BUSINESS SCOPE

Q-Net Technologies, Inc., ("Q-Net" or the "Company"), is a publicly traded holding company (OTC BB: QNTI / Frankfurt BB: QNO). The company was formed as a vehicle to introduce consumer technology and value added Internet services into the Chinese market.

The company has two operating divisions:

• Liaoning Qinnet E-Book Technologies Co., Ltd. is a joint venture with Liaoning Publishing Group ("LPG"), one of the largest and most respected publishers in China. It is responsible for introducing the "Q-Reader" and additional "electronic publishing" technologies into China. The size of a novel, the Q-Reader is an electronic device that downloads, stores and displays published materials from the Internet as well as from the company's proprietary e-Book content web site. This device also features full Internet, e-mail and personal digital assistant (PDA) capabilities. This division is also responsible for the delivery and sales of the e-content material, or e-Books.
  
  
• Beijing Qinnet Electronic Technologies Co., Ltd. has developed and is introducing Thin Client Server Technology ("TCS"). This technology offers a low cost PC solution in countries that are not proliferated with desktop or laptop computers. The system is proprietary and offers full computer services without the cost of rapidly obsolete hardware, larger servers and attendant support requirements. This division has also developed and introduced Q-Net Web Solutions ("QWS"). This is proprietary modular software designed for small and medium sized companies to create their own web presence at a fraction of the current cost. China has in excess of 7 million small to medium sized companies. QWS has been created as a "One Stop Web Solution Shop" for this market.

LIAONING QINNET - Electronic Publishing.

Liaoning Qinnet E-Book Technologies, Ltd. (LQ) is a joint venture (70 to Q-Net) with Liaoning Publishing Group ("LPG"), one of the largest and most respected publishers in China and the first to be managed independently of central government control. Headquartered in Shenyang, a major industrial city in northeast China, LQ has developed a strong management and production base for the design and manufacture of electronic publishing hardware and content. An independent company assembles the Q-Reader under contract. The product is being distributed nationally through established sales channels including thousands of LPG outlets. The content (e-books) is provided through the company's website. Payment for the content is made through pre-paid debit cards. Additionally, the company designed the Q-Reader to comport with standards established by the central government for a 5-year program introducing students nationally to interactive and electronic educational resources. It is anticipated that Q-Readers will be sold in volume to the Chinese Educational system pursuant to this program.

The Q-Reader is a hand-held device capable of receiving, storing and displaying a large number of electronic files from the Internet. Directed to the educational, professional and research markets, the device features complete Internet, email and Personal Digital Assistant (PDA) capabilities. Each of the downloaded "e-Book" files contains an "electronic book," such as a novel, a textbook, technical treatise, scientific journal, a periodical, dictionary or an entire newspaper. With 32 MB of memory, the Q-Reader can store the equivalent of 20-30 books each from 200-300 pages long, based upon the size of the published material. Each can be erased after use or maintained for long-term reference depending upon the owner's preference and the source of material.

The device features adjustable character sizes, enabling use by those with vision difficulties. A student can download an entire semester of textbooks into the Q-Reader. With diverse applications, a medical researcher can obtain the latest published research report on a particular subject. A lawyer can download legal texts and a physicist can obtain up to date articles from the most recent journals. The Q-Reader also contains a unique student "study outline" feature and will be delivered with a complete Chinese and Chinese-English dictionary, historical and geographic information, entertainment programs, as well as a $300 US credit to download publications from major publishers in China.

The Q-Reader was introduced to the market at the International Publishing Show in Beijing in January of 2002, and also at the International Technology show in Beijing in May with great success. Over 24,000 units were pre-ordered by national distributors within China. Notably these orders were placed during only 3 days at the exhibition. The joint venture partner, LPG, will also distribute the Q-Reader through its large retail outlet base of over 1000 stores throughout China.

