under Rule 144, as currently in effect, a person, including
an affiliate, who has beneficially owned shares for at least one year is
entitled to sell, within any three-month period commencing 90 days after the
date of this prospectus, a number of shares that does not exceed the greater
of 1% of the then outstanding shares of our common stock or the average weekly
trading volume in our common stock during the four calendar weeks preceding the
date on which notice of such sale is filed, subject to various restrictions. In
addition, a person who is not deemed to have been an affiliate of ours at any
time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years would be entitled to sell
those shares under Rule 144(k) without regard to the requirements described
above. To the extent that shares were acquired from an affiliate, such person's
holding period for the purpose of effecting a sale under Rule 144 commences on
the date of transfer from the affiliate. As of May 4, 1999, none of our
outstanding shares were eligible for sale under Rule 144; however, on October 1,
1999, 11,950,337 shares of common stock will become eligible for sale under Rule
144.

The shares of common stock issuable upon conversion or exercise of the
convertible debentures and warrants held by the selling stockholders are being
registered on the registration statement of which this prospectus is a part.
Upon effectiveness of that registration statement, such shares will also be
immediately eligible for sale in the public market subject to restrictions
included in our agreements with the selling stockholders. See "Description of
Capital Stock--Warrants and Debentures." We also intend to file a registration
statement to register for resale the 3,000,000 shares of common stock reserved
for issuance under our 1998 Stock Option Plan. That registration statement will
become effective immediately upon filing. Accordingly, shares covered by that
registration statement would become eligible for sale in the public market
subject to vesting restrictions. As of May 4, 1999, 78,332 of these options
were exercisable. Finally, some of our stockholders have demand registration
rights with to their shares of common stock. See "Description of Capital
Stock--Registration Rights."

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<PAGE>
There has been very limited trading volume in our common stock to date.
Sales of substantial amounts of our common stock under Rule 144, this
prospectus or otherwise could adversely affect the prevailing market price of
our common stock and could impair our ability to raise capital through the
future sale of our securities. See "Risk Factors--Shares eligible for future
sale by our current stockholders may adversely affect our stock price."

97
<PAGE>
PLAN OF DISTRIBUTION

We previously issued our convertible debentures and warrants to purchase
Common Stock to the selling stockholders in a private offering and other
transactions. See "Description of Capital Stock--Warrants and Debentures" for a
description of the terms of such debentures and warrants. This prospectus
relates to the offer and sale of the shares of our common stock to be received
by the Seller Stockholders when and if they convert their debentures and/or
exercise their warrants. We are registering the shares of common stock to
fulfill our obligations under various registration rights agreements with the
selling stockholders. See "Description of Capital Stock--Registration Rights."
The registration of the shares of common stock does not necessarily mean that
any of the shares will be offered or sold by the selling stockholders under this
prospectus. See "selling stockholders."

The selling stockholders and their pledgees, donees, transferees or other
successors in interest may offer their shares at various times in one or more of
the following transactions:

- - a block trade on the O-T-C Market Bulletin Board or other market on which
the common stock may be traded in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction;

- - purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;

- - ordinary brokerage transactions and transactions in which the broker
solicits purchasers;

- - privately negotiated, face-to-face transactions between the selling
stockholders and purchasers without a broker-dealer;

- - through the writing of options or short sales; and

- - any combination of the above.

The sale price to the public may be the market price prevailing at the time
of sale, a price relating to such prevailing market price or such other price as
RGC International Investors determines from time to time.

RGC International Investors may also sell the shares directly to market
makers acting as principals or broker-dealers acting as agents for themselves or
their customers. Brokers acting as agents from RGC International Investors will
receive usual and customary commissions for brokerage transactions, and market
makers and block purchasers purchasing the shares will do so for their own
account and at their own risk. It is possible that RGC International Investors
will attempt to sell shares of common stock in block transactions to market
makers or other purchasers at a price per share which may be below the then
market price. There can be no assurance that all or any of the shares offered
hereby will be issued to or sold by RGC International Investors. RGC
International Investors and any brokers, dealers or agents effecting the sale of
any of the shares may be deemed to be "underwriters" under the Securities Act.
In addition, any securities covered by this prospectus may also be sold under
Rule 144 rather than pursuant to this prospectus. See "Shares Eligible for
Future Sale." The selling stockholders have the sole discretion not to accept
any offer to purchase shares or make any sale of shares if they conclude the
purchase price is inadequate.

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<PAGE>
The selling stockholders, alternatively, may sell the shares offered under
this prospectus through an underwriter. The selling stockholders have not
entered into any agreement with a prospective underwriter. We can not guarantee
that this type of agreement will not be entered into. If the selling
stockholders enter into this type of agreement, we will supplement or revise
this prospectus.

Upon being notified by the selling stockholders that any material
arrangement has been entered into with a broker or dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplemented
prospectus, if required, pursuant to Rule 424(c) under the Securities Act,
disclosing:

- - the name of each broker or dealer;

- - the number of shares involved;

- - the price at which the shares were sold;

- - the commissions paid or discounts or concessions allowed to the
broker(s) or dealer(s), where applicable;

- - that the broker(s) or dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this prospectus,
as supplemented; and

- - other facts material to the transaction.

To comply with the securities laws of various jurisdictions, the shares
offered by this prospectus may need to be offered or sold in such jurisdictions
only through registered or licensed brokers or dealers.

The selling stockholders and any other persons participating in the sale or
distribution of the shares of common stock will be subject to the relevant
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the shares by
the selling stockholders or any other person. The foregoing may affect the
marketability of such shares.

99
<PAGE>
We will indemnify the selling stockholders, or their transferees or
assignees, against some liabilities, including liabilities under the Securities
Act, or to contribute to payments the selling stockholders or their respective
pledgees, donees, transferees or other successors in interest, may be required
to make in respect thereof.

We are bearing all costs relating to the registration of the shares. The
selling stockholders will pay any commissions, discounts or other fees payable
to broker-dealers in connection with any sale of the shares.

The selling stockholders have agreed to suspend sales for limited periods
upon notification that actions, such as amending or supplementing this
prospectus, are required in order to comply with federal or state securities
laws.

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<PAGE>
LEGAL MATTERS

The validity of the issuance of the common stock offered hereby has been
passed upon for us by Silicon Valley Law Group, San Jose, California.

EXPERTS

The financial statements and schedules included in the registration
statement on Form S-1 have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
reports appearing elsewhere herein and in the registration statement, and are
included in reliance upon such reports given upon the authority of said firm as
experts in auditing and accounting.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-l. This
prospectus, which is a part of the registration statement, does not contain all
of the information included in the registration statement. Some information is
omitted and you should refer to the registration statement and its exhibits.
With respect to references made in this prospectus to any contract, agreement or
other document of Nettaxi, such references are not necessarily complete and you
should refer to the exhibits attached to the registration statement for copies
of the actual contract, agreement or other document. You may review a copy of
the registration statement, including exhibits, at the SEC's public reference
room at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or Seven
World Trade Center, 13th Floor, New York, New York 10048 or Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661.

The public may obtain information on the operation of the public reference
room by calling the SEC at 1-800-SEC-0330.

We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information on file at the public reference rooms. You can
also request copies of these documents, for a copying fee, by writing to the
SEC.

Our SEC filings and the registration statement can also be reviewed by
accessing the SEC's Internet site at http://www.sec.gov, which contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC.

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NETTAXI, INC.

CONTENTS

<TABLE>
<CAPTION>
<S> <C>
Unaudited Pro Forma Combined Consolidated Financial Statements F-2
Pro forma combined consolidated balance sheet merger with Plus Net, Inc. F-3 - F-4
Pro forma combined consolidated statement of operations merger with Plus Net, Inc. F-5
Pro forma combined consolidated statement of operations merger with Plus Net, Inc. F-6

NETTAXI, INC.
Report of Independent Certified Pubic Accountants F-7
Consolidated balance sheets F-8 - F-9
Consolidated statements of operations F-10
Consolidated statements of shareholders' equity F-11
Consolidated statements of cash flows F-12
Notes to consolidated financial statements F-13-F-31

PLUS NET, INC.
Report of Independent Certified Pubic Accountants F-32
Balance Sheets F-33
Statements of operations F-34
Statements of shareholders' (deficiency) equity F-35
Statements of cash flows F-36
Notes to financial statements F-37-F-39
</TABLE>

F-1
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma combined consolidated financial information reflects the
proposed acquisition of all of the outstanding stock of Plus Net, Inc.

The accompanying unaudited pro forma combined consolidated balance sheet
presents the financial position of Nettaxi, Inc. as if the proposed merger
(treated as pooling of interests) had occurred on March 31, 1999. The unaudited
pro forma combined consolidated statements of operations for the year ended
December 31, 1998 and the three months ended March 31, 1999 give effect to the
proposed merger as if it had occurred at the beginning of the earliest period
presented.

In the proposed merger, Nettaxi will acquire all the outstanding equity
securities of Plus Net in exchange for 7,000,000 shares of Nettaxi common stock.
All shares will be issued to Plus Net stockholders of record.

The unaudited pro forma combined consolidated financial statements have been
prepared from, and should be read in conjunction with, the historical financial
statements and notes thereto of Nettaxi and Plus Net, appearing elsewhere in
this Joint Proxy Statement/Prospectus. These statements are not necessarily
indicative of future operations or the actual results that would have occurred
had the transactions been consummated at the beginning of the periods indicated.

F-2
<PAGE>
NETTAXI, INC.

PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
MERGER WITH PLUS NET, INC.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Nettaxi, Inc.
Combined
Nettaxi, Inc. Plus Net, Inc. Pro Forma Consolidated
3/31/99 3/31/99 Adjustments Pro Forma
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 77,500 $ 1,437,600 $ - $ 1,515,100
Accounts receivable, less allowance for doubtful 285,600 - - 285,600
accounts
Prepaid expenses and other assets 67,500 - - 67,500
--------------- ---------------- ------------- ---------------
TOTAL CURRENT ASSETS 430,600 1,437,600 - 1,868,200
--------------- ---------------- ------------- ---------------
PROPERTY AND EQUIPMENT, net 399,000 600 - 399,600
PURCHASED TECHNOLOGY, net 623,500 - - 623,500
OTHER INTANGIBLES, net 107,500 - - 107,500
DEPOSITS 23,600 - - 23,600
--------------- ---------------- ------------- ---------------
$ 1,584,200 $ 1,438,200 $ - $ 3,022,400
=============== ================ ============= ===============
</TABLE>

F-3
<PAGE>
NETTAXI, INC.

PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
MERGER WITH PLUS NET, INC.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Nettaxi, Inc.
Combined
Nettaxi, Inc. Plus Net, Inc. Pro Forma Consolidated
3/31/99 3/31/99 Adjustments Pro Forma
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 610,300 $ 1,138,800 $ - $ 1,749,100
Accrued expenses 90,600 - - 90,600
Deferred revenue 42,000 - - 42,000
Income tax payable - 100,000 - 100,000
Current portion of capital lease 7,300 - - 7,300
Notes payable to shareholder 200,000 - - 200,000
- --------------------------------------------- --------------- ---------------- ------------- ---------------
TOTAL CURRENT LIABILITIES 950,200 1,238,800 - 2,189,000
- --------------------------------------------- --------------- ---------------- ------------- ---------------

LONG-TERM LIABILITIES:
Capital lease, net of current portion 3,600 - - 3,600
- --------------------------------------------- --------------- ---------------- ------------- ---------------
TOTAL LIABILITIES 953,800 1,238,800 - 2,192,600
- --------------------------------------------- --------------- ---------------- ------------- ---------------

SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value; 1,000,000 - - - -
shares authorized; no shares outstanding
Common stock subscribed (95,000) - - (95,000)
Common stock, $0.001 par value; 50,000,000 10,800 7,000 - 17,800
shares authorized, 14,110,000 and 21,110,000
shares issued and outstanding, historical and
pro forma, respectivley
Additional paid-in capital 4,872,100 - - 4,872,100
Accumulated deficit (4,157,500) 192,400 - (3,965,100)
- --------------------------------------------- --------------- ---------------- ------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 630,400 199,400 - 829,800
- --------------------------------------------- --------------- ---------------- ------------- ---------------
$ 1,584,200 $ 1,438,200 $ - $ 3,022,400
=============== ================ ============= ===============
</TABLE>

F-4
<PAGE>
NETTAXI, INC.

PRO FORMA COMBINED CONSOLIDATED STATEMENT
OF OPERATIONS MERGER WITH PLUS NET, INC.

<TABLE>
<CAPTION>
Plus Net
Nettaxi, Inc. For the period Nettaxi, Inc.
For the year 10/28/98 (date of Combined
ended Incorporation) to Pro Forma Consolidated
12/31/98 12/31/98 Adjustments Pro Forma
- ------------------------------------------ --------------- ------------------- ------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES $ 258,000 $ - $ - $ 258,000
COST OF REVENUES 239,800 - - 239,800
- ------------------------------------------ --------------- ------------------- ------------- ---------------

GROSS PROFIT 18,200 - - 18,200
OPERATING EXPENSES:
Sales and marketing 745,600 - - 745,600
Research and development 634,700 - - 634,700
General and administrative 1,053,200 200 - 1,053,400
Asset impairment 667,000 - - 667,000
- ------------------------------------------ --------------- ------------------- ------------- ---------------
TOTAL OPERATING EXPENSES 3,100,500 200 - 3,100,700
- ------------------------------------------ --------------- ------------------- ------------- ---------------

LOSS FROM OPERATIONS (3,082,300) (200) - (3,082,500)

OTHER INCOME (EXPENSE):
Interest income 9,800 - - 9,800
Interest expense (68,800) - - (68,800)
Other income 28,500 - - 28,500
- ------------------------------------------ --------------- ------------------- ------------- ---------------

LOSS BEFORE INCOME TAXES (3,112,800) (200) - (3,113,000)

INCOME TAXES (800) - - (800)
- ------------------------------------------ --------------- ------------------- ------------- ---------------

NET LOSS $ (3,113,600) $ (200) $ - $ (3,113,800)
========================================== =============== =================== ============= ===============

PREFERRED STOCK DIVIDEND (14,300) - - (14,300)
- ------------------------------------------ --------------- ------------------- ------------- ---------------

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $ (3,127,900) $ (200) $ - $ (3,128,100)
========================================== =============== =================== ============= ===============

BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.37) $ (0.20)
========================================== =============== =================== ============= ===============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,499,781 15,499,781
========================================== =============== =================== ============= ===============
</TABLE>

F-5
<PAGE>
NETTAXI, INC.

PRO FORMA COMBINED CONSOLIDATED STATEMENT
OF OPERATIONS MERGER WITH PLUS NET, INC.

<TABLE>
<CAPTION>
Nettaxi, Inc. Plus Net
For the three For the three Nettaxi, Inc.
months months Combined
ended ended Pro Forma Consolidated
3/31/99 3/31/99 Adjustments Pro Forma
- ------------------------------------------ --------------- --------------- ------------- ---------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES $ 280,200 $ 409,100 $ - $ 689,300
COST OF REVENUES 283,100 40,300 - 323,400
- ------------------------------------------ --------------- --------------- ------------- ---------------

GROSS PROFIT (2,900) 368,800 - 365,900

OPERATING EXPENSES:
Sales and marketing 135,700 - - 135,700
Research and development 217,800 - - 217,800
General and administrative 347,400 75,400 - 423,600

- ------------------------------------------ --------------- --------------- ------------- ---------------
TOTAL OPERATING EXPENSES 700,900 75,400 - 777,100
- ------------------------------------------ --------------- --------------- ------------- ---------------

LOSS FROM OPERATIONS (703,800) 293,400 - (410,400)

OTHER INCOME (EXPENSE):
Interest income 2,600 - - 2,600
Interest expense (500) - - (500)
- ------------------------------------------ --------------- --------------- ------------- ---------------

LOSS BEFORE INCOME TAXES (701,700) 293,400 - (408,300)
- ------------------------------------------ --------------- --------------- ------------- ---------------
INCOME TAXES - (100,800) - (100,800)
- ------------------------------------------ --------------- --------------- ------------- ---------------

NET LOSS $ (701,700) $ 192,600 $ - $ (509,100)
========================================== =============== =============== ============= ===============

BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.05) $ (0.02)
========================================== =============== =============== ============= ===============

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING 14,110,000 21,110,000
========================================== =============== =============== ============= ===============
</TABLE>

F-6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To The Board of Directors and Shareholders of
Nettaxi, Inc.

We have audited the accompanying consolidated balance sheets of Nettaxi, Inc. as
of December 31, 1998 and 1997, and the related consolidated statements of
operations, shareholders' equity and cash flows for the year ended December 31,
1998 and for the period from October 23, 1997 (date of incorporation) to
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Nettaxi, Inc. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the year ended December 31, 1998 and for the
period from October 23, 1997 (date of incorporation) to December 31, 1997, in
conformity with generally accepted accounting principles.

BDO Seidman, LLP

San Jose, California
March 16, 1999, except for matters discussed in Note 2 for which the date is
June 5, 1999.

F-7
<PAGE>
NETTAXI, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
---------------------- March 31,
1997 1998 1999
---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 10) $ 49,500 $ 465,800 $ 77,500
Accounts receivable, net of allowance for doubtful accounts 60,100 133,700 285,600
of $0, $31,200 and $28,000, respectively (Note 10)
Prepaid expenses and other assets 2,900 16,100 67,500
---------- ---------- ------------
TOTAL CURRENT ASSETS 112,500 615,600 430,600
---------- ---------- ------------
PROPERTY AND EQUIPMENT, net (Note 3) 142,800 255,100 399,000
PURCHASED TECHNOLOGY, net (Note 4) 1,682,000 667,000 623,500
OTHER INTANGIBLES, net (Note 4) 145,000 115,000 107,500
DEPOSITS - - 23,600
---------- ---------- ------------
$2,082,300 $1,652,700 $ 1,584,200
========== ========== ============
</TABLE>

F-8
<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------------- March 31,
1997 1998 1999
- ---------------------------------------------------------- ----------- ------------ ------------
(Unaudited)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,000 $ 186,900 $ 610,300
Accrued expenses (Note 5) 77,300 74,000 90,600
Deferred revenue - 47,000 42,000
Income taxes payable (Note 9) 600 - -
Current portion of capital lease obligations (Note 7) - 7,300 7,300
Notes payable to shareholder (Note 6) - - 200,000
Current portion of convertible notes payable, 246,500 - -
related party (Note 6)
- ---------------------------------------------------------- ----------- ------------ ------------
TOTAL CURRENT LIABILITIES 335,400 315,200 950,200
- ---------------------------------------------------------- ----------- ------------ ------------
LONG-TERM LIABILITIES:

Capital lease obligations, less current portion (Note 7) - 5,400 3,600
Convertible notes payable, related party (Note 6) 773,500 - -
- ---------------------------------------------------------- ----------- ------------ ------------
TOTAL LONG-TERM LIABILITIES 773,500 5,400 3,600
- ---------------------------------------------------------- ----------- ------------ ------------
TOTAL LIABILITIES 1,108,900 320,600 953,800

COMMITMENTS AND CONTINGENCIES (Notes 7, 13, and 14)
SHAREHOLDERS' EQUITY (Notes 6, 8 and 14)
Preferred stock, $0.001 par value; 1,000,000 shares 100 - -
authorized; 134,000 shares and no shares issued
and outstanding, respectively
Common stock subscribed - (95,000) (95,000)
Common stock, $0.001 par value; 50,000,000 shares 2,600 10,800 10,800
authorized; 5,483,500 and 14,110,000 shares
issued and outstanding, respectively
Additional paid-in capital 1,297,900 4,872,100 4,872,100
Accumulated deficit (327,200) (3,455,800) (4,157,500)
- ---------------------------------------------------------- ----------- ------------ ------------
TOTAL SHAREHOLDERS' EQUITY 973,400 1,332,100 630,400
- ---------------------------------------------------------- ----------- ------------ ------------
$2,082,300 $ 1,652,700 $ 1,584,200
----------- ------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements

F-9
<PAGE>
NETTAXI, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the Year ended December 31, 1998 and for the Period from Three Months Ended March 31,
------------------------- --------------------------
October 23, 1997 (date of incorporation) to December 31, 1997 1997 1998 1998 1999
- -------------------------------------------------------------- ----------- ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES (Notes 10 and 11) $ 144,900 $ 258,000 $ 36,300 $ 280,200
COST OF REVENUES 87,400 239,800 20,600 283,100
- -------------------------------------------------------------- ----------- ------------ ------------ ------------

GROSS PROFIT 57,500 18,200 15,700 (2,900)

OPERATING EXPENSES:
Sales and marketing 3,100 745,600 90,600 135,700
Research and development 36,500 634,700 161,700 217,800
General and administrative 160,000 1,053,200 146,600 347,400
Asset impairment (Note 4) - 667,000 - -
- -------------------------------------------------------------- ----------- ------------ ------------ ------------
TOTAL OPERATING EXPENSES 199,600 3,100,500 398,900 700,900
- -------------------------------------------------------------- ----------- ------------ ------------ ------------

LOSS FROM OPERATIONS (142,100) (3,082,300) (383,200) (703,800)

OTHER INCOME (EXPENSE):
Interest income - 9,800 - 2,600
Interest expense (Note 6) (17,000) (68,800) (25,500) (500)
Other income - 28,500 - -

