SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB
                                   (Mark One)

[x]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934.

       For the fiscal year ended December 31, 2000

[_]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

       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.)

                  18 West 18th Street, New York, New York 10011
--------------------------------------------------------------------------------
                     (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)

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

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

      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 [ ]


<PAGE>

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained, to the best of Issuer's knowledge, in definitive proxy or information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this From 10-KSB. [x]

The Issuer's revenues for its most recent fiscal year were $ 66,450.

The number of shares  outstanding  of each of our classes of common  stock as of
March 29, 2001 was 8,980 shares of Class A common stock, 1,988 shares of Class B
common stock and 223,827,132  shares of Class C common stock.  The  registrant's
common stock is not currently  listed or admitted for trading on any exchange or
over-the-counter market.

<PAGE>

                             YOUNETWORK CORPORATION
                                TABLE OF CONTENTS

                                                                           Page
                          Item Number and Caption                         Number

PART I....................................................................   -4-
          Item 1.    Description of Business..............................   -4-
          Item 2.    Description of Property..............................   -7-
          Item 3.    Legal Proceedings....................................   -7-
          Item 4.    Submission of Matters to a Vote of Security Holders..   -8-

PART II...................................................................   -8-
          Item 5.    Market for Common Equity and Related
                     Stockholders Matters.................................   -8-
          Item 6.    Management's Discussion and Analysis or Plan of
                     Operation............................................  -11-
          Item 7.    Financial Statements.................................  -17-
          Item 8.    Changes in and Disagreements with Accountants on
                     Accounting and Financial Disclosure..................  -17-

PART III..................................................................  -17-
          Item 9.    Directors, Executive Officers, Promoters and
                     Control Persons; Compliance with Section 16(a)
                     of the Exchange Act..................................  -17-
          Item 10.   Executive Compensation...............................  -19-
          Item 11.   Security Ownership of Certain Beneficial Owners
                     and Management.......................................  -20-
          Item 12.   Certain Relationships and Related Transactions.......  -21-
          Item 13.   Exhibits, List and Reports on Form 8-K...............  -23-

<PAGE>

                                     PART I

Item 1. Description of Business.

OVERVIEW

History

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 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 Shares in the Company
at $1.00 per share.

In June 2000, the Company  terminated  its Web site and related online  business
operations and 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  have  been  classified  as
discontinued operations.

At December 31, 2000, $5,267 of such rebates are outstanding. As a result of the
termination of its Web Site and related online business,  these rebates can only
be exchanged for cash.

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  enterprises and
consumers.  While operating  under this new business plan and until  significant
revenues can be generated, the Company intends to keep its operating overhead at
minimal  levels by  outsourcing  all its  development,  IT management  and sales
functions to qualified third parties, effectively making these expenses variable
costs of the revenue model.


                                       4
<PAGE>

The Company plans to reposition itself as a managed custom applications platform
provider with an emphasis on internet  technologies and intends to differentiate
itself from other Applications  Service Providers ("ASPs") offerings by focusing
on the custom  applications  hosting.  By comparison,  most ASPs currently offer
network  versions of  enterprise  applications  from various major vendors for a
monthly fee.

The Company has established two options for its application  platform offerings,
the first being  comprised of  high-availability  premium  software and hardware
products  and,  the  second,  consisting  of a low-cost  offering of open source
software components.  The Company's core applications  architecture will operate
on both platforms  providing the benefits of a unified development effort across
both  offerings.  This will be a scalable  solution  that permits our clients to
upgrade and downgrade services based on business needs.

The Company  currently  operates a New York City facility  that provides  custom
developed backend systems hosting and management,  based on the Sun Microsystems
and CISCO hardware and Oracle  Software  platforms.  We provide  development and
maintenance  services  through  a  strategic   relationship  with  International
Computing,  LLC  ("IC"),  a company  which is  majority-owned  by  International
Commerce  Exchange  Systems,  Inc. ("ICES") and an entity partially owned by Don
Senerath,   a  director  of  the  Company,   its  Chief  Executive  Officer  and
Co-Chairman.