The Q-Reader is expected to retail in the $400 US range. Current production run of 100 units for test marketing has been completed on schedule. Second production run of 1,000 units for wholesale delivery scheduled to begin early October 2002. The first commercial production run of 5000 units is committed for the end of this year. First full year of production is expected to be 60,000 units for 2003. The content is available through the Q-Reader website www.cnbook.com.cn. Currently there are over 2000 tittles available with more being added each day, as well as from other sources available on the Internet. This content will be provided by some of the largest publishers in China and from other sources internationally. At present the average cost of e-Book content is approximately $1, a fraction of the cost of printed texts.

The Student Model is a second-generation product in development. It is designed to be less expensive than the Q-Reader and selling for under $200. This model is targeted to the mass market of education, particularly with secondary school, college and graduate school applications. The device will utilize a wireless technology environment specifically created for an interactive classroom and campus environment, allowing the student to access the capacity of a classroom, school or campus wide server for a cost far less than a laptop or a PC. Each unit will accept the attachment of a keyboard, mouse, and network connections. Students may download material from the school server or interface with a server in the classroom and take the book sized unit home for further use. Rough prototype testing is currently under way and it is anticipated that the student model will be available by the middle of 2003.

As noted, in addition to the electronic book capacity, the Q-Reader provides complete Internet access in the smallest device yet developed while providing standard Internet sized text and illustrations. The Q-Reader also features e-mail capabilities, both sending and receiving, and Personal Digital Assistant (PDA) functions including calendars, scheduling, names, address, telephone and other data.

BEIJING QINNET TECHNOLOGIES INC.

Beijing Qinnet Technologies Co., Ltd, based in Beijing, is a wholly owned subsidiary of Q-Net Technologies, Inc., and serves as the corporate headquarters for overall Chinese operations. The operations of Q-Net are being managed in China by talented local management and are consolidated under Q-Net, the holding company based in the United States. BQ has developed two proprietary product lines: Q-Net Web Solutions ("QWS") and Thin Client Server ("TCS") .

A Chinese government survey accepts that Chinese enterprises have embraced and acknowledged the power of the web. However, it outlines two major areas of concern for the small to medium sized business owner:

1) Poor quality and website construction
2) Cost and site management

Q-Net Web Solutions ("QWS") has designed proprietary modular software allowing the estimated 8.6 million companies in this category to construct and maintain a professional web presence without the expense of in-house web staff. This series of modules will serve the needs of small and medium sized businesses that may not have the resources to develop, operate and maintain their own sites. This QWS software is distributed and sold throughout China under the Qinnet brand name. Services offered by this business unit also include the value added Internet services of web hosting, design and construction. It has been created as a "One Stop Web Solution Shop". Currently it is estimated that there is less than 5% of small to medium sized businesses with an online presence.

The anticipated average cost for web presence and maintenance is expected to be approximately $400 US per annum. The software has been completed and is under going test sales in Beijing with revenues from this unit expected to be booked in the fourth quarter of 2002. The company can and will provide a more sophisticated web solution on a consulting basis to those clients that seek a more customized approach to their web presence. The objective is to establish a mass of customer base to secure a significant share in the market. The market presence of QWS will also help management advance the marketing development for the company's other products and services.

Q-Net Thin Client Server ("TCS") technology provides small and medium sized businesses and individual customers with economically priced access to computer capabilities previously available only to large corporations with sophisticated and expensive computer resources. With the installation of a relatively inexpensive terminal consisting of a screen, keyboard and mouse, a customer will be connected to a server through the local area network (LAN) provided by Q-Net. Alternatively, a customer will be connected via broadband through a wide area network (WAN) to a geographically based control center administered and maintained by Q-Net. For a monthly charge, significantly below the cost of maintaining a conventional system, the customer is provided with Internet access, software applications, upgrades and new technology, all without the cost of expensive periodic expenditures to upgrade obsolete equipment or the need to maintain internal Information Technology services. The system removes the need to periodically upgrade or replace old or obsolete terminals and software, the need to employ an in-house computer staff to maintain and monitor the hardware and software systems, the need to periodically upgrade or replace costly servers and the need to download new software and pay attendant licensing fees.

