SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB
(Mark One)

[x]    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
       of 1934

       For the Quarterly period ended September 30, 2000.

[_]    Transition report under Section 13 or 15(d) of the Exchange Act

       For the transition period from ________ to ___________

Commission File Number 0-25238

                             YOUNETWORK CORPORATION
--------------------------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)

                Delaware                                   13-3990305
--------------------------------------------------------------------------------
     (State or Other Jurisdiction of                     (IRS Employer
      incorporation or Organization)                   Identification No.)

                 115 East 23rd Street, New York, New York 10010
--------------------------------------------------------------------------------
                     (Address of Principal Executive Office)

                                 (212) 387-0310
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)


--------------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

      Check  whether the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

Yes [x]  No [ ]

      State the  number of shares  outstanding  of each of  issuer's  classes of
common  equity,  as of the latest  practicable  date:  As of  November  7, 2000,
8,980,  shares of  Registrant's  Class A Common  Stock,  $.0001 par value,  were
outstanding,  1,988  shares of  Registrant's  Class B Common  Stock,  $.0001 par
value,  were outstanding and 223,827,132  shares of Registrant's  Class C Common
Stock, $.0001 par value, were outstanding.

<PAGE>

                     YOUNETWORK CORPORATION 10-QSB FOR THE
                    QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

                                      INDEX
<TABLE>
<CAPTION>

                                                                              Page No.
                                                                              -------
<S>                                                                           <C>
Part I:  Financial Information

Item 1.  Financial Statements

         Condensed Balance Sheets at December 31, 1999 and  at
         September 30, 2000 (Unaudited)............................................3

         Unaudited  Condensed Statement of Operations for the three months and
         nine months ended September 30, 2000 and 1999 and for the period from
         inception (January 14, 1998) to September 30, 2000 .......................4

         Unaudited  Condensed  Statements  of Cash  Flows for the nine  months
         ended  September 30, 2000 and 1999 and for the period from  inception
         (January 14, 1998) to September 30, 2000  ................................5

         Notes to the Unaudited Condensed Financial Statements.....................6

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations......................................12

Part II: Other Information.

Item 1   Legal Proceedings........................................................19

Item 2   Changes in Securities and Use of Proceeds................................19

Item 3   Defaults Upon Senior Securities..........................................19

Item 4   Submission of Matters to a Vote of Security Holders......................19

Item 5   Other Information........................................................19

Item 6   Exhibits and Reports on Form 8-K.........................................19

Signatures .......................................................................20
</TABLE>


                                       2
<PAGE>

                                     PART I
                              FINANCIAL STATEMENTS

Item 1 Financial statements.

                                 YOUNETWORK CORP
                          (A Development Stage Company)
                                 Balance Sheets
                    December 31, 1999 and September 30, 2000

                                     ASSETS
<TABLE>
<CAPTION>

                                                                      September 30, 2000  December 31, 1999
                                                                      ------------------  ------------------
                                                                           (Unaudited)
<S>                                                                          <C>               <C>
Current assets:
  Cash and cash equivalents                                                  $     3,822       $    41,127
   Prepaid expenses                                                                1,033            59,308
                                                                             -----------       -----------
                    Total current assets                                           4,855           100,435

Property and equipment, net                                                      549,113           763,731

Other assets:
  Software development costs, net                                                369,698           508,334
  Software license, net                                                           60,361           165,431
  Security deposits                                                              187,196           187,196
  Loan to stockholder                                                                 --            12,201
  Other assets                                                                    25,549            41,974
  Intangible assets, net                                                          21,528                --
  Due from Affiliates                                                             26,400                --
                                                                             -----------       -----------
                  Total other assets                                             690,732           915,136
                                                                             -----------       -----------

                                                                             $ 1,244,700       $ 1,779,302
                                                                             ===========       ===========

                          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current portion of capital lease obligation                                $   254,009       $   242,627
  Notes payable - stockholders                                                    85,000           200,000
  Due to related party                                                                --           200,000
  Deferred revenue                                                                    --           175,000
  Accounts payable                                                               175,916           114,381
  Accrued rebate payable                                                           5,267             4,063
  Other current liabilities                                                       19,749            73,710
                                                                             -----------       -----------
                      Total current liabilities                                  539,941         1,009,781

Capital lease obligations, less current portion                                   62,839           254,439
Due to ICES                                                                      144,710                --
Due to ICES Venture                                                                2,926                --
Due to International Computing                                                   199,353                --
Note payable - stockholder                                                        15,000                --
                                                                             -----------       -----------
                      Total other liabilities                                    424,828           254,439

                                                                             -----------       -----------
                      Total liabilities                                          964,769         1,264,220
                                                                             -----------       -----------

Commitments

Stockholders' equity:
Common stock:
Class A - par value $.0001 per share:
 Authorized - 1,500,000
 shares Issued and outstanding - 7,052 shares at December 31, 1999 and
 8,980 shares at September 30, 2000                                                   --                 1
Class B - par value $.0001 per share:
 Authorized - 1,500,000 shares
 Issued and outstanding - 1,058 shares at December 31, 1999 and
 1,988 shares at September 30, 2000                                                    1                 1
Class C - par value $.0001 per share:
 Authorized - 247,000,000 shares
 Issued and outstanding - 41,852,352 shares at                                    22,383             4,185
 December 31, 1999 and 223,827,132 at September 30, 2000
Additional paid-in capital                                                     3,425,545         2,395,242
Receivable in connection with equity transaction                                 (37,753)               --
Deficit accumulated during the development stage                              (3,130,245)       (1,884,347)
                                                                             -----------       -----------
Total stockholders' equity                                                       279,931           515,082
                                                                             -----------       -----------