Technology and Infrastructure

The Company's systems are designed for portability, efficiency and growth. Using
state of the art technology  from Windows NT and Unix, the Company has created a
custom and scalable  solution  that is based on high  bandwidth  access,  latest
server technology and redundant storage systems.  An emphasis on portability has
been  placed on the  application  modules in order to support the  migration  of
systems as they  encounter the added demand of a fast growing  client base.  The
Company's access to the internet is reinforced with multiple  support  providers
and  daily  and  weekly  backups  to  minimize  data  loss as a result of system
failure. A high degree of automation is employed to assure quality of service as
well as cost-efficient operation of our system. The Company continues to monitor
and upgrade components of its  infrastructure  with the goal of providing highly
productive and market competitive user environments.

Competition

The market  for  hosting  and  management  services  is  rapidly  evolving,  and
competition for clients is intense and expected to increase significantly in the
future.  There are  insignificant  and  relatively  inconsequential  barriers to
entry.  Management believes that the principal competitive factors for companies
seeking  to  create  such  a  business  are  functionality,  reliability,  cost,
flexibility  and  integrity.  The  Company's  primary  competitors  include such
companies as FutureLink and Breakaway Solutions. These competitors are targeting
the  same  small to  medium-sized  enterprises,  which is part of the  Company's
growth strategy.  Nearly all of the Company's existing and potential competitors
have longer operating histories and significantly  greater financial,  technical
and marketing resources than the Company.


                                       5
<PAGE>

Moreover,  those  competitors  are able to undertake  more  extensive  marketing
campaigns  for their  brands and  services  and make more  attractive  offers to
potential  employees,  vendor  affiliates,  commerce  companies and  third-party
service providers.  However, the Company, as a boutique  information  technology
service  provider,   which  offers  a  comprehensive  suite  of  services,   can
effectively direct the Company's products to rapidly growing enterprises.  These
enterprises  need to get to market quickly and often do not employ the requisite
technical staff and resources to achieve this growth strategy.  By meeting their
increasingly   growing  demand  for  hosting,   support   services  and  systems
integration as a low-cost single service provider,  management believes that the
Company is properly positioned to capitalize on this market demand.

It is probable that new  competitors  or alliances  among our  competitors  will
emerge  in the  future  and  may  gain  market  share.  Such  competitors  could
materially   impact  our  ability  to  obtain  contracts.   Additionally,   such
competitive  pressure  could  require  the  Company  to reduce  the price of its
services  and  therefore  have an  adverse  effect  on its  business,  financial
condition and results from operations.

Intellectual property and proprietary rights

The Company has no patents and does not  anticipate  that  patents will become a
significant  part  of  its  intellectual  property  in the  foreseeable  future.
Management  regards its technology as proprietary and will attempt to protect it
by  relying on  trademark,  servicemark,  copyright  and trade  secret  laws and
restrictions on disclosure and transferring title and other methods. The Company
will enter into  confidentiality  agreements  with its consultants and employees
and will  attempt to limit  access by vendors  of its  proprietary  information.
Despite  these  precautions,  it may be  possible  for a third  party to copy or
otherwise  obtain  and  use  the  Company's   proprietary   information  without
authorization or develop similar technology independently. Policing unauthorized
use of the  Company's  proprietary  information  is difficult.  Legal  standards
relating to the  validity,  enforceability  and scope of  protection  of certain
proprietary  rights  in  internet-related  businesses  are  uncertain  and still
evolving,  and no assurances can be given as to the future viability or value of
any of the Company's proprietary rights.

Employees

The Company has no employees,  however,  one member of the Company's  management
has agreed to perform services without compensation until such time as cash flow
from  operations  permits  or until the  Company  is able to  obtain  additional
financing.  To date,  these  services  have  been  minimal  and  have  primarily
consisted  of the  execution  of various  maintenance  routines as needed.  As a
result,  the  Company  has not  recognized  any  compensation  expense for these
nominal services.