LOSS BEFORE INCOME TAXES (159,100) (3,112,800) (408,700) (701,700)
- -------------------------------------------------------------- ----------- ------------ ------------ ------------

INCOME TAXES (Note 9) (600) (800) - -
- -------------------------------------------------------------- ----------- ------------ ------------ ------------

NET LOSS $ (159,700) $(3,113,600) $ (408,700) $ (701,700)
============================================================== =========== ============ ============ ============

PREFERRED STOCK DIVIDEND (167,500) (14,300) (14,300) -
- -------------------------------------------------------------- ----------- ------------ ------------ ------------

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS $ (327,200) $(3,127,900) $ (423,000) $ (701,700)
============================================================== =========== ============ ============ ============

BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.06) $ (0.37) $ (0.07) $ (0.05)
============================================================== =========== ============ ============ ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,483,500 8,499,781 6,125,230 14,110,000
============================================================== =========== ============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-10
<PAGE>
NETTAXI, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
Common Additional
Preferred Stock Common Stock Stock Paid-in
Shares Amount Shares Amount
---------------- -------------- ---------- -----------
<S> <C> <C> <C> <C>
BALANCES, October 23, 1997 - $ - 2,576,088 $ 100
Issuance of common stock for services and - - 187,837 -
salaries
Issuance of common stock for property, - - 2,475,066 2,500
equipment and technology (Note 4)
Proceeds from sale of preferred stock 134,000 100 - -
Net loss available to common shareholders - - - -
- ----------------------------------------------------------- ---------------- -------------- ---------- -----------
BALANCES, December 31, 1997 134,000 100 5,238,991 2,600
Net proceeds from sale of preferred stock 11,400 - - -
Net proceeds from sale of common stock - - 1,756,378 1,800
Issuance of common stock for services and - - 328,132 300
salaries
Exchange of convertible notes payable and - - 2,792,763 2,800
accrued interest (Note 6)
Exchange of preferred stock for common stock (145,400) (100) 734,438 -
Compensation expense related to warrants granted - - - -
(Note 8)
Warrants exchanged for common stock - - 2,399,298 2,400
Issuance of common stock to Placement Agent - - 200,000 200
Common stock issued in connection with - - 660,000 700
Reorganization
Net loss available to common shareholders - - - -
- ----------------------------------------------------------- ---------------- -------------- ---------- -----------
BALANCES, December 31, 1998 - - 14,110,000 10,800
Balance of information is unaudited through March 31, 1999
Net loss available to common shareholders - - - -
- ----------------------------------------------------------- ---------------- -------------- ---------- -----------
BALANCES, March 31, 1999 - $ - 14,110,000 $ 10,800
=========================================================== ================ ============== ========== ===========

Accumulated
Subscribed Capital Deficit Total
- ----------------------------------------------------------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCES, October 23, 1997 $ - $ - $ - $ 100
Issuance of common stock for services and - 52,500 - 52,500
salaries
Issuance of common stock for property, - 977,500 - 980,000
equipment and technology (Note 4)
Proceeds from sale of preferred stock - 267,900 - 268,000
Net loss available to common shareholders - - (327,200) (327,200)
- ----------------------------------------------------------- ------------- ---------- ------------ ------------
BALANCES, December 31, 1997 - 1,297,900 (327,200) 973,400
Net proceeds from sale of preferred stock - 22,900 - 22,900
Net proceeds from sale of common stock - 1,198,300 - 1,200,100
Issuance of common stock for services and - 142,500 - 142,800
salaries
Exchange of convertible notes payable and - 1,103,000 - 1,105,800
accrued interest (Note 6)
Exchange of preferred stock for common stock - 100 - -
Compensation expense related to warrants granted - 855,000 - 855,000
(Note 8)
Warrants exchanged for common stock (95,000) 92,600 - -
Issuance of common stock to Placement Agent - 159,800 - 160,000
Common stock issued in connection with - - (700) -
Reorganization
Net loss available to common shareholders - - (3,127,900) (3,127,900)
- ----------------------------------------------------------- ------------- ---------- ------------ ------------
BALANCES, December 31, 1998 (95,000) 4,872,100 (3,455,800) 1,332,100
Balance of information is unaudited through March 31, 1999
Net loss available to common shareholders - - (701,700) (701,700)
- ----------------------------------------------------------- ------------- ---------- ------------ ------------
BALANCES, March 31, 1999 $ (95,000) $4,872,100 $(4,157,500) $ 630,400
=========================================================== ============= ========== ============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-11
<PAGE>
NETTAXI, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 12)

<TABLE>
<CAPTION>
For the Year ended December 31, 1998 and for the Period from Three Months Ended March 31,
--------------------------
October 23, 1997 (date of incorporation) to December 31, 1997 1997 1998 1998 1999
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(159,700) $(3,113,600) $ (408,700) $ (701,700)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Gain on disposal of equipment - (28,500) - -
Depreciation and amortization 70,200 433,500 104,900 75,700
Allowance for doubtful accounts - 31,200 - (3,200)
Issuance of common stock for interest on convertible notes - 68,800 - -
Issuance of common stock for services and salaries 52,500 302,800 5,800 -
Asset impairment (Note 4) - 667,000 - -
Compensation expense related to options granted - 855,000 - -
Changes in operating assets and liabilities:
Accounts receivable (60,000) (104,800) 60,000 (148,700)
Prepaid expenses and other assets (2,900) (13,200) 1,800 (51,400)
Accounts payable 11,000 175,900 600 423,400
Accrued expenses 37,300 13,700 31,900 16,600
Deferred revenue - 47,000 - (5,000)
Income taxes payable 600 (600) (600) -
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (51,000) (665,800) (204,300) (394,300)
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of equipment - 34,600 - -
Deposits - - - (23,600)
Capital expenditures - (159,200) (500) (168,600)
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES - (124,600) (500) (192,200)
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on obligations under capital lease - (2,000) - (1,800)
Notes payable to shareholder - - - 200,000
Net proceeds from issuance of preferred stock 100,500 8,600 8,600 -
Net proceeds from issuance of common stock - 1,200,100 147,500 -
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 100,500 1,206,700 156,100 198,200
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 49,500 416,300 (48,700) (388,300)
CASH AND CASH EQUIVALENTS, beginning of period - 49,500 49,500 465,800
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 49,500 $ 465,800 $ 800 $ 77,500
====================================================================== ========== ============ ============ ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-12
<PAGE>
1. SUMMARY OF ACCOUNTING POLICIES

The Company Nettaxi, Inc. (formerly Swan Valley Snowmobiles, Inc., a
publicly traded corporation-the Company), is a Nevada Corporation,
which was incorporated on October 26, 1995.

On September 29, 1998 the Company completed the acquisition of 100% of
the outstanding common stock of Nettaxi OnLine Communities, Inc., in
exchange for 660,000 shares of the Company's $0.001 par value common
stock and changed its name to Nettaxi, Inc. For accounting purposes,
the acquisition has been treated as the acquisition of the Company by
Nettaxi OnLine Communities, Inc. with Nettaxi OnLine Communities, Inc.
as the acquiror (Reverse Acquisition). Since the Company prior to the
Reverse Acquisition was a public shell corporation with no significant
operations, pro-forma information giving effect to the acquisition is
not presented. All shares and per share data prior to the acquisition
have been restated to reflect the stock issuance and related stock
split (Note 8).

As the former shareholders of Nettaxi OnLine Communities, Inc.
received 85% of the shares in the Company immediately after the
acquisition, the financial statements for periods prior to the
reorganization are those of Nettaxi OnLine Communities, Inc.

Nettaxi OnLine Communities, Inc., a Delaware corporation, was
incorporated on October 23, 1997. Nettaxi OnLine Communities, Inc.
provides a theme-oriented community and launch point for entrepreneurs
and consumers on the Internet.

Use of Estimates

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

F-13
<PAGE>
The accompanying interim consolidated financial statements as of March
31, 1999, and for the three months ended March 31, 1999 and 1998, are
unaudited. The unaudited interim consolidated financial statements
have been prepared on the same basis as the annual consolidated
financial statements and, in the opinion of management, reflect all
adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results
of operations and cash flows as of March 31, 1999 and for the three
months ended March 31, 1999 and 1998. The financial data and other
information disclosed in these notes to consolidated financial
statements related to these periods are unaudited. The results for the
three months ended March 31, 1999 and 1998 are not necessarily
indicative of the results to be expected for the year ending December
31, 1999.

Consolidation

The accompanying consolidated financial statements include the
accounts of Nettaxi, Inc. (formerly Swan Valley Snowmobile, Inc.) and
its wholly-owned subsidiary, Nettaxi OnLine Communities, Inc. All
intercompany accounts and transactions have been eliminated in the
consolidated financial statements.

Cash and Cash Equivalents

The Company considers all highly liquid investments having original
maturities of 90 days or less to be cash equivalents.

Accounts Receivable and Allowances For Doubtful Accounts

The Company grants credit to its customers after undertaking an
investigation of credit risk for all significant amounts. An allowance
for doubtful accounts is provided for estimated credit losses at a
level deemed appropriate to adequately provide for known and inherent
risks related to such amounts. The allowance is based on reviews of
losses, adjustment history, current economic conditions and other
factors that deserve recognition is estimating potential losses. While
management uses the best information available in making its
determination, the ultimate recovery of recorded accounts receivable
is also dependent upon future economic and other conditions that may
be beyond management's control.

F-14
<PAGE>
Property and Equipment

Property and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated economic useful
lives of the assets, as follows:

<TABLE>
<CAPTION>
Estimated useful lives
----------------------
<S> <C>
Furniture and fixtures 7 years
Office equipment 5 years
Computers and equipment 3 years
</TABLE>

Assets held under capital leases are amortized on a straight-line
basis over the shorter of the lease term or the estimated useful lives
of the related assets.

Purchased Technology and Other Intangibles

The Company amortizes, on a straight-line basis, the cost of purchased
technology over the shorter of five (5) years or the useful life of
the related technology, and the other intangibles over a 5 year
period.

Software Development Costs

In accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased, or
otherwise Marketed, software development costs are expensed as
incurred until technological feasibility has been established, at
which time such costs are capitalized until the product is available
for general release to customers. To date, the establishment of
technological feasibility of the Company's products and general
release of such software have substantially coincided. As a result,
software development costs qualifying for capitalization have been
insignificant, and therefore, the Company has not capitalized any
software development costs.