                                                                             $ 1,244,700       $ 1,779,302
                                                                             ===========       ===========
</TABLE>


                                       3
<PAGE>

                                 YOUNETWORK CORP
                          (A Development Stage Company)
                            Statements of Cash Flows
          For the Nine months Ended September 30, 2000 and 1999 and for
       the Period from Inception (January 14, 1998) to September 30, 2000
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                                              For the Period
                                                                                                              from Inception
                                                                                                               (January 14,
                                                                                                                 1998) to
                                                                                Nine Months Ended September    September 30,
                                                                                           30,                     2000
                                                                                ---------------------------   -------------
                                                                                    2000           1999
                                                                                ------------   -----------
<S>                                                                             <C>            <C>            <C>
Cash flows from operating activities:
 Net loss                                                                       $(1,245,898)   $(1,022,522)   $(3,130,245)
 Adjustments to reconcile net loss to net cash used by operating activities:
  Prepaid expenses                                                                   58,275        154,384         (1,033)
  Depreciation and amortization                                                     475,719             --        767,121
  Other assets                                                                       16,425        (36,452)       (25,549)
  Due from Affiliates                                                               (26,400)            --         (1,050)
  Deferred revenue                                                                 (175,000)        75,035             --
  Accounts payable                                                                  438,782         19,912        553,163
  Accrued rebate payable                                                              1,204             --          5,267
  Interest payable on loans                                                           6,823             --          6,823
  Costs incurred with severance package                                             120,000             --        120,000
  Due to ICES Ventures                                                                2,926             --          2,926
  Other current liabilities                                                         (53,961)       (37,083)        19,749
                                                                                -----------    -----------    -----------
Net cash used in operating activities                                              (381,105)      (846,726)    (1,708,178)
                                                                                -----------    -----------    -----------

Cash flows from investing activities:
  Purchase of property and equipment                                                (13,924)      (153,230)      (918,000)
  Software development costs                                                             --       (440,584)      (554,545)
  Loan to stockholder                                                                12,201        (23,861)            --
  Purchase of software license                                                           --       (270,276)      (270,276)
  Payment of security deposits                                                           --       (179,331)      (187,196)
                                                                                -----------    -----------    -----------
Net cash used in investing activities                                                (1,723)    (1,067,282)    (1,930,017)

Cash flows from financing activities:
Proceeds from issuance of common stock                                              248,500      2,083,291      2,847,928
Proceeds from revolving credit line - ICES                                          142,274             --        142,274
Payment on loan to International Computing                                           (5,034)            --        194,966
Proceeds from Notes Payable stockholders                                            140,000             --        140,000
Deferred registration costs                                                              --       (175,740)            --
Payments of capital lease obligations                                              (180,217)        (6,808)       316,849
                                                                                -----------    -----------    -----------
Net cash provided by financing activities                                           345,523      1,900,743      3,642,017
                                                                                -----------    -----------    -----------

Net increase (decrease) in cash                                                     (37,305)       (13,265)         3,822

Cash, beginning of period                                                            41,127        178,068             --
                                                                                -----------    -----------    -----------

Cash, end of period                                                             $     3,822    $   164,803    $     3,822
                                                                                ===========    ===========    ===========

               Supplemental Disclosure of Cash Flow Information

Cash paid during the period for:
 Interest                                                                       $    45,004    $     2,026    $    66,956
                                                                                ===========    ===========    ===========

         Supplemental Schedule of Non-Cash Investing and Financing Activities

Capital lease obligation incurred for the acquisition of equipment              $        --    $        --    $   627,392
                                                                                ===========    ===========    ===========
Issuance of Class A Common Stock for services                                   $        --    $        --    $    21,400
                                                                                ===========    ===========    ===========
Issuance of Class C Common Stock for various costs                              $   347,247    $        --    $   347,247
                                                                                ===========    ===========    ===========
Contribution to capital from liabilities forgiven                               $   415,000    $        --    $   415,000
                                                                                ===========    ===========    ===========
Issuance of warrants for acquisition of software development costs              $        --    $        --    $    38,000
                                                                                ===========    ===========    ===========
Issuance of warrants for portion of computer equipment lease                    $        --    $        --    $    54,748
                                                                                ===========    ===========    ===========
</TABLE>


                                       4
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                             Statement of Operations
     for the three months and nine months ended September 30, 2000 and 1999
   and for the Period from Inception (January 14, 1998) to September 30, 2000
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                      For the Period
                                                                                                                      from Inception
                                                                                                                       (January 14,
                                                                                                                          1998) to
                                                         Three Months Ended                Nine Months Ended           September 30,
                                                            September 30,                    September 30,                 2000
                                                  ------------------------------    ------------------------------    --------------
                                                        2000             1999            2000             1999
                                                  -------------    -------------    -------------    -------------
<S>                                               <C>              <C>              <C>              <C>              <C>
Revenue                                           $      26,400    $          --    $      26,400    $          --    $      26,400