                                       6
<PAGE>

Government Regulation

We are not currently subject to direct regulation by any government agency other
than regulations applicable to businesses generally, and there are currently few
laws or regulations directly applicable to eCommerce on the Internet. Due to the
increasing  popularity  and use of the  Internet,  a number of  legislative  and
regulatory  proposals  are  under  consideration  by  federal,  state  and local
governmental  organizations,  and  it is  possible  that a  number  of  laws  or
regulations may be adopted with respect to the Internet  relating to such issues
as user  privacy,  taxation,  infringement,  pricing,  quality of  products  and
services and intellectual  property ownership.  The adoption of any such laws or
regulations  may decrease the growth in the use of the Internet,  which could in
turn decrease the demand for our services,  increase our cost of doing business,
or  otherwise  have a  material  adverse  effect  on our  business,  results  of
operations  and financial  condition.  Any new  legislation  or  regulation,  or
application or  interpretation  of existing laws,  could have a material adverse
effect on our business, results of operations and financial condition.

Item 2. Description of Property.

Our  headquarters  are currently  located in a leased facility in the Borough of
Manhattan,  New York,  consisting of  approximately  6,000 square feet of office
space under a lease that  expires  June 30,  2002.  The  current  annual rent is
$132,000.  The Company has  subleased  this entire  space to ICES,  other than a
minimal  amount of space  required to house the  Company's  computer  facilities
room, and has entered into a month to month shared lease  arrangement  with ICES
based upon actual costs incurred for the computer facilities room space.

The Company had also rented a leased  facility in the Borough of Manhattan,  New
York consisting of  approximately  1,000 square feet of office space,  which was
under a lease that expires April 3, 2003.  The Company has cancelled  this lease
effective  February 1, 2001 pursuant to a negotiated  settlement with the lessor
for $9,000.  The settlement  calls for forfeiture of the $5,500 security deposit
and cash  payments  totaling  $3,500.  This total  liability  of $9,000 has been
accrued for at December 31, 2000.

Item 3. Legal Proceedings.

On or about  March 30,  2001,  the  Company  received a  complaint  from  Globix
Corporation  claiming  that $14,622 is allegedly  due pursuant to a contract for
computer  services.  The  Company  denies  the claim and  intends  to answer the
complaint.

A final judgment of possession  with a warrant was issued to Waltox Corp.,  N.V.
on March 30,  2001 by the Civil  Court of the City of New York,  New York County
for the  Company's  non-payment  of rent for  office  space  for the  months  of
December  2000  through  February  2001.  The  Company  is  in  the  process  of
negotiating a stipulation of settlement relating to the judgment.  To date, that
Company has paid the December 2000 rent and has made payments  totaling  $10,000
against the remaining  unpaid amount.


                                       7
<PAGE>

An action was brought by EIN Corporation against the Company and Compuces,  Inc.
("Compuces")  in Civil  Court  of the  City of New  York,  New  York  County  on
September 18, 2000,  alleging breach of agreement and seeking to recover $27,514
for  services  allegedly  rendered  by the  plaintiff.  The Company has filed an
answer denying the allegations and the action is currently in discovery.

Other  than the above  actions,  the  Company  is not  involved  in any  pending
litigation,  nor is the Company aware of any pending or contemplated proceedings
against  the  Company.  Management  knows of no legal  proceedings,  pending  or
threatened,  or judgments  entered  against any of the  directors or officers in
their capacity as such.

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

There were no matters  submitted to a vote of security holders during the fourth
quarter of 2000.

                                     PART II

Item 5. Market for Common Equity and Related Stockholders Matters.

Market Information.