F-15
<PAGE>
Revenue Recognition and Deferred Revenue

The Company's revenues are derived principally from the sale of banner
advertisements and from products from its online malls. Advertising
revenues are recognized in the period in which the advertisement is
delivered, provided that collection of the resulting receivable is
probable. Advertisers are charged on a per impression or delivery
basis up to a maximum as specified in the contract. To date, the
duration of the Company's advertising commitments has not exceeded one
year. When the Company guarantees a minimum number of impressions or
deliveries, revenue is recognized ratably in proportion to the number
of impressions or deliveries recorded to the minimum number of
impressions and deliveries guaranteed. Deferred revenue resulting from
advertising agreements aggregated $47,000 and $0 as of December 31,
1998 and 1997, and is amortized on a straight-line basis over the life
of the advertising agreement. Product revenue is recognized upon
shipment.

Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes, which requires an asset and liability approach. This approach
results in the recognition of deferred tax assets (future tax
benefits) and liabilities for the expected future tax consequences of
temporary differences between the book carrying amounts and the tax
basis of assets and liabilities. The deferred tax assets and
liabilities represent the future tax return consequences of those
differences, which will either be deductible or taxable when the
assets and liabilities are recovered or settled. Future tax benefits
are subject to a valuation allowance when management believes it is
more likely than not that the deferred tax assets will not be
realized.

F-16
<PAGE>
Advertising Costs

The cost of advertising is expensed as incurred. Advertising costs for
the year ended December 31, 1998 and for the period ended December 31,
1997 were approximately $3,100 and $300, respectively, and for the
three months period ended March 31, 1999 $10,000.

Long-Lived Assets

The Company periodically reviews its long-lived assets for impairment.
When events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable, the Company writes the
asset down to its fair value.

Fair Values of Financial Instruments

The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:

Cash and cash equivalents:

The carrying amount reported in the consolidated balance sheets
for cash and cash equivalents approximate fair value for cash and
cash equivalents.

Long-term debt:

The fair value of long-term debt is estimated based on current
interest rates available to the Company for debt instruments with
similar terms and remaining maturities.

Related party notes receivable and payable:

The fair value of the notes receivable and notes payable to
shareholders is based on arms-length transactions and bear
interest at rates comparable to similar debt obligations.

At December 31, 1998 and 1997, the fair values of the Company's debt
instruments approximate their historical carrying amounts.

F-17
<PAGE>
Stock-Based Incentive Program

SFAS No. 123, Accounting for Stock-Based Compensation, encourages
entities to recognize compensation costs for stock-based employee
compensation plans using the fair value based method of accounting
defined in SFAS No. 123, but allows for the continued use of the
intrinsic value based method of accounting prescribed by Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees. The Company continues to use the accounting prescribed by
APB Opinion No. 25 and as such is required to disclose pro forma net
income (loss) and earnings (loss) per share as if the fair value based
method of accounting had been applied (Note 8).

Adoption of New Accounting Pronouncements

In February 1998, the Financial Accounting Standards Board (FASB)
issued SFAS No. 132, Employer's Disclosure about Pensions and Other
Postretirement Benefits, which standardizes the disclosure
requirements for pension and other postretirement benefits. The
adoption of SFAS No. 132 had no impact on the Company's current
disclosures.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires companies to
recognize all derivatives contracts as either assets or liabilities in
the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (i) the
changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk or (ii) the earnings effect of the
hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the
period of change. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000.

F-18
<PAGE>
Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new standard
to affect its consolidated financial statements.

In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) No. 98-1, Software for Internal
Use, which provides guidance on accounting for the cost of computer
software developed or obtained for internal use. SOP No. 98-1 is
effective for financial statements for fiscal years beginning after
December 15, 1998. The Company does not expect that the adoption of
SOP No. 98-1 will have a material impact on its consolidated financial
statements.

Earnings Per Common Share

In February 1997, the FASB issued SFAS No. 128, Earnings Per Share,
which was effective December 28, 1997. Conforming to SFAS No. 128, the
Company changed its method of computing earnings per share and
restated all prior periods included in the consolidated financial
statements. Under SFAS No. 128, the dilutive effect of stock options,
warrants and convertible stock is excluded from the calculation of
basic earnings per share.

2. BUSINESS COMBINATION

Effective May 7, 1999, Nettaxi, Inc. completed a merger in a single
transaction with Plus Net, Inc. by exchanging 7 million shares of its
common stock for all of the common stock of Plus Net, Inc. Each share
of Plus Net was exchanged for 1,000 shares of Nettaxi common stock.

The merger constituted a tax-free reorganization and has been
accounted for as a pooling of interests under Accounting Principles
Board Opinion No. 16.

For periods proceeding the merger, there were no intercompany
transactions which require elimination from the combined consolidated
results of operations and there were no adjustments necessary to
conform the accounting practices of the two companies.

F-19
<PAGE>
The following unaudited pro forma consolidated financial information
reflects the results of operations for the year ended December 31,
1998 and the three months ended March 31, 1999, as if the merger had
occurred on October 28, 1998, the date Plus Net was incorporated.
These pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of what operating results
would have been had the merger actually taken place on October 28,
1998, and may not be indicative of future operating results.

<TABLE>
<CAPTION>
Year Ended Three Months
December 31, Period Ended
1998 March 31, 1999
<S> <C> <C>
Net revenues:
Nettaxi $ 258,000 $ 280,200
Plus Net - 409,100
- ----------------------------------------------------- -------------- ---------------
Combined $ 258,000 $ 689,300
===================================================== ============== ===============

Net (Loss) Income Available to Common Shareholders:
Nettaxi $ (3,127,900) $ (701,700)
Plus Net (200) 192,600
- ----------------------------------------------------- -------------- ---------------
Combined $ (3,128,100) $ (509,100)
===================================================== ============== ===============
</TABLE>

3. PROPERTY AND EQUIPMENT

A summary of property and equipment follows:

<TABLE>
<CAPTION>
December 31,
------------------ March 31,
1997 1998 1999
-------- -------- -----------
(Unaudited)
<S> <C> <C> <C>
Furniture and fixtures $ 5,000 $ 5,000 $ 5,000
Office equipment 45,000 59,700 59,700
Computers and equipment 100,000 250,200 418,800
-------- -------- -----------
150,000 314,900 483,500
Less accumulated depreciation 7,200 59,800 84,500
-------- -------- -----------
$142,800 $255,100 $ 399,000
======== ======== ===========
</TABLE>

F-20
<PAGE>
Equipment under capital lease obligations aggregated $14,700 as of
December 31, 1998 and March 31, 1999, with related accumulated
amortization of $500 and $1,200, respectively.

4. PURCHASED TECHNOLOGY AND OTHER INTANGIBLES

In November 1997, the Company issued a convertible secured promissory
note in the amount of $1,020,000 (Note 6) and 2,475,066 shares of
common stock, valued at $980,000, to a related party in exchange for
fixed assets, liabilities and technology. Core to the technology
acquired was a web to database software application and the underlying
technology to the Company's Internet The City products. Based on the
fair market value of the consideration exchanged, as determined by an
independent appraisal service, the aggregate purchase price was
$2,000,000, and was allocated to the following respective assets and
liabilities based on their fair market value at the time of the
transaction:

<TABLE>
<CAPTION>
<S> <C>
Purchased technology, aggregate $1,740,000
- ---------------------------------------- -----------
Other intangibles 150,000
Computers and equipment 100,000
Office equipment 45,000
Furniture and fixtures 5,000
Contracts payable and accrued expenses (40,000)
- ---------------------------------------- -----------
$2,000,000
======================================== ===========
</TABLE>

In 1998, the Company experienced several significant functional
problems with portions of the purchased technology, namely the web to
database software application, due to those components incompatibility
with subsequent releases of upgraded versions of its operating system.
Following attempts to make these components of the acquired technology
compatible, the Company decided, in December 1998, not to spend
additional monies on these components but to replace them. As
approximately 50% of the components of the acquired technology were no
longer technically viable with the upgraded versions of the Company's
operating systems and provided no alternative future use, the Company
wrote off the unamortized portion of the impaired technology.

F-21
<PAGE>
In December 1998, the Company recorded an impairment of purchased
technology with a net book value of $667,000.

A summary of purchased technology and other intangibles follows:

<TABLE>
<CAPTION>
December 31,
------------------- March 31,
1997 1998 1999
- -------------------------------- ---------- -------- -----------
(Unaudited)
<S> <C> <C> <C>
Purchased technology $1,740,000 $870,000 $ 870,000
Less accumulated amortization 58,000 203,000 246,500
- -------------------------------- ---------- -------- -----------
$1,682,000 $667,000 $ 623,500
================================ ========== ======== ===========
</TABLE>

<TABLE>
<CAPTION>
December 31,
------------------- March 31,
1997 1998 1999
- -------------------------------- ---------- -------- -----------
(Unaudited)
<S> <C> <C> <C>
Other intangibles $ 150,000 $150,000 $ 150,000
Less accumulated amortization 5,000 35,000 42,500
- -------------------------------- ---------- -------- -----------
$ 145,000 $115,000 $ 107,500
================================ ========== ======== ===========
</TABLE>

5. ACCRUED EXPENSES

Accrued expenses consisted of the following:

<TABLE>
<CAPTION>
December 31,
----------------- March 31,
1997 1998 1999
- -------------------------------- --------- ------- -----------
(Unaudited)
- ----------------------------------
<S> <C> <C> <C>
Payroll and related expenses $17,500 $10,000 $ 14,300
Professional fees - 52,700 55,000
Accrued interest, related party 17,000 - -
Other 42,800 11,300 21,300
- -------------------------------- --------- ------- -----------
$77,300 $74,000 $ 90,600
================================ ========= ======= ===========
</TABLE>

F-22
<PAGE>
6. NOTES PAYABLE

On November 1, 1997, the Company issued a 10% five year convertible
secured promissory note in the amount of $1,020,000. In September
1998, this note, with accrued interest of $85,800, was converted into
2,792,763 shares of common stock, in accordance with the terms of the
original debt agreement. Interest expense on the note aggregated
$68,800 in 1998 and $17,000 in the period ended December 31, 1997.

In March 1999, a shareholder advanced the Company $200,000 under a
short-term note. The note bears interest at 5% and was repaid in May
1999.

7. LEASE COMMITMENTS

The Company leases its facility under an operating lease, which
expires on October 31, 1999. The facility lease requires the Company
to pay certain maintenance and operating expenses, such as taxes,
insurance, and utilities. Rent expense related to the operating lease
was $35,500 in 1998, and $6,800 for the period ended December 31,
1997. The Company believes that it will be able to renew or find
another lease with similar terms and conditions and not experience any
business interruptions in 1999 as a result of the above.