General and administrative expenses                     172,334          201,760          645,608          295,915        1,290,694
                                                  -------------    -------------    -------------    -------------    -------------

Operating loss                                         (145,934)        (201,760)        (619,208)        (295,915)      (1,264,294)

Other income (expense):
 Other                                                       --               --          175,000               --          175,000
Interest income (expense), net                          (16,423)           2,612          (45,175)           7,635          (69,932)
                                                  -------------    -------------    -------------    -------------    -------------
Other income (expense), net                             (16,423)           2,612          129,825            7,635          105,068
                                                  -------------    -------------    -------------    -------------    -------------

Loss from continuing operations                        (162,357)        (199,148)        (489,383)        (288,280)      (1,159,226)

Income (loss) from discontinued operations (net
 of income taxes)                                        21,950         (499,943)        (756,515)        (734,242)      (1,971,019)
                                                  -------------    -------------    -------------    -------------    -------------
Net loss                                          $    (140,407)   $    (699,091)   $  (1,245,898)   $  (1,022,522)   $  (3,130,245)
                                                  =============    =============    =============    =============    =============

Per share:
Loss from continuing operations                              --            (0.01)              --            (0.01)
Loss from discontinued operations                            --            (0.01)           (0.01)           (0.02)
                                                  -------------    -------------    -------------    -------------
 Net loss per common share, basic and diluted     $          --    $       (0.02)   $       (0.01)   $       (0.03)
                                                  =============    =============    =============    =============

Weighted average of common shares outstanding -
basic and diluted                                   223,827,132       40,753,957      132,208,432       37,095,591
                                                  =============    =============    =============    =============
</TABLE>


                                       5
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS


Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

YouNetwork  Corporation,  a Delaware corporation (the "Company"),  a development
stage company  incorporated on January 14, 1998 under the name YouNetwork Corp.,
a New York corporation and, pursuant to a merger effective February 3, 1999, the
stockholders of YouNetwork Corp.  exchanged all of their common stock for shares
of Class C Common  Stock,  $.0001 par value per share  ("Class C Shares") of the
Company.

The Company had developed an online consumer network  comprised of consumers who
were internet shoppers and who became members of the Company's network.  Members
earned  rebates  based on  purchases  and could  request such rebates as cash, a
credit to future product  purchases or to purchase Class B Common Stock,  $.0001
par value per share  ("Class B Shares")  in the  Company at $1.00 per share.  At
September  30, 2000,  $5,267 of such rebates have not been refunded or converted
to Class B Shares.

During 1999, the Company filed a registration statement under the Securities Act
of 1933,  as amended,  to register  1,000,000  shares each of its Class A Common
Stock,  $.0001 par value per share  ("Class A Shares")  and Class B Shares  (the
"Registration Statement"). Of the total number of the Class A Shares registered,
250,000  shares  were  reserved  for  issuance at no cost to each  consumer  who
registered to become a member of the Company's  consumer network.  The remaining
750,000 shares of the Class A Shares were reserved for  distribution to existing
members  based  upon  referring  new  members  to  the  consumer  network.   The
Registration Statement became effective in July 1999.

Upon the  issuance  of the  Class A Shares,  the  Company  recorded  a charge to
operations for promotions  costs for the value of the shares issued based on the
current  fair market  value of the  Company's  securities.  Upon the issuance of
Class B Shares,  the Company  recorded a reduction in the  liability for rebates
due to members of the consumer  network.  A liability for rebates due to members
and a corresponding charge to cost of goods sold were recorded when members make
purchases on the consumer network. To date, the Company has issued 8,980 Class A
Shares and 1,988 Class B Shares.

Pursuant to the Restructure and Recapitalization  Agreement dated April 20, 2000
between the Company and the certain  stockholders  listed  therein,  $415,000 of
outstanding loans due to such stockholders of the Company were reclassified as a
contribution to capital of the Company.

On May 19,  2000,  the  Company  and  Compuces,  Inc.,  a  Delaware  corporation
("Compuces"), entered into a Stock Purchase Agreement (the "Stock Purchase


                                       6
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
          NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)


Agreement")  pursuant to which the  Company  agreed to sell to  Compuces,  after
giving effect to such sale, 80% of the Company's outstanding Class C Shares on a
fully  diluted  basis.  Accordingly,  Compuces is now the  beneficial  holder of
approximately  80.3%  of the  Class C  Shares  and  approximately  80.3%  of the
Company's  outstanding  voting  securities (which include the Class A Shares and
the Class B Shares), which effected a "change in control" of the Company.

Compuces  is  a  wholly-owned  subsidiary  of  International  Commerce  Exchange
Systems, Inc., a Delaware corporation ("ICES"). ICES is a privately held company
which develops, invests in and operates Internet technology related companies.

The  consideration  for the  issuance of the Class C Shares to Compuces  was the
agreement by Compuces to advance funds to the Company in an amount sufficient to
pay certain  specified debts of the Company in an amount not to exceed $300,000.
As of  September  30, 2000,  Compuces  has  advanced  the Company  approximately
$262,247 for the repayment of such debts.