Our  common  stock  is  currently  not  traded  on  any  forum,   including  the
Over-the-Counter  Bulletin  Board or pink sheets.  There has never been a public
market for our stock.  On July 13, 1999, our  registration  statement  (File No.
333-71949)  was declared  effective  and we commenced our offering in connection
with 1,000,000  Class A shares for no cash  consideration  and 1,000,000 Class B
shares  offered  to our  members  at the rate of one share  for each  $1.00 of a
member's purchase dividend.

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.

We did not receive any proceeds from the sale of our Class A or Class B shares.

One Class A share was offered to each of the first  250,000  members at no cost.
The remaining  750,000 Class A shares were reserved for distribution to existing
members based upon referring new members to the consumer network.

Class B shares in our  offering  were offered to a member at a rate of one share
for each $1.00 of a member's purchase  dividend balance,  which may only be paid
with purchase dividends earned by members who purchased products on the consumer
network of our former on-line business.  A purchase dividend balance, or rebate,
was created when a member was credited for a percentage of the value of products
or services purchased on our former website.


                                       8
<PAGE>

A member could have chosen to have their purchase  dividend balance paid to them
in cash, purchase additional products or services or purchase Class B shares. If
a member chose to purchase a Class B share with their purchase dividend balance,
the  purchase  dividend  balance  was  reduced  $1.00  for  each  Class  B share
purchased.  Subsequent to the termination of our on-line business,  a member may
only choose to have their  previously  earned purchase  dividend balance paid to
them in cash.  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 made purchases on the consumer network.  To date, the Company has issued
8,980 Class A shares and 1,988 Class B shares.

Holders

As of March 29, 2001, there were approximately 133 holders of our Class C common
equity. All holders of shares of common equity are entitled to one vote for each
share held on record on all matters submitted to a vote of the stockholders.  We
do not have cumulative voting rights in the election of directors;  accordingly,
holders  of a  majority  of the  shares  voting  are  able to  elect  all of the
directors.  In the event of our liquidation,  dissolution or winding up, holders
of common  stock are  entitled to share  ratably in all of our assets  remaining
after  payment of  liabilities.  Holders of common stock have no  preemptive  or
other subscription of conversion rights. There are no redemption or sinking fund
provisions applicable to our common stock.

Stock Options.

The  Company  has a 1999 Stock  Option Plan that  provides  for the  granting of
options  to  key  employees,  including  officers,  non-employee  directors  and
consultants  of  Younetwork  and its  subsidiaries  to purchase up to  4,000,000
shares of common stock which are intended to qualify  either as incentive  stock
options within the meaning of the Internal Revenue Code of 1986, as amended,  or
as options which are not intended to meet such requirements, non-statutory stock
options.  There are currently  518,000  outstanding  options granted pursuant to
said plan.

The 1999 plan is  administered  by the board of directors of the Company.  Under
the plan,  the board of directors  has the authority to determine the persons to
whom options will be granted, the number of shares to be covered by each option,
whether the options  granted are intended to be  incentive  stock  options,  the
manner of exercise, and the time, manner and form of payment upon exercise of an
option.

On May 1, 2000 the Company  granted 203,000 options at an option price of .10 to
the then current employees.  Theses options vested immediately upon issuance and
expire on May 1, 2005.


                                       9
<PAGE>

Dividends.

Younetwork has not paid any dividends  since its  inception.  The Company has no
intention of paying any dividends on its common stock in the foreseeable future,
as it intends to use any earnings to generate  increased growth.  The payment by
the Company of dividends,  if any, in the future rests within the  discretion of
its board of directors and, amongst other things, will depend upon the Company's
earnings,  capital  requirements  and  financial  condition,  as well  as  other
relevant factors.

Recent Sales of Unregistered Securities.

The  Company  did not  offer  for sale or sell any  securities  during  the last
quarter of 2000.

The  following  gives  effect to the  330,000 to 1 exchange of Class C shares of
Common Stock  effected  February 3, 1999,  pursuant to an agreement  and plan of
merger  between   Younetwork  Corp.,  a  New  York  corporation  and  Younetwork
Corporation.  The purpose of the merger was to take advantage of the laws of the
State of Delaware.