A summary of the future minimum lease payments under capitalized
leases together with the present value of such minimum lease payments
and future minimum payments required under non-cancelable operating
leases with terms in excess of one year follows:

<TABLE>
<CAPTION>
December 31, Operating Lease Capital Leases
- ------------------------------------------- ---------------- ---------------
<S> <C> <C>
1999 $ 33,800 $ 7,500
2000 - 5,500
- ------------------------------------------- ---------------- ---------------
33,800 13,000
================
Less amounts representing interest (8.00%) 300
---------------
Present value of minimum lease payments 12,700
Less current maturities 7,300
$ 5,400
===============
</TABLE>

F-23
<PAGE>
8 SHAREHOLDERS' EQUITY

PREFERRED STOCK

In October 1997, the Company offered shares of its preferred stock
through a private placement offering. This offering established a
maximum of 150,000 shares of Series A preferred stock at $0.75 per
share, each share convertible into 5.05 shares of the Company's common
stock at any time.

During the year ended December 31, 1998 and the period ended December
31, 1997, the Company issued 11,400 and 134,000 shares of Series A
preferred stock in this offering for net cash proceeds of $8,600 and
$100,500, respectively. As these shares were issued at a discount from
the then fair market value of the stock the Company recorded deemed
preferred stock dividends of $14,300 and $167,500 in the year ended
December 31, 1998 and for the period ended December 31, 1997,
respectively.

In September 1998, all of the shares of Series A preferred stock were
converted into 734,438 shares of the Company's common stock.

COMMON STOCK

In October 1997, the Company offered shares of its common stock
through a private placement offering. This offering established a
maximum of 1,262,650 shares of common stock at $0.40 per share. During
1998, the Company issued 506,378 shares of common stock in this
offering for net proceeds of $200,500.

During the year ended December 31, 1998 and the period ended December
31, 1997, the Company issued 252,045 and 88,395 shares of common stock
with ascribed values of $120,000 and $35,000 as payments for services,
respectively. The shares issued in connection with the services
performed were valued at the then fair market value of the shares
issued based on the October 1997 Private Placement Offering.

F-24
<PAGE>
During the year ended December 31, 1998 and the period ended December
31, 1997, the Company issued 76,087 and 99,442 shares of common stock
with ascribed values of $22,800 and $17,500 to officers and employees
of the Company in lieu of salaries, respectively.

In September 1998, the Company's Board of Directors declared a 2.53 to
1 stock split, in connection with the Acquisition as discussed in Note
1. All references to number of shares of common stock and per share
data in the consolidated financial statements have been adjusted to
reflect the stock split on a retroactive basis.

In September 1998, in connection with the Acquisition, the Company
offered shares of its common stock through a private placement
offering (the Offering). The Offering established a maximum of
1,250,000 shares of common stock at $0.80 per share. The Placement
Agent received 200,000 shares of common stock with a fair market value
of $160,000. The Company issued 1,250,000 shares of common stock in
the Offering for net proceeds of $999,600.

WARRANTS

In 1998, prior to the adoption of the Stock Option Plan as discussed
below, the Company granted warrants to officers and employees of the
Company, to purchase 2,399,298 shares of common stock at $0.04.

In September 1998, these warrants were exchanged for 2,399,298 shares
of common stock via the issuance of promissory notes for $95,000,
concurrent with the reorganization of the Company. The promissory
notes have been accounted for as common stock subscribed and are an
offset to shareholders' equity until such notes are collected.

In accordance with APB Opinion No. 25, Accounting for Stock Issued to
Employees, the Company recorded $855,000 of compensation costs
associated with the above warrants.

F-25
<PAGE>
STOCK OPTION PROGRAM

On September 29, 1998, the Company adopted a Stock Option Plan (the
Plan). The Plan is restricted to employees, officers, and consultants
of the Company. Options granted under the Plan generally vest over
three years and are exercisable over ten years. Non-stautory options
are granted at prices not less than 85% of the estimated fair value of
the stock on the date of grant as determined by the Board of
Directors. Incentive options are granted at prices not less than 100%
of the estimated fair value of the stock on the date of grant.
However, options granted to shareholders who own greater than 10% of
the outstanding stock are established at no less than 110% of the
estimated fair value of the stock on the date of grant.

The Company has reserved three million shares of common stock for
issuance under The Plan. Options granted during the period September
29, 1998 to December 31, 1998 were granted at an exercise price, which
equaled the then fair market value of the Company's common stock based
on the Private Placement Offering in September 1998.

A summary of the status of the Company's Stock Option Plan as of
December 31, 1998, and changes during the year then ended is presented
in the following table:

<TABLE>
<CAPTION>
Options Outstanding
--------------------
Weighted-
Options Average
Available Exercise
for Grant Shares Price
- ------------------------------------ ---------- -------- ----------
<S> <C> <C> <C>
Balances, September 29, 1998 - - $ -
Shares reserved 3,000,000 - -
Granted (280,000) 280,000 0.82
- ------------------------------------ ---------- -------- ----------
Balances, December 31, 1998 2,720,000 280,000 $ 0.82
==================================== ========== ======== ==========
Exercisable at year-end 23,333 $ 0.82
==================================== ========== ======== ==========
Weighted-average fair value of
options granted during the period: $ 0.82
==========
</TABLE>

The following table summarizes information about stock options outstanding
as of December 31, 1998:

F-26
<PAGE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------------------- ---------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Exercise Number Contractual Exercise Price Number Exercise Price
Price Outstanding Life (Years) per Share Exercisable per Share
----------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
0.80 - $1.00 280,000 9.75 $ 0.82 23,333 $ 0.82
----------- ----------------- --------------- ----------- ---------------
</TABLE>

In the first quarter of 1999, the Company granted an additional
100,000 stock options at the then fair market value of the Company's
common stock.

SFAS No. 123, Accounting for Stock-Based Compensation, requires the
Company to provide pro forma information regarding net (loss) income
and (loss) earnings per share as if compensation cost for the
Company's stock option plan had been determined in accordance with the
fair value based method prescribed in SFAS No.123. The Company
estimates the fair value of stock options at the grant date by using
the Black-Scholes option pricing-model with the following weighted
average assumptions used for grants in 1998: dividend yield of 0;
expected volatility of 180%; risk-free interest rate of 5.7%; and
expected lives of three years for all plan options.

Under the accounting provisions of SFAS No. 123, the Company's pro
forma net loss and basic loss per common share would have been
$(3,183,000) and $(0.37), respectively at December 31, 1998, having
used the fair recorded intrinsic value of stock options, as determined
by using the Black-Scholes pricing-model.

9. INCOME TAXES

The provision for income taxes for the year ended December 31, 1998
and the period ended December 31, 1997 consisted of minimum state
taxes.

F-27
<PAGE>
The following summarizes the differences between income tax expense
and the amount computed applying the Federal income tax rate of 34%
for the year ended December 31, 1998 and for the period ended December
31, 1997:

<TABLE>
<CAPTION>
1997 1998
- -------------------------------------------- --------- ------------
<S> <C> <C>
Federal income tax benefit at statutory rate $(54,100) $(1,058,400)
State income tax benefit (9,800) (180,800)
Tax benefit not currently recognizable 64,500 835,400
Other - 404,600
- -------------------------------------------- --------- ------------
Provision for income taxes $ 600 $ 800
============================================ ========= ============
</TABLE>

Deferred income taxes and benefits result from temporary timing
differences in the recognition of certain expenses and income items
for tax and financial reporting purposes, as follows:

<TABLE>
<CAPTION>
December 31, 1997 1998
- --------------------------------- --------- ----------
<S> <C> <C>
Net operating loss carryforward $ 67,400 $ 473,900
Depreciation and amortization (10,100) (90,300)
Accrued compensation and benefits - 4,000
Reserves not currently deductible 200 316,200
- --------------------------------- --------- ----------
Total deferred tax asset 57,500 884,400
Valuation allowance (57,500) (884,400)
- --------------------------------- --------- ----------
Net deferred tax asset $ - $ -
================================= ========= ==========
</TABLE>

The Company has net operating loss carryforwards available to reduce
future taxable income, if any, of approximately $1,227,000 for Federal
income tax purposes. The benefits from these carryforwards expire
through 2018. As of December 31, 1998, management believes it cannot
be determined that it is more likely than not that these carryforwards
and its other deferred tax assets will be realized, and accordingly,
fully reserved for these deferred tax assets.

F-28
<PAGE>
Pursuant to the "change in ownership" provisions of the Tax Reform Act
of 1986, utilization of the Company's net operating loss and research
and development tax credit carryforwards may be limited, if a
cumulative change of ownership of more than 50% occurs within any
three-year period. The Company has not determined if an ownership
change has occurred.

10. CONCENTRATION OF CREDIT RISK

Financial instruments, which potentially subject the Company to
concentration of credit risk, consist principally of cash and cash
equivalents and trade receivables. The Company places its cash and
cash equivalents with high quality financial institutions and, by
policy, limits the amounts of credit exposure to any one financial
institution.

The Company's accounts receivable are derived from many customers in
various industries. The Company believes any risk of accounting loss
is significantly reduced due to the diversity of its end-customers and
geographic sales areas. The Company performs credit evaluation of its
customers' financial condition whenever necessary, and generally does
not require cash collateral or other security to support customer
receivables.

11. MAJOR CUSTOMERS

For the year ended December 31, 1998, four customers accounted for
approximately 28%, 21%, 13% and 12% of revenues, respectively with
related accounts receivable as of December 31, 1998 of $52,100,
$38,100, $0 and $23,800, respectively.

For the period ended December 31, 1997, one customer accounted for
approximately 84% of revenues, with related accounts receivable at
December 31, 1997 of $59,100.

F-29
<PAGE>
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

The following is supplemental disclosure for the statements of cash
flows.

NETTAXI, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
December 31, March 31,
----------------------
Periods Ended 1997 1998 1999
- -------------------------------- ---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
Cash Paid:
- --------------------------------
Income taxes $ - $ 1,400 $ -
Interest $ - $ 100 $ -

Noncash Investing and Financing
- --------------------------------
Activities:
- --------------------------------
Note payable and common stock
issued for purchased
technology and other assets $2,000,000 $ - $ -
Purchase of equipment under
capital lease $ - $ 14,700 $ -
Issuance of common stock for
convertible notes payable plus
accrued interest $ - $1,020,000 $ -
Conversion of preferred stock to
common stock $ - $ 109,100 $ -
Promissory notes received for
common stock subscribed $ - $ 95,000 $ -
================================ ========== ========== ============
</TABLE>

13. CONTINGENCIES

The Company is involved in litigation arising in the ordinary course
of business. In the opinion of management, after consulting with legal
counsel, these matters are without merit and will be resolved without
material adverse effect on the Company's financial position, results
of operations or cash flows.