Terminal Development / Server Configurations

Q-Net has developed the TCS System and proprietary Q-Net TCS terminal product based on both the Citrix and Microsoft server platforms. By developing its own advanced terminal, the margins generated by the division are much more competitive than through the resale of conventional terminals manufactured by other vendors. The company anticipates a 50% savings on the terminal cost and this advantage gives Q-Net a significant market opportunity. Terminal production is expected to begin in the fourth quarter of 2002. The company will offer several different terminal models, from basic low cost models to higher end terminals featuring smart card readers and integrated VoIP capabilities for many different user bases and applications. The company will initially offer hardwired capabilities, with wireless systems available in 2003.

Q-Net will utilize its relationships within the telecommunications industry to distribute and install TCS systems in geographic areas that are currently wired with broadband access. Q-Net has established a relationship with China NetCom (CNC), one of China's largest telecom companies. It is anticipated that CNC will provide Q-Net with access to its customer base, with an initial market of 300,000 residential and 2,000 commercial customers. CNC expects the Beijing market to expand rapidly as their corporate plan includes an accelerated focus on Broad Band expansion throughout the country. CNC has expressed a high level of interest in bringing the TCS system to other markets in major cites throughout China. At the same time, to avoid reliance on a single large distribution partner, Q-Net is developing additional relationships with other cable operators and telecom companies with similar customer bases. Terminal boards for the TCS system will range in price from $150 - $200 US. Hardware upgrading is limited to the terminal board and cosmetics e.g. type of monitor, flat, plasma or TV screen and functionality of terminal board, high end or basic. Testing is currently underway and sales are expected to begin in the later part of Q4 2002.

With the competitive pricing structure and substantial range of services offered by the TCS, Q-Net anticipates wide acceptance of the TCS product in the commercial, academic and residential markets. Current projects are proceeding or are anticipated for university, business, residential and hotel installations. Q-Net is installing its pilot system in Beijing to serve as its demonstration facility for customers. Future demonstration sites will be located in other cities as required. While sales will begin initially in Beijing, subsequent growth will open additional markets in other major cites.

The Market

China has been recognized as the most rapidly growing economy in the world. With a growth rate during the last year exceeding 7%, it has far outpaced the 1.5% growth of the US economy as well as those of the other western post-industrial markets. Much of this growth has been generated in the Chinese telecommunications and information sectors, which have also been identified as the fastest growing in the world. Last November, the country was approved for membership in the World Trade Organization (WTO). Already large, state owned industries have been privatized, including the previously government controlled telecommunications monopoly, China Telecom, and the breakup of these entities has had a demonstrated impact on the private sector. Reflecting the increased exposure to western trade and commerce, China's Internet market has seen dramatic growth in recent years. In 1998 there were less than 700,000 Internet users; as of June 30, 2001 there were over 27 million users and the current number has been reported at over 30 million users. This growth trend is expected to continue for several years at a rapid pace and these conditions provide Q-Net with the opportunity to grow in many areas. Through its established operations, Q-Net has gained market recognition and currently has offices in Beijing, where Beijing Qinnet is headquartered and Shenyang, where Liaoning Qinnet E-Book Technologies Ltd is located in conjunction with our JV partner, Liaoning Publishing Group.

As Q-Net's business units mature, additional business opportunities are being identified and developed by the established expertise and resources of the Company. Q-Net will address opportunities that can be consolidated as "add-ons" to the existing operations, which will produce, expected levels of revenues and profitability within reasonable time frames while creating the opportunity to capture large market share. Internet based technology is relatively new in the Chinese market and its commercial development is 2 to 3 years behind the rest of the modern world. Many opportunities for growth and expansion are still available in many niche markets in China, the most populous and rapidly developing consumer and industrial market in the world. Q-Net has assembled an energetic and aggressive management team in China to accomplish this task and is confident that its efforts will build a solid business enterprise designed for long-term growth in this exciting and clearly growing market. Q-Net will utilize its North American management team to guide the Chinese business units and provide the necessary capital to finance and grow as appropriate opportunities are developed.