In December 1998, Dalia Silverman and Kleopatra Georgiades purchased from us for
an aggregate purchase price of $200,000: (i) an aggregate of 8,910,000 shares of
common stock  representing 27% of the issued and outstanding  common stock, on a
fully diluted basis; and (ii) options to purchase, in the aggregate, such number
of shares of common  stock,  at nominal  consideration,  as shall equal,  in the
aggregate,  when added to the Shares  27% of the issued and  outstanding  common
stock of Younetwork on a fully diluted basis,  immediately following the sale of
additional  common stock by Younetwork in consideration of the first $400,000 of
common stock sale proceeds  received by Younetwork  following  December 4, 1998.
The  proceeds  from  the sale of our  shares  to said  individuals  was used for
software development in the approximate amount of $68,000, legal expenses in the
amount of  $10,000,  and  $122,000  to  salaries,  office  expenses  and general
administrative  costs. In March of 1999, the individuals  exercised the purchase
options and received 1,479,452 shares of Younetwork Class C Common Stock.

In March and April of 1999, we sold 6,680,000 shares of our class C Common Stock
for $1,488,000.  The purpose of the offering was to raise  necessary  additional
capital to finance  network  expansion and equipment  upgrades,  and development
costs in connection with our proprietary  tracking software.  The offering was a
private  transaction  exempt from  registration  pursuant to Section 4(2) of the
Securities Act.

In  August of 1999,  we sold  595,000  shares  of our  Class C Common  Stock for
$595,000.  The purpose of the offering was to raise necessary additional capital
to finance  network  expansion  and  equipment  upgrades,  development  costs in
connection  with our  proprietary  tracking  software and working  capital.  The
offering was a private transaction exempt from registration  pursuant to Section
4(2) of the Securities Act.

During the fourth  quarter of 1999,  we sold 76,500 shares of our Class C Common
Stock for $76,500. The purpose of the offering was to raise necessary additional
capital to finance network expansion and equipment  upgrades,  development costs
in connection with our proprietary  tracking  software and working capital.  The
offering was a private transaction exempt from registration  pursuant to Section
4(2) of the Securities Act.


                                       10
<PAGE>

In April 2000, we sold 246,700  shares of our Class C Common Stock for $246,700.
The purpose of the offering was to raise necessary working capital. The offering
was a private  transaction exempt from registration  pursuant to Section 4(2) of
the Securities Act.

On May 19,  2000,  the Company  entered  into a Stock  Purchase  Agreement  with
Compuces.  Under the terms of this agreement,  the Company sold to Compuces in a
private  placement,  shares of the  Company's  Class C common  stock,  par value
$.0001  per share,  constituting,  after  giving  effect to such sale 80% of the
Company's Class C common stock and  approximately  80.3% of the Company's voting
securities.  The  consideration  for the  issuance  of the Class C shares of the
Company was the  agreement  by  Compuces  to advance  funds to the Company in an
amount sufficient to pay certain specified debts to the Company in an amount not
to exceed $300,000.  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.

The foregoing  transactions were exempt from the registration  provisions of the
Securities  Act of 1933,  as  amended,  by reason of  Section  4(2)  thereof  as
constituting  private transactions not involving a public offering. A restricted
legend  has been  placed  on all  shares  issued in these  transactions  and the
registrant's  transfer  agent  will  be  given  the  appropriate  stop  transfer
instructions.  The purchasers of securities in each such transaction represented
their  intention to acquire the securities  for  investment  only and not with a
view to or for sale in connection with any distribution  thereof and appropriate
legends  were  affixed to the  certificates  for the  securities  issued in such
transactions. All purchasers of securities in each such transaction had adequate
access to information  about the Registrant.  The offers and sales should not be
integrated  with the public  offering herein since such sales and those sales to
be made to the public (a) are not part of a single plan of  financing;  (b) have
not and will not be made at or about  the same  time;  and (c) have not and will
not be made for the same general purpose.  Furthermore, said sales should not be
integrated  in reliance  upon the safe harbor  interpretation  of Rule 152 under
which it is the view of the staff of the Unites States  Securities  and Exchange
Commission  that the filing of a  registration  statement  following an offering
otherwise  exempt under Section 4(2) does not vitiate the  exemption  under that
Section.