F-30
<PAGE>
14. SUBSEQUENT EVENTS

On March 31, 1999, the Company entered into a $5,000,000 Convertible
Debt Financing Agreement (the Agreement) for which proceeds was
received in April 1999. The convertible debenture bears interest at 5%
and matures on March 31, 2004. The debentures are convertible at the
option of the holder into that number of shares of common stock equal
to the principal amount of the debentures to be converted including
all accrued interest, divided by the conversion price specified in the
debentures. The conversion price is the lesser of a variable or fixed
conversion price. The variable conversion price is based on the
trading price of the Company's common stock over a fixed period to
conversion of the debentures, and the fixed conversion price is
$11.88. The fixed conversion price represents 120% of the average of
the three lowest trades ten days prior to the effective date of the
Agreement. In conjunction with the Agreement, the Company issued
warrants, which vest immediately, to purchase 150,000 shares of common
stock at $12.375. Utilizing the Black-Scholes model the Company will
record an additional $130,500 of interest expense over the life of the
debt to the date of convertibility.

Subsequent to March 31, 1999, the Company granted 635,000 options at
an exercise price that equaled the then fair market value of the
Company's common stock.

F-31
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Stockholders and Board of Directors
Plus Net, Inc.

We have audited the accompanying balance sheet of Plus Net, Inc. as of December
31, 1998, and the related statements of operations, shareholders' deficiency,
and cash flows for the period October 28, 1998 (date of incorporation) to
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Plus Net, Inc. as of December
31, 1998, and the results of its operations and its cash flows for the period
October 28, 1998 (date of incorporation) to December 31, 1998, in conformity
with generally accepted accounting principles.

/s/ BDO Seidman, LLP

San Jose, California
June 5, 1999

F-32
<PAGE>
PLUS NET, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
- ----------------------------------------------------------- -------------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 1,437,600
- ----------------------------------------------------------- -------------- -----------
TOTAL CURRENT ASSETS - 1,437,600
- ----------------------------------------------------------- -------------- -----------
PROPERTY AND EQUIPMENT, net (Note 2) 700 600
- ----------------------------------------------------------- -------------- -----------
$ 700 $ 1,438,200
=========================================================== ============== ===========

LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) EQUITY

CURRENT LIABILITIES:
Accounts payable $ - $ 1,138,800
Note payable, related party 900 -
Income tax payable - 100,000
- ----------------------------------------------------------- -------------- -----------

TOTAL CURRENT LIABILITIES 900 1,238,800
- ----------------------------------------------------------- -------------- -----------

SHAREHOLDERS' (DEFICIENCY) EQUITY:
Common stock, $1.00 par value; 10,000 shares authorized; 7,000 7,000
7,000 issued and outstanding
Notes receivable (7,000) -
Retained earnings (200) 192,400
- ----------------------------------------------------------- -------------- -----------
TOTAL SHAREHOLDERS' (DEFICIENCY) EQUITY (200) 199,400
- ----------------------------------------------------------- -------------- -----------
$ 700 $ 1,438,200
=========================================================== ============== ===========
</TABLE>

See accompanying notes to financial statements

F-33
<PAGE>
PLUS NET, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the Period from October 28, 1998 (date of incorporation) to
December 31, 1998 and for the three months ended March 31, 1999 1998 1999
- --------------------------------------------------------------- ------ ------------
(Unaudited)
<S> <C> <C>
REVENUES $ - $ 409,100
COST OF REVENUES - 40,300
- --------------------------------------------------------------- ------ ------------
GROSS PROFIT - 368,800
- --------------------------------------------------------------- ------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES 200 75,400
- --------------------------------------------------------------- ------ ------------
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES (200) 293,400
- --------------------------------------------------------------- ------ ------------
INCOME TAXES - (100,800)
- --------------------------------------------------------------- ------ ------------
NET (LOSS) INCOME $(200) $ 192,600
=============================================================== ====== ============
</TABLE>

See accompanying notes to financial statements

F-34
<PAGE>
PLUS NET, INC.

STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY

<TABLE>
<CAPTION>
Common Stock Notes Retained
---------------
Shares Amount Receivable Earnings Total
- ----------------------------------- ------ ------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, October 28, 1998 6,000 $ 6,000 $ (6,000) $ - $ -
Common stock issued for notes 1,000 1,000 (1,000) - -
receivable
Net loss - - - (200) (200)
- ----------------------------------- ------ ------- ------------ ---------- ---------
BALANCE, December 31, 1998 7,000 $ 7,000 $ (7,000) $ (200) $ (200)
Balance of information is unaudited
through March 31, 1999:
Notes receivable collected - - 7,000 - 7,000
Net income - - - 192,600 192,600
- ----------------------------------- ------ ------- ------------ ---------- ---------
BALANCE, March 31, 1999 7,000 $ 7,000 $ - $ 192,400 $199,400
=================================== ====== ======= ============ ========== =========
</TABLE>

See accompanying notes to financial statements

F-35
<PAGE>
PLUS NET, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the Period from October 28, 1998 (date of incorporation) to
December 31, 1998 and for the three months ended March 31, 1999 1998 1999
- ------------------------------------------------------------------------ ------ ------------
(Unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(200) $ 192,600
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization 200 100
Changes in current operating assets and liabilities:
Accounts payable - 1,138,800
Note payable 900 (900)
Income tax payable - 100,000
- ------------------------------------------------------------------------ ------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 900 1,430,600
- ------------------------------------------------------------------------ ------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (900) -
- ------------------------------------------------------------------------ ------ ------------
NET CASH USED IN INVESTING ACTIVITIES (900) -
- ------------------------------------------------------------------------ ------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock - 7,000
- ------------------------------------------------------------------------ ------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 7,000
- ------------------------------------------------------------------------ ------ ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ - $ 1,437,600

CASH AND CASH EQUIVALENTS, beginning of period - -

CASH AND CASH EQUIVALENTS, end of period $ - $ 1,437,600
======================================================================== ====== ============
</TABLE>

See accompanying notes to financial statements

F-36
<PAGE>
1. SUMMARY OF ACCOUNTING POLICIES

The Company Plus Net, Inc. (the Company) was incorporated in 1998 to
take advantage of the many opportunities on the Internet. The Company
began its operations in January 1999 and is developing and licensing a
wide range of tools to generate revenue opportunities that are
showcased in Traffico.com. This portal site includes a powerful search
engine and Internet guide, and a free web-based e-mail service. In
addition, the Company has developed a robust engine to process on-line
credit card transaction, along with contracts for advertising
placement and colocation services. The Company is dedicated to
providing web visitors with the Internet's most useful and powerful
tools to enhance the Web experience.

Use of Estimates

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

Cash and Cash Equivalents

The Company considers all highly liquid investments having original
maturities of 90 days or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost. Depreciation on equipment
is calculated on a straight-line basis over the estimated useful lives
of the assets, generally five years.

Long-Lived Assets

F-37
<PAGE>
Revenue Recognition

Revenue is principally derived from successful credit evaluations and
from the processing of on-line monetary transactions.

Revenue is recorded only upon successful fulfillment of credit checks
and completion of transactions.

Adoption of New Accounting Pronouncements

In February 1998, the FASB issued SFAS No. 132, Employer's Disclosure
about Pensions and Other Postretirement Benefits, which standardizes
the disclosure requirements for pension and other postretirement
benefits. The adoption of SFAS No. 132 did not have a material impact
the Company's current disclosures.

Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new standard
to affect its financial statements.

F-38
<PAGE>
PLUS NET, INC.

NOTES TO FINANCIAL STATEMENTS

2. PROPERTY AND EQUIPMENT

A summary of property and equipment follows:

<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
- ----------------------------- ------------- -----------
(Unaudited)
<S> <C> <C>
Equipment $ 900 $ 900
- ----------------------------- ------------- -----------
900 900

Less accumulated depreciation 200 300
- ----------------------------- ------------- -----------
$ 700 $ 600
============================= ============= ===========
</TABLE>

3. SUBSEQUENT EVENTS

Effective May 7, 1999 the Company completed a merger with Nettaxi,
Inc. by exchanging all of its common stock for 7 million shares of the
common stock of Nettaxi, Inc.

The merger constituted a tax-free reorganization and has been
accounted for as a pooling of interests under Accounting Principles
Board Opinion No. 16.

F-39
<PAGE>
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. Neither we nor the
selling stockholders have authorized anyone else to provide you with different
information. Neither we nor the selling stockholders are asking an offer to
sell, or soliciting an offer to buy, these securities in any jurisdiction where
that would not be permitted or legal. Neither the delivery of this prospectus
nor any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or our affairs have not
changed since the date hereof.

Until __________, 1999, 25 days after the date of this prospectus, all
dealers that buy, sell or trade our common stock, whether or not participating
in this offering, may be required to deliver a prospectus. This requirement is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.

NETTAXI, INC.

2,116,448 Shares of
Common Stock

____________________

PROSPECTUS
____________________

_________, 1999

101
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an itemization of various expenses, all of
which we will pay, in connection with the sale and distribution of the
securities being registered. All of the amounts shown are estimates, except the
SEC registration fee.

SEC Registration Fee $ 10,502.00
Accounting Fees and Expenses $
Legal Fees and Expenses $
NASD (National Market System Filing Fee) $ 90,000.00
Miscellaneous $
Total $

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Nevada Private Corporation Law ("NPCL") provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that such person was an officer or director of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to:

- - any action or suit by or in the right of the corporation against expenses,
including amounts paid in settlement and attorneys' fees, actually and
reasonably incurred, in connection with the defense or settlement believed
to be in, or not opposed to, the best interests of the corporation, except
that indemnification may not be made for any claim, issue or matter as to
which such a person has been adjudged by a court of competent jurisdiction
to be liable to the corporation or for amounts paid in settlement to the
corporation; and

- - any other action or suit or proceeding against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement, actually
and reasonably incurred, if he or she acted in good faith and in a manner
which he or she reasonably believed to be in, or not opposed to, reasonable
cause to believe his or her conduct was unlawful.

To the extent that a director, officer, employee or agent has been "successful
on the merits or otherwise" the corporation must indemnify such person. The
articles of incorporation or bylaws may provide that the expenses of officers
and directors incurred in defending any such action must be paid as incurred and
in advance of the final disposition of such action. The NPCL also permits the
corporation to purchase and maintain insurance on behalf of the corporation's
directors and officers against any liability arising out of their status as
such, whether or not the corporation would have the power to indemnify him
against such liability. These provisions may be sufficiently broad to indemnify
such persons for liabilities arising under the Securities Act.

102
<PAGE>
The Company's Articles of Incorporation include a provision eliminating the
personal liability of directors for breach of fiduciary duty except that such
provision will not eliminate or limit any liability which may not be so
eliminated or limited under applicable law.

The Company intends to enter into indemnification agreements with its
directors and officers substantially in the form attached to this registration
statement as Exhibit 10.35. These agreements provide, in general, that the
Company will indemnify such directors and officers for, and hold them harmless
from and against, any and all amounts paid in settlement or incurred by, or
assessed against, such directors and officers arising out of or in connection
with the service of such directors and officers as a director or officer of the
Company or its Affiliates to the fullest extent permitted by Nevada law.