In June 2000, the Company  terminated  its Web site and related online  business
operations  and, as a result,  suspended the issuance of any additional  Class A
Shares or Class B Shares in connection  therewith.  Accordingly,  all operations
and financial  activity  associated with the online business has been classified
as discontinued operations.

Commencing in July 2000,  the Company has been deriving  revenue from  licensing
the use of the Company's system components and from providing hosting management
services to related parties. In addition,  the Company intends to derive revenue
from third party users. This strategic shift to a managed infrastructure company
seeks to utilize the existing investment in the Company's hardware,  proprietary
and leased  licensed  software  and to provide  eCommerce  services  designed to
enable clients to extend their business to the Internet.

The accompanying unaudited financial statements are for interim periods and have
been prepared in accordance with generally accepted accounting principles but do
not include all disclosures provided in the annual financial  statements.  While
the Company  believes  that the  disclosures  presented are adequate to make the
information  not  misleading,  these  financial  statements  should  be  read in
conjunction with the financial statements and accompanying notes included in the
Company's  Annual  Report on Form  10-KSB for the year ended  December  31, 1999
("Form 10-KSB") as filed with the Securities and Exchange Commission.

 The December 31, 1999 balance  sheet was derived from these  audited  financial
statements,  but does not include all disclosures required by generally accepted


                                       7
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
          NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)

accounting principles. In the opinion of management,  the accompanying unaudited
financial  statements  contain all  adjustments  necessary to present fairly the
financial  position as of September 30, 2000 and the results of  operations  for
the three months and nine months ended  September 30, 2000 and 1999 and the cash
flows for the nine months ended September 30, 2000 and 1999.

The statements of operations and cash flows for the nine months ended  September
30, 2000 and 1999 are not  necessarily  indicative of the results to be expected
for the full year.

USE OF ESTIMATES

The  financial  statements  have been  prepared  in  conformity  with  generally
accepted accounting principles and as such, include estimates and assumptions of
management that affect the amounts reported in the financials statements. Actual
results could differ from these estimates.

INCOME TAXES

The Company  accounts for income taxes in accordance with Statement of Financial
Accounting   Standards   ("SFAS")  No.  109,   "Accounting  for  Income  Taxes".
Accordingly,  deferred income taxes have been provided for to show the effect of
temporary  differences between the tax basis of assets and liabilities and their
reported  amounts  in  the  financial  statements.  A  valuation  allowance  was
established  to offset the Company's net deferred tax assets as of September 30,
2000 and December 31, 1999 because  management  does not currently  believe that
the future realization of such deferred tax assets is more likely than not.

LOSS PER SHARE

The computation of loss per share of common stock in the accompanying Statements
of  Operations  is  computed by dividing  the net loss by the  weighted  average
number of common shares outstanding for the respective periods. Diluted earnings
per share as computed  under SFAS No. 128  includes  the effects of common stock
equivalents,  including  the  dilutive  effect of all  outstanding  common stock
options and warrants using the treasury stock method. Diluted earnings per share
is the same as  basic  earnings  per  share in the  accompanying  Statements  of
Operations.  Options  and  warrants to  purchase  520,500 and 244,000  shares of
common stock,  respectively,  have been excluded from the computation of diluted
loss per share for the three months and nine months ended September 30, 2000 and
1999,  respectively,  as their effect would be  antidilutive  for the respective
periods.


                                       8
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
          NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)


Note 2 - GOING CONCERN

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of  liabilities  in the normal  course of  business.  As noted in the  Company's
audited  financial  statements for the year ended December 31, 1999, the Company
has  incurred  significant  net losses.  This  factor,  in addition to a working
capital  deficiency and minimal  revenues,  raises  substantial  doubt as to the
Company's  ability to obtain  long-term  debt or equity  financing  and  achieve
profitability   to  generate   positive  cash  flows  from   operations.   These
accompanying  financial statements do not include any adjustments related to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue its existence.  Since May 2000, ICES has advanced funds under
a revolving  promissory  note  ("Revolving  Promissory  Note") to the Company to
satisfy  its  working  capital  requirements.  Under the terms of the  Revolving
Promissory  Note,  the  Company  may  borrow  from  ICES  amounts  not to exceed
$750,000,  with interest at 10% on principal  advances only, and due in total as
to principal and interest on or before  January 31, 2002 without any  prepayment
penalty.  As of September 30, 2000,  these advances  totaled  $142,274.  Accrued
interest under this note totaled $2,436 at September 30, 2000.


Note 3 - DEFERRED REVENUE AND NOTES PAYABLE

The Company entered into an agreement in March 1998 with a company that provides
long-distance  telephone  service.  During 1998, the Company  received from this
company advances totaling $175,000. In March 2000, the Company was released from
all  obligations  pursuant to this agreement and was not required to perform its
obligations  under the  agreement  or to repay  the  advance.  Accordingly,  the
Company recorded $175,000 as other income in the quarter ended March 31, 2000.

Under the terms of an employment  contract,  George  Santacroce,  a former chief
executive  officer and  director  of the  Company,  was  entitled to a severance
payment in the amount of $120,000. He was issued an aggregate of 2,000,000 Class
C Shares in lieu of $60,000 and a non-interest  bearing  promissory note payable
in the principal amount of $60,000.  The Company has agreed to pay the aggregate
principal  amount  under  the  note in  twelve  equal  and  consecutive  monthly
installments of $5,000 commencing January 1, 2001.

The Company has borrowed  money from ICES to fund working  capital  requirements
pursuant  to the  Revolving  Promissory  Note.  The  amount  payable  under  the
Revolving Promissory Note as of September 30, 2000 is $142,274. Accrued interest
under this Note totaled $2,436 at September 30, 2000.


                                       9
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
          NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)

Note 3 - DEFERRED REVENUE AND NOTES PAYABLE (Continued)

The Company has a  non-interest  bearing  promissory  note to Don Senerath,  the
Company's chairperson, chief executive officer and a director of the Company, in
the amount of $40,000. This amount is payable upon demand by Don Senerath to the
extent that the Company has funds available for such purpose.

The  Company  owes  International  Computing,  LLC  ("IC"),  a New York  limited
liability  company,  $194,966 for software  development  costs.  Pursuant to the
Stock Purchase  Agreement,  the amount due to IC was converted to long-term debt
and repayable in a lump-sum payment of principal and interest at a rate of 6% on
May 19, 2005. The Stock Purchase Agreement contains provisions to accelerate the
repayment of the debt contingent upon specific levels of revenue or placement of
equity securities,  neither of which have occurred.  Accrued interest payable to
IC for this debt totaled $4,387 at September 30, 2000.

Until July 21, 2000, IC was 100% owned by Steadfast Ventures, LLC ("Steadfast"),
a Delaware  limited  liability  company,  of which Don  Senerath,  the Company's
chairperson  and  chief  executive  officer,  is a  member.  Pursuant  to a Unit
Purchase  Agreement  dated July 21, 2000,  ICES  acquired 70% of the  membership
units in IC from Steadfast.


Note 4 - AMORTIZATION OF SOFTWARE DEVELOPMENT COSTS

Amortization  of $46,212 and $138,636 for the three months and nine months ended
September  30,  2000,  respectively,  is included in general and  administrative
expense. Amortization did not commence until October 1, 1999 and, therefore, the
three  months and nine  months  ended  September  30,  1999 do not  include  any
amortization expense.


Note 5 - DEPRECIATION AND AMORTIZATION

Depreciation of property and equipment is computed by the  straight-line  method
over the  assets'  estimated  useful  lives  ranging  from three to five  years.
Leasehold improvements are amortized by the straight-line method over the lesser
of the term of the related lease or the useful life.

Depreciation and amortization for property, equipment and leasehold improvements
of $78,435 and $232,013 for the three months and nine months ended September 30,
2000,


                                       10
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)

Note 5 - DEPRECIATION AND AMORTIZATION (Continued)

and $27,867 and $41,769 for the three months and nine months ended September 30,
1999, respectively, is included in general and administrative expense.

The capitalized  software license fees and technical support costs (collectively
referred to as the "Capitalized License") are being amortized on a straight-line
basis over 24 months and 12 months, respectively, commencing July 1, 1999.

Capitalized  License  amortization  of $22,636 and $105,070 for the three months
and nine months  ended  September  30,  2000,  and $112,615 and $112,615 for the
three months and nine months ended September 30, 1999, respectively, is included
in general and administrative expense.


Note 6 - DISCONTINUED OPERATIONS

In June 2000,  the Company  suspended its Web site and related  online  business
operations  and, as a result,  suspended the issuance of any additional  Class A
Shares or Class B Shares.

Subsequently,  the Company has decided to terminate  this  business and redeploy
its   infrastructure   to  provide  eCommerce   hosting   management   services.
Accordingly,  the operations and financial activity directly associated with the
online business has been classified as discontinued operations.

The  historical  investment in the  hardware,  proprietary  and leased  licensed
software  and  technology  development  consulting  has, at nominal  cost,  been
modified to be fully functional and scaleable as an eCommerce  hosting platform.
As a result,  these investments and associated costs have not been classified as
discontinued operations and an impairment loss has not been recognized.


Note 7 - RELATED PARTY TRANSACTIONS

The Company has provided hosting management services to various  subsidiaries of
ICES during the three months ended September 30, 2000 totaling $26,400.

The  Company has  borrowed  $107,224  from ICES and has accrued  interest in the
amount of $2,436  under the  Revolving  Promissory  Note during the three months
ended  September 30, 2000. At September 30, 2000, the Company owes ICES $142,274
and accrued interest of $2,436 under this note.


                                       11
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (Continued)

Note 7 - RELATED PARTY TRANSACTIONS (Continued)

The Company is indebted to IC $194,966 and associated accrued interest of $4,387
at September 30, 2000 under the terms of the Stock  Purchase  Agreement.  During
the three months ended  September  30, 2000,  the Company has accrued  $2,745 of
interest related to the debt.

The Company leases shared facilities on a month to month basis from ICES for its
computer room and is charged its prorata share of such occupancy  expenses based
upon the actual cost incurred by ICES.  The expenses  totaled  $2,926 during the
three months ended  September 30, 2000.  The Company owes ICES a total of $2,926
at September 30, 2000 for these expenses.