The Company maintains liability insurance for its directors and officers
covering, subject to exceptions, any actual or alleged negligent act, error,
omission, misstatement, misleading statement, neglect or breach of duty by such
directors or officers, individually or collectively, in the discharge of their
duties in their capacity as directors or officers of the Company.

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<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Set forth in chronological order is information regarding shares of common
stock issued and options and warrants and other convertible securities granted
by the Company during the past three years. Also included is the consideration,
if any, received by the Company for such shares and options and information
relating to the section of the Securities Act of 1933, as amended (the
"Securities Act"), or rule of the Securities and Exchange Commission under which
exemption from registration was claimed.

Transactions described in Items (1) through (10) below refer to the
securities of Nettaxi Online Communities, Inc., a Delaware corporation which
was the predecessor entity of the filer of this registration statement, and
transactions described in Items (11) through (18) below refer to the
securities of Nettaxi, Inc., a Nevada corporation which is the filer of this
Registration Statement.

(1) In October, 1997, the Company issued each of Robert A. Rositano,
Jr. and Dean Rositano 1,288,044 shares for $51.00 in cash. The issuances
were made in reliance on Section 4(2) of the Securities Act and were made
without general solicitation or advertising. The purchasers were sophisticated
investors with access to all relevant information necessary to evaluate the
investments, and who represented to the Company that the shares were being
acquired for investment.

(2) In October, 1997, the Company entered into the Asset Purchase
Agreement with SSN Properties, LLC pursuant to which the Company issued the
aggregate amount of 2,475,066 shares of common stock to SSN Properties, LLC
valued at $0.396 per share. SSN Properties made a pro rata distribution of such
shares to its members in April, 1999. The issuance was made in reliance on
Section 4(2) of the Securities Act and/or Regulation D promulgated under the
Securities Act and was made without general solicitation or advertising. The
purchaser was a sophisticated investor with access to all relevant information
necessary to evaluate the investment, and who represented to the Company that
the shares were being acquired for investment.

(3) In November, 1997 the Company issued 88,395 shares of common stock
to two consultants of the Company in exchange for services performed for the
Company. The issuances were made in reliance on Section 4(2) of the Securities
Act and/or Regulation D promulgated under the Securities Act and were made
without general solicitation or advertising. The purchasers were sophisticated
investors with access to all relevant information necessary to evaluate these
investments, and who represented to the Company that the shares were being
acquired for investment.

(4) In November, 1997, the Company conducted a private offering of its
Common Stock. Pursuant to that offering, a total of 506,378 shares of common
stock were issued in exchange for $200,500. The issuance was made in
reliance on Section 4(2) of the Securities Act and/or Regulation D promulgated
under the Securities Act and were made without general solicitation or
advertising. The purchasers were sophisticated investors with access to all
relevant information necessary to evaluate these investments, and who
represented to the Company that the shares were being acquired for investment.

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(5) In November 1997, the Company conducted a private offering of its
Series A Preferred Stock. Pursuant to that offering, a total of 367,219 shares
of Series A Preferred Stock were issued for total cash consideration of
$109,050. The Series A Preferred Stock was convertible on a one-for-two basis
with Common Stock. In September 1998, the outstanding shares of Series A
Preferred Stock were converted into 734,438 shares of common stock. The
issuances were made in reliance on Section 4(2) of the Securities Act and/or
Regulation D promulgated under the Securities Act and were made without general
solicitation or advertising. The purchasers were sophisticated investors with
access to all relevant information necessary to evaluate these investments, and
who represented to the Company that the shares were being acquired for
investment.

(6) In February, 1998 the Company issued 66,297 shares of common stock
to each of Robert A. Rositano, Jr. and Dean Rositano in lieu of foregone salary
which was earned between October, 1997 and January, 1998. The issuances
were made in reliance on Section 4(2) of the Securities Act and/or Regulation D
promulgated under the Securities Act and were made without general solicitation
or advertising. The purchasers were sophisticated investors with access to all
relevant information necessary to evaluate these investments, and who
represented to the Company that the shares were being acquired for investment.

(7) In September, 1998 the Company issued 2,792,763 shares of common
stock to SSN Properties, LLC pursuant to the Conversion Agreement providing for
an exchange of convertible notes payable and accrued interest. SSN Properties
made a pro rata distribution of such shares to its members in April, 1999.
The issuance was made in reliance on Section 4(2) of the Securities Act and/or
Regulation D promulgated under the Securities Act and were made without general
solicitation or advertising. The purchaser was a sophisticated investor with
access to all relevant information necessary to evaluate these investments, and
who represented to the Company that the shares were being acquired for
investment.

(8) In September, 1998, the Company issued 176,790 shares of common
stock to SSN Properties, LLC in debt conversion. SSN Properties made a pro rata
distribution of such shares to its members in April, 1999. The issuance
was made in reliance on Section 4(2) of the Securities Act and/or Regulation D
promulgated under the Securities Act and were made without general solicitation
or advertising. The purchaser was a sophisticated investor with access to all
relevant information necessary to evaluate these investments, and who
represented to the Company that the shares were being acquired for investment.

(9) In August and September, 1998, the Company issued 118,190 shares of
common stock to key employees and consultants in consideration for services
rendered to the Company valued at $67,000. The issuances were made in reliance
on Section 4(2) of the Securities Act and/or Regulation D promulgated under the
Securities Act and were made without general solicitation or advertising. The
purchasers were sophisticated investors with access to all relevant information
necessary to evaluate these investments, and who represented to the Company that
the shares were being acquired for investment.

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<PAGE>
(10) In September, 1998, the Company issued 2,399,298 shares of common
stock to officers, key employees and consultants who exchanged their
warrants for shares of Common Stock via the issuance of promissory notes.
Warrants to purchase the aggregate amount of 631,394 of the shares of common
stock were issued in March, 1998 to six employees, two directors and two
consultants of the Company. The exercise price for the warrants was $0.0396.
Warrants to purchase the aggregate amount of 1,767,904 shares of common stock
were issued in August, 1998, to Robert A. Rositano, Jr. and Dean Rositano
pursuant to their Employment Agreements. The exercise price for the warrants
was $0.0396. The issuances were made in reliance on Section 4(2) of the
Securities Act and/or Regulation D promulgated under the Securities Act and
were made without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary to
evaluate these investments, and who represented to the Company that the shares
were being acquired for investment.

(11) In September 1998, the Company and its stockholders entered into a
Reorganization Agreement with Swan Valley Snowmobiles, Inc. ("Swan Valley").
Under the terms of the Reorganization Agreement, the stockholders of the Company
received approximately 2.53 shares of common stock of Swan Valley for each share
of the Company they owned prior to the reorganization and the Company became a
wholly-owned subsidiary of Swan Valley. Swan Valley changed its name to
Nettaxi, Inc. and references to "the Company" hereafter refer to Nettaxi,
Inc. the filer of this registration statement. The issuance was made in
reliance on Section 4(2) of the Securities Act and/or Regulation D promulgated
under the Securities Act and were made without general solicitation or
advertising. The purchasers were sophisticated investors with access to all
relevant information necessary to evaluate these investments, and who
represented to the Company that the shares were being acquired for investment.

(12) In September, 1998, pursuant to the terms of the Reorganization
Agreement, the Company conducted a private offering of its common stock.
Pursuant to that offering, a total of 1,250,000 shares of common stock were sold
for total cash consideration of $1,000,000. The issuance was made in
reliance on Section 4(2) of the Securities Act and/or Regulation D promulgated
under the Securities Act and were made without general solicitation or
advertising. The purchasers were sophisticated investors with access to all
relevant information necessary to evaluate these investments, and who
represented to the Company that the shares were being acquired for investment.

(13) In September, 1998, the Company, pursuant to its 1998 Stock Option
Plan, issued options to purchase 280,000 shares of common stock to officers and
employees of the Company, with an exercise price of $0.88 and $0.80 per share,
respectively. These issuances were made in reliance on Section 4(2) of the
Securities Act and/or Rule 701 promulgated under the Securities Act and were
made without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary to
evaluate these investments, and who represented to the Company that the shares
were being acquired for investment.

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<PAGE>
(14) In October, 1998, the Company issued 200,000 shares of common
stock to Baytree Capital Associates pursuant to the terms of a Letter Agreement
with Baytree Capital Associates for financial business consulting services.
The issuance was made in reliance on Section 4(2) of the Securities Act and/or
Regulation D promulgated under the Securities Act and were made without general
solicitation or advertising. The purchasers were sophisticated investors with
access to all relevant information necessary to evaluate these investments, and
who represented to the Company that the shares were being acquired for
investment.

(15) From January, 1999 to June, 1999, the Company pursuant to its
1998 Stock Option Plan, issued options to purchase 585,000 shares of common
stock to its key employees, with exercise prices ranging from $7.437 to $15.00
per share. These issuances were made in reliance on Section 4(2) of the
Securities Act and/or Rule 701 promulgated under the Securities Act and were
made without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary to
evaluate these investments, and who represented to the Company that the shares
were being acquired for investment.

(16) In March, 1999 the Company issued an option to purchase an
aggregate of 125,000 shares of Common Stock to Wall Street Trading Group
pursuant to the Common Stock Purchase Option to Purchase Common Shares of
Nettaxi. The exercise price for the Option is $8.00 per share. The issuance
was made in reliance on Section 4(2) of the Securities Act and/or Regulation D
promulgated under the Securities Act and were made without general solicitation
or advertising. The purchaser was a sophisticated investor with access to all
relevant information necessary to evaluate these investments, and who
represented to the Company that the shares were being acquired for investment.

(17) On March 31, 1999, the Company issued convertible debentures in
the amount of $5,000,000 and warrants to purchase 150,000 shares of common stock
of the Company. The issuance was made in reliance on Section 4(2) of the
Securities Act and/or Regulation D promulgated under the Securities Act and
were made without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary to
evaluate these investments, and who represented to the Company that the shares
were being acquired for investment.

(18) In April, 1999 the Company issued an aggregate amount of 7,000,000
shares of common stock to the former shareholders of Plus Net, Inc. pursuant to
the Merger Agreement and Plan of Reorganization between the Company and Plus
Net. The issuance was made in reliance on Section 4(2) of the Securities Act
and/or Regulation D promulgated under the Securities Act and were made without
general solicitation or advertising. The purchasers were sophisticated
investors with access to all relevant information necessary to evaluate these
investments, and who represented to the Company that the shares were being
acquired for investment.