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

CAUTIONARY STATEMENT

The matters discussed in this section contain forward-looking  statements within
the meaning of Section 21E of the  Securities  Exchange Act of 1934, as amended,
and Section 27A of the  Securities  Act of 1933, as amended,  that involve risks
and   uncertainties.   All  statements   other  than  statements  of  historical
information  provided  herein  maybe  deemed to be  forward-looking  statements.
Without  limiting the foregoing,  the words "may",  "will",  "could",  "should",
"intends", "thinks", "believes", "anticipates", "estimates", "plans", "excepts",
or the negative of such terms and similar  expressions  are intended to identify
assumptions  and  uncertainties  which  could  cause  actual  results  to differ
materially  from those  expressed in them.  Any  forward-looking  statements are
qualified in their  entirety by reference  to the factors  discussed  throughout
this report and the Company's  Annual Report on Form 10-KSB,  for the year ended
December  31, 1999.  The  following  cautionary  statements  identify  important
factors that could cause the Company's actual results to differ  materially from
those projected in the forward-looking statements made in this Report. Among the
key factors that have a direct  bearing on the  Company's  results of operations
are:

o     General  economic and  business  conditions;  the  existence or absence of
      adverse  publicity;  changes  in, or  failure to comply  with,  government
      regulations;  changes in marketing and  technology;  changes in political,
      social and economic conditions;


                                       12
<PAGE>

o     Increased competition in the Internet; Internet capacity; general risks of
      the Internet;

o     Success of  acquisitions  and operating  initiatives;  changes in business
      strategy or development plans; management of growth;

o     Availability, terms and deployment of capital;

o     Costs and other effects of legal and administrative proceedings;

o     Dependence  on senior  management;  business  abilities  and  judgment  of
      personnel; availability of qualified personnel; labor and employee benefit
      costs;

o     Development risks; risks relating to the availability of financing, and

o     Other factors referenced in this Report and the Form 10-KSB.

Because the risk factors referred to above could cause actual results or outcome
to differ materially from those expressed in any forward-looking statements made
by the Company,  you should not place undue reliance on any such forward-looking
statements.  Other  factors may be described  from time to time in the Company's
other filings with the  Securities  and Exchange  Commission,  news releases and
other communications.  Further, any forward-looking  statement speaks only as of
the date on which it is made and the Company  undertakes no obligation to update
any  forward-looking  statement or statements to reflect events or circumstances
after the date on which such  statement is made or to reflect the  occurrence of
unanticipated  events.  New  factors  emerge  from  time to time,  and it is not
possible for the Company to predict which will arise.  In addition,  the Company
cannot assess the impact of each factor on the Company's  business or the extent
to which any factor,  or  combination  of factors,  may cause actual  results to
differ materially from those contained in any forward-looking statements.

Subsequent  written  and oral  forward-looking  statements  attributable  to the
Company  or  persons  acting on its  behalf  are  expressly  qualified  in their
entirety by the cautionary statements set forth above and contained elsewhere in
this Quarterly Report on Form 10-QSB.

OVERVIEW

The Company, a Delaware Corporation,  was incorporated on January 14, 1998 under
the name  YouNetwork  Corp., a New York  corporation  and,  pursuant to a merger
effective  February 3, 1999, the stockholders of YouNetwork Corp.  exchanged all
of their common stock for shares of the Class C Shares of the Company.

The Company had developed an online consumer network  comprised of consumers who
were Internet shoppers and who became members of the Company's network.  Members


                                       13
<PAGE>

earned  rebates  based on  purchases  and could  request such rebates as cash, a
credit to future product  purchases or to purchase Class B Shares in the Company
at $1.00 per share. At September 30, 2000,  $5,267 of such rebates have not been
refunded or converted to Class B Shares.

During 1999, the Company filed the Registration Statement which became effective
in July  1999.  Of the total  number of the Class A Shares  registered,  250,000
shares were reserved for issuance at no cost to each consumer who  registered to
become a member of the Company's consumer network.  The remaining 750,000 shares
of the Class A Shares were reserved for  distribution to existing  members based
upon referring new members to the consumer network.

Upon the  issuance  of the  Class A Shares,  the  Company  recorded  a charge to
operations for promotions  costs for the value of the shares issued based on the
current  fair market  value of the  Company's  securities.  Upon the issuance of
Class B Shares,  the Company  recorded a reduction in the  liability for rebates
due to members of the consumer  network.  A liability for rebates due to members
and a corresponding charge to cost of goods sold were recorded when members make
purchases on the consumer network. To date, the Company has issued 8,980 Class A
Shares and 1,988 Class B Shares.

On May 19, 2000, pursuant to the Stock Purchase Agreement, the Company agreed to
sell to  Compuces,  after  giving  effect  to such  sale,  80% of the  Company's
outstanding  Class C Shares on a fully diluted basis.  Accordingly,  Compuces is
now the  beneficial  holder of  approximately  80.3% of the  Class C Shares  and
approximately  80.3%  of the  Company's  outstanding  voting  securities  (which
include the Class A Shares and the Class B Shares),  which effected a "change in
control" of the Company.  The Stock Purchase  Agreement also provides for, among
other things,  that the Company will not dilute the other Class C  stockholders'
equity  interest  in the Company  unless and until the  Company  raises at least
$300,000  in capital in a private or public  financing  based upon a  $5,000,000
post-money valuation.