(19) In May, 1999 the Company issued options to purchase up to 150,000
shares of common stock to Fontenelle LLC. The options vest upon the completion
of financial consulting services to be provided to the Company by Fontenelle
LLC. The exercise price for the options is $14.875 per share. This issuance was
made in reliance on Section 4(2) of the Securities Act and/or Rule 701
promulgated under the Securities Act and was made without general solicitation
or advertising. The purchaser was a sophisticated investor with access to all
relevant information necessary to evaluate these investments, and who
represented to the Company that the shares were being acquired for investment.

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<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS

The following Exhibits are attached hereto and incorporated herein by
reference:

Exhibit
Number Description of Exhibit
- -------- ---------------------------------------------------------------------

**2.1 Agreement and Plan of Reorganization dated September 24, 1998 by and
among Nettaxi Online Communities, Inc., the owners of all the
outstanding shares of common stock of Nettaxi Online Communities, Inc.
and the Company.

**2.2 Merger Agreement and Plan of Reorganization dated April 1, 1999 by and
between Plus Net, Inc. and the Company

**3.1 Articles of Incorporation of the Company

**3.2 Certificate of Amendment to the Articles of Incorporation of the
Company

**3.3 By-Laws of the Company

**4.1 Specimen Common Stock Certificate of the Company

**4.2 See Exhibits 3.1, 3.2 and 3.3 for provisions of the Articles of
Incorporation and By-Laws of the Company defining the rights of
holders of Common Stock of the Company.

**4.3 Convertible Debenture dated March 31, 1999 in favor of RGC
International Investors, LDC

*5.1 Opinion of Silicon Valley Law Group with respect to the legality of
securities being registered

**10.1 Asset Purchase and Sale Agreement dated October 1, 1997 by and between
SSN Properties, LLC and the Company

**10.2 Sub Lease dated September 3, 1997 by and between Execustaff and the
Company

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<PAGE>
+**10.3 Master Software License Bundling and Distribution Agreement dated
November 13, 1997 between Apple Computer, Inc. and the Company

+**10.4 Master Software License, Bundling and Distribution Agreement dated
March 14, 1997 between Fountain Technologies, Inc. and the Company

**10.5 Stock Option Agreement dated March 20, 1998 by and between Robert A.
Rositano, Jr. and the Company

**10.6 Stock Option Agreement dated March 20, 1998 by and between Dean
Rositano and the Company

+**10.7 Web Advertising Services Agreement dated June 3, 1998 between Fly Cast
Communications Corporation and the Company

+**10.8 Sales and Representation Contract dated July 7, 1998 between Michael
Weiner dba Unique Media Services and the Company

**10.9 Employment Agreement dated August 1, 1998 between Dean Rositano and
the Company

**10.10 Employment Agreement dated August 1, 1998 between Robert A. Rositano,
Jr. and the Company

**10.11 Stock Option Agreement dated August 1, 1998 by and between Robert A.
Rositano, Jr. and the Company

**10.12 Stock Option Agreement dated August 1, 1998 by and between Dean
Rositano and the Company

+**10.13 Merchant Services Agreement dated August 3, 1998 by and between
eCharge Corporation and the Company

**10.14 Letter Agreement dated September 3, 1998 between Bay Tree Capital
Associates, LLC and the Company

+**10.15 Conversion Agreement dated September 4, 1998 by and between SSN
Properties, LLC and the Company

+**10.16 Internet Infospace Content (World Wide Web Site) Distribution
Agreement dated October 8, 1998 by and between InfoSpace.com, Inc., a
Delaware corporation and the Company

**10.17 1998 Stock Option Plan of the Company

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<PAGE>
**10.18 Form of Stock Option Agreement for options issued pursuant to 1998
Stock Option Plan of the Company

**10.19 Stock Option Agreement under the 1998 Stock Option Plan by and between
Dean Rositano and the Company

**10.20 Stock Option Agreement under the 1998 Stock Option Plan by and between
Robert A. Rositano, Jr. and the Company

+**10.21 Agreement for Terminal Facility Co-Location Space dated January 18,
1999 between Alchemy Communications, Inc. and the Company

**10.22 Technology Licensing Agreement dated February 3, 1999 by and between
Go Hip, Inc. and the Company

**10.23 First Amendment to Technology Licensing Agreement dated as of April 1,
1999 by and between Go Hip, Inc. and the Company

+**10.24 Letter Agreement dated January 15, 1999 between Babenet, Ltd. and the
Company

+**10.25 [Intentionally Blank/Updated form of agreement filed as Exhibit 10.40]

+**10.26 License and Distribution Agreement dated March 30, 1999 by and between
Netopia, Inc. and the Company

+**10.27 Website Linking and Promotion Agreement dated March 5, 1999 between PI
Graphix, Inc. and the Company

**10.28 Settlement Agreement dated March 2, 1999 by and among Michael Gardner,
Bay Tree Capital Associates, LLP, Wall Street Trading Group, Bruce K.
Dorfman, Robert A. Rositano, Jr., Dean Rositano and the Company

**10.29 Common Stock Purchase Option to Purchase Common Shares of Nettaxi,
Inc. dated March 4, 1999 between Wall Street Trading Group and the
Company

**10.30 Securities Purchase Agreement dated March 31, 1999 by and among RGC
International Investors, LDC and the Company

**10.31 Stock Purchase Warrant dated March 31, 1999 by and among RGC
International Investors, LDC and the Company

**10.32 Registration Rights Agreement dated March 31, 1999 by and among RGC
International Investors, LDC and the Company

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<PAGE>
**10.33 Oppenheimer Funds 401K Plan

**10.34 Standard Office Lease- Gross dated March 1999 by and between South Bay
Construction and Development Co. III & South Bay Construction and
Development Co. VII and the Company

*10.35 Form of Indemnification Agreement between the Company and each of its
Directors and Executive Officers

+**10.36 Development Agreement dated as of December 16, 1998 between the Big
Network Inc. and the Company

10.37 Employment Agreement dated April 1, 1999 by and between Mr. Glenn
Goelz and the Company

10.38 Consulting Agreement dated May 10, 1999 by and between Fontenelle LLC
and the Company

+10.39 Development and License Agreement dated May, 1999 by and between eBay,
Inc. and the Company

+10.40 Internet Services Suite Agreement dated May 5, 1999 by and between
Wired Digital, Inc., Lycos, Inc. and the Company

10.41 Lease Agreement dated as of May 27, 1999 by and between H&L Realty and
Management Company, Agent for owners Flamingo Fountains and the
Registrant

**21.1 Subsidiaries of the Company

**23.1 [Intentional Blank/Updated as Exhibit 23.3]

*23.2 Consent of Silicon Valley Law Group (included in Exhibit 5.1)

23.3 Consent of BDO Seidman

**24.1 Powers of Attorney (included on signature pages to this Registration
Statement)

**27.1 Financial Data Schedule

* To be Filed by amendment
** Previously filed with the SEC
+ Confidential treatment requested

(B) FINANCIAL STATEMENT SCHEDULES

111
<PAGE>
Financial Statement Schedules omitted because the information is included
in the Financial Statements or notes thereto.

112
<PAGE>
ITEM 17. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 14 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

(b) The undersigned registrant hereby undertakes that:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually, or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum Offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
(230.424(b) of this Chapter) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate Offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; and

(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the Registration Statement.

Provided, however, that paragraphs (b)(1)(i) and (b)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities and Exchange of 1934 that are
incorporated by reference in the registration statement.

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<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the Offering.

(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Amendment No. 2 to the registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on June 25, 1999.

NETTAXI, INC.

By: /s/ ROBERT A. ROSITANO, Jr.
- ------------------------------------
Robert A. Rositano, Jr.
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the registration statement has been signed by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------- ----------------------------- -------------
<S> <C> <C>

/s/ ROBERT A. ROSITANO, JR Chief Executive Officer, June 25, 1999
- ---------------------------
Robert A. Rositano, Jr. Secretary and Director
(principal executive officer)

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<PAGE>
* President and Director June 25, 1999
- ---------------------------
Dean Rositano.

* Vice President Chief June 25, 1999
- ---------------------------
Glenn Goelz Financial Officer (principal
accounting officer)

* Director June 25, 1999
- ---------------------------
Roger Thornton

* Director June 25, 1999
- ---------------------------
Andrew Garroni

* Director June 25, 1999
- ---------------------------
Ronald Goldie

* Director June 25, 1999
- ---------------------------
Steven S. Antebi
<FN>
* By executing his name hereto on June 25, 1999, Robert A. Rositano, Jr. is
signing this document on behalf of the persons indicated above pursuant to
powers of attorney duly executed by such persons and filed with the Securities
and Exchange Commission.
</TABLE>

By: /s/ ROBERT A. ROSITANO, Jr.
- ------------------------------------
Robert A. Rositano, Jr.
(Attorney-in-Fact)

POWER OF ATTORNEY

I, the undersigned director of Nettaxi, Inc., hereby constitutes and
appoint Robert A. Rositano, Jr. and Dean Rositano, and each of them singly
(with full power to each of them to act alone), as my true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
in each of them for him and in his name, place and stead, and in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement (or any other Registration Statement for the
same offering that is to be effective upon filing pursuant to Rule 462(b) under
the Securities Act of 1933), and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them or their or
his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

/s/ Steven S. Antebi Director June 25, 1999
- ------------------------
Steven S. Antebi

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<PAGE>
EXHIBIT INDEX

The following Exhibits are attached hereto and incorporated herein by reference:

Exhibit
Number Description of Exhibit
- -------- ----------------------------------------------------------------------

**2.2 Merger Agreement and Plan of Reorganization dated April 1, 1999 by and
between Plus Net, Inc. and the Company

**3.1 Articles of Incorporation of the Company

**3.2 Certificate of Amendment to the Articles of Incorporation of the
Company

**3.3 By-Laws of the Company

**4.1 Specimen Common Stock Certificate of the Company

**4.2 See Exhibits 3.1, 3.2 and 3.3 for provisions of the Articles of
Incorporation and By-Laws of the Company defining the rights of
holders of Common Stock of the Company.

**4.3 Convertible Debenture dated March 31, 1999 in favor of RGC
International Investors, LDC

*5.1 Opinion of Silicon Valley Law Group with respect to the legality of
securities being registered

**10.1 Asset Purchase and Sale Agreement dated October 1, 1997 by and between
SSN Properties, LLC and the Company

**10.2 Sub Lease dated September 3, 1997 by and between Execustaff and the
Company

+**10.3 Master Software License Bundling and Distribution Agreement dated
November 13, 1997 between Apple Computer, Inc. and the Company

+**10.4 Master Software License, Bundling and Distribution Agreement dated
March 14, 1997 between Fountain Technologies, Inc. and the Company

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**10.5 Stock Option Agreement dated March 20, 1998 by and between Robert A.
Rositano, Jr. and the Company