Compuces is a  wholly-owned  subsidiary of ICES, a privately  held company which
develops, invests in and operates Internet technology related companies.

The  consideration  for the  issuance of the Class C Shares to Compuces  was the
agreement by Compuces to advance funds to the Company in an amount sufficient to
pay certain  specified debts of the Company in an amount not to exceed $300,000.
As of  September  30, 2000,  Compuces  has  advanced  the Company  approximately
$262,247 for the repayment of such debts.

In June 2000, the Company  terminated  its Web site and related online  business
operations  and, as a result,  suspended the issuance of any additional  Class A
Shares or Class B Shares in connection  therewith.  Accordingly,  all operations
and financial  activity  associated with the online business has been classified
as discontinued operations.


                                       14
<PAGE>

Under the Stock Purchase Agreement,  one member of the Company's  management has
agreed to perform services without further  compensation until such time as cash
flow  from  operations  permits  or the  Company  is able to  obtain  additional
financing.

The Company has  historically  financed its operations  through  working capital
provided  by  operations,  related  party  loans and  advances  and the  private
placement of equity securities. The Company's ability to continue its operations
in any form is currently dependent on financing from external sources. There can
be no assurance that additional  capital will be available on terms favorable to
the Company or at all, or that the Company  will be able to generate  sufficient
cash flow in order to sustain operations.  To the extent that additional capital
is raised  through the sale of equity or debt  securities,  the issuance of such
securities could result in additional dilution to the Company's stockholders. In
the event that the Company experiences the need for additional  capital,  and is
not able to generate capital from financing  sources or from future  operations,
management may be required to modify,  suspend or discontinue  the operations of
the Company indefinitely.

Since May 2000,  ICES has advanced funds under the Revolving  Promissory Note to
the Company to satisfy its working  capital  requirements.  As of September  30,
2000, these advances totaled $142,274.

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of  liabilities  in the normal  course of  business.  As noted in the  Company's
audited  financial  statements for the year ended December 31, 1999, the Company
has incurred significant net losses. The Company has incurred losses of $140,408
and $1,245,898 for the three months and nine months ended September 30, 2000 and
$699,091 and $1,022,522 for the three months and nine months ended September 30,
1999,  respectively.  The Company expects to continue to incur operating  losses
over at least  the next  six  months  and no  assurances  can be given  that the
Company will be able to continue as a going concern. This factor, in addition to
working capital deficiency and minimal revenues,  raises substantial doubt as to
the Company's  ability to obtain  long-term debt or equity financing and achieve
profitable  operations.  The Company's ability to continue as a going concern is
dependent  upon its ability to  generate  positive  cash flows from  operations.
These accompanying  financial  statements do not include any adjustments related
to the  recoverability  and  classification  of  recorded  asset  amounts or the
amounts and  classification  of liabilities  that might be necessary  should the
Company be unable to continue its existence.

Commencing in July 2000,  the Company has been deriving  revenue from  licensing
the use of the Company's system components and from providing hosting management
services to related  parties.  The Company also  intends to derive  revenue from
third party users.  This  strategic  shift to a managed  infrastructure  company
seeks to utilize the existing investment in the Company's hardware,  proprietary
and leased  licensed  software  and to provide  eCommerce  services  designed to
enable  clients to extend their  business to the Internet.  Management  believes
that the existing  infrastructure can be leveraged,  in conjunction with certain
strategic  partners,  to provide Web  development,  hosting and support services
between eCommerce business enterprises and between business


                                       15
<PAGE>

enterprises  and consumers.  Under this new business plan and until  significant
revenues can be generated, the Company intends to keep its operating overhead at
minimal levels.

The Company  believes that its current  Revolving  Promissory  Note coupled with
revenues from its licensing and hosting  management  services will be sufficient
for this first phase of its business development.


RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH SEPTEMBER 30, 1999

Since inception, the Company has been in the early stages of development and has
generated nominal revenues to date.

Total revenues were $26,400 and the Company incurred  operating  expenses in the
amount of $172,334  during the three months ended September 30, 2000 as compared
with $201,760 for the three months ended  September  30, 1999.  This decrease of
$29,426  consists  of a  reduction  in general  and  administrative  expenses of
$36,227 primarily as a result of overall lower levels of spending as the Company
commences operations pursuant to its new business plan, and a reduction in other
depreciation  and  amortization  of $39,411 offset by  amortization  of software
development  costs of $46,212 as amortization of software  development costs did
not commence until October 1, 1999.

All revenues and operating  expenses relating to the former online business have
been  classified  as  discontinued  operations  for all periods prior to July 1,
2000.  During the three months ended  September 30, 2000,  $21,950 of income has
been  recorded  relating  to the  former  online  business  as a  result  of the
write-off  of net  excess  accruals  and have been  classified  as  discontinued
operations.

Other  expenses  increased  during the three months ended  September 30, 2000 by
$19,035 versus the three months ended September 30, 1999 primarily due to higher
interest   expense  on  capital  lease   obligations  of  $5,763,   interest  on
intercompany  indebtedness of $5,181,  amortization  of capitalized  interest on
warrants issued in 1999 of $5,475 and a reduction in interest income of $2,616.

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH SEPTEMBER 30, 1999

Since inception, the Company has been in the early stages of development and has
had nominal revenues to date.

Total revenues were $26,400 and the Company incurred  operating  expenses in the
amount of $645,608  during the nine months ended  September 30, 2000 as compared


                                       16
<PAGE>

with $295,915 for the nine months ended  September 30. This increase of $349,693
is  primarily  reflects  the  results  of a full nine  months of  operations  in
calendar 2000 and principally is comprised of an increase in other  depreciation
and amortization of $182,699 and amortization of software  development  costs of
$138,636 as  amortization of software  development  costs did not commence until
October 1,  1999,and  an  increase  in general  and  administrative  expenses of
$28,358  primarily as a result of overall higher levels of spending in the first
half of 2000.

All revenues and operating  expenses relating to the former online business have
been  classified  as  discontinued  operations  for all periods prior to July 1,
2000.  During the nine months ended  September  30, 2000,  $21,950 of income has
been  recorded  relating  to the  former  online  business  as a  result  of the
write-off  of net excess  accruals  during the 3rd quarter of 2000 and have been
classified as discontinued operations.

Other income  increased  during the nine months  ended  September  30, 2000,  by
$122,190 as compared with the nine months primarily due to a contract settlement
in March 2000 of $175,000  offset by an increase in interest  expense on capital
lease  obligations of $16,859,  an increase in interest expense of $26,542 and a
decrease in interest income of $9,410.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2000, the Company had a working capital deficit of $535,086.

During  the  quarter  ended   September  30,  2000,   the  Company's  cash  flow
requirements  were provided  solely by related party loans. In order to continue
to  finance  operations,  the  Company  needs to borrow  against  the  Revolving
Promissory  Note provided by ICES. The amount of these  borrowings were $107,224
during the quarter ended September 30, 2000 and the total amount  outstanding at
September 30, 2000 was $142,274. Accrued interest under this note totaled $2,436
as of September 30, 2000.

The Company has no commitments for capital  expenditures or additional equity or
debt financing and no assurances can be made that its working  capital needs can
be met should they exceed the funds  available  under the  Revolving  Promissory
Note.

The Company has  historically  financed its operations  through  working capital
provided  by  operations,  related  party  loans and  advances  and the  private
placement of equity securities. The Company's ability to continue its operations
in any form is currently dependent on financing from external sources. There can
be no assurance that additional  capital will be available on terms favorable to
the Company or at all, or that the Company  will be able to generate  sufficient
cash flow in order to sustain operations.  To the extent that additional capital
is raised  through the sale of equity or debt  securities,  the issuance of such
securities could result in additional dilution to the Company's stockholders. In
the event that the Company experiences the need for additional  capital,  and is


                                       17
<PAGE>

not able to generate capital from financing  sources or from future  operations,
management may be required to modify,  suspend or discontinue  the operations of
the Company indefinitely.

The Company has incurred losses, some of which may be available to offset future
taxable  income.  Due to  uncertainties  regarding  the  recovery  of such asset
through  future  operations,  management  has recorded a valuation  allowance to
reduce all its deferred tax asset to zero. Accordingly,  there is no benefit for
income taxes in the accompanying financial statements.


                                       18
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

      An action was brought by EIN Corporation against the Company and Compuces,
      Inc. in Civil Court of City of New York,  New York County on September 18,
      2000,  alleging breach of agreement and seeking to recover  $27,514.42 for
      services allegedly rendered by the plaintiff.  An answer was filed denying
      the allegations and the Company intends to defend the action vigorously.

Item 2. Changes in Securities and Use of Proceeds.

      None.

Item 3. Defaults Upon Senior Securities.

      None.

Item 4. Submission of Matters to a Vote of Security Holders.

      Not applicable.

Item 5. Other Information.

      Although it was previously reported in the Registrant's  Current Report on
      Form 8-K dated  October 5, 2000 that the  Registrant's  board of directors
      had  selected  Deloitte  &  Touche  LLP  as  the  Registrant's   principal
      accountant,  on October 31, 2000 the Registrant's  board of directors has,
      by unanimous  vote,  engaged J.H. Cohn LLP as the  Registrant's  principal
      accountant.


Item 6. Exhibits and Reports on Form 8-K.

      (a) Exhibits.

      None.

(b) Current Reports on Form 8-K.

      On October 5, 2000 the  Registrant  filed a Current  Report on Form 8-K to
      report,   under  Item  4,  the  change  in  the  Registrant's   certifying
      accountants, which event occurred on October 4, 2000.


                                       19
<PAGE>

                                   SIGNATURES

      In accordance with the requirement of the Securities Exchange Act of 1934,
the  Registrant  has  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                           YOUNETWORK CORPORATION

Dated: November 7, 2000
                                           By: /s/ Don Senerath
                                              -----------------
                                            Don Senerath
                                            Chairman & Chief Executive Officer

                                           By: /s/ Joseph C. Sienkiewicz
                                               -------------------------
                                            Joseph C. Sienkiewicz
                                            Chief Financial Officer


                                       20