Item 6. Management's Discussion and Analysis or Plan of Operation.

                SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

The matters discussed in this section contain forward-looking  statements within
the meaning of Section 21D 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", "expects",
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.


                                       11
<PAGE>

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;

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.

Because  the risks  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.


                                       12
<PAGE>

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 Annual Report on Form 10-KSB.

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.

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 years ended December 31, 2000 and 1999 and
the period  January 14, 1998  (inception)  to December 31, 2000, the Company has
incurred  significant net losses.  The Company has incurred losses of $1,478,999
and  $1,721,523  for the years ended  December  31, 2000 and  December 31, 1999,
respectively  and  $3,363,345  for the period  January 14, 1998  (inception)  to
December 31, 2000.  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
a working capital  deficiency and minimal revenues,  raises substantial doubt as
to the  Company's  ability to continue as a going  concern.  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 as a going concern.

The Company believes that the amount of borrowings from ICES under the Revolving
Promissory Note coupled with revenues from its licensing and hosting  management
services will be sufficient for the execution of its new business plan.

Results of Operations
Twelve Months Ended December 31, 2000 as Compared with December 31, 1999.

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

Total  revenues  for the twelve  months ended  December  31, 2000 were  $66,450,
generated  entirely from providing  hosting and  management  services to various
subsidiaries  of ICES,  as  compared  with  revenues  of $0 for the  year  ended
December 31, 1999. The increase in revenues has been primarily  attributable  to
T3 Access and Hosting Services.


                                       13
<PAGE>

The Company incurred general and administrative  expenses in the amount $853,104
during the twelve  months ended  December 31, 2000 as compared with $461,251 for
the twelve months ended December 31, 1999.  This increase of $391,853  primarily
reflects the results of a full twelve  months of operations in calendar 2000 and
is  principally  comprised  of an  increase  in  depreciation  and  amortization
expenses of $170,857 and amortization of software development costs of $138,636.
The  amortization  of such costs did not commence until October 1, 1999, and the
amortization of software  licenses costs of $22,860 increased as these costs did
not  commence   until  May  1999.   The   remaining   increase  in  general  and
administrative  expenses  of $59,500  is  primarily  a result of overall  higher
levels of spending in the first half of 2000. From inception to date general and
administrative expenses totaled $1,416,328.

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 twelve months ended  December 31, 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 third quarter of 2000 and have been
classified as discontinued operations.

Interest  expense (net)  increased  during the twelve months ended  December 31,
2000 by $41,470,  as compared with the previous twelve months due to an increase
in interest  expense of $30,235  combined with a decrease in interest  income of
$11,235.  From inception to date, interest expense totaled $100,244 and interest
income totaled $11,235.

Liquidity and Capital Resources

Since  inception  the Company has  incurred net losses of  $3,363,345  and had a
working capital deficit of $566,366 as of December 31, 2000.

During the first half of calendar  2000,  the Company's  cash flow  requirements
were provided  primarily by stockholder loans of $140,000 and sale of stock. See
"Market for Common  Equity and Related  Stockholders  Matters - Recent  Sales of
Unregistered Securities".

During the second half of calendar 2000,  the Company's  cash flow  requirements
were  provided  solely by related  party loans.  In order to continue to finance
operations, the Company will continue to borrow against the Revolving Promissory
Note from ICES. The total amount of principal  borrowings  permitted  under said
note is $750,000.

The amounts of these borrowings were $155,400 during the second half of calendar
2000 and the total amount outstanding at December 31, 2000 was $190,450. Accrued
interest under this note totaled $6,595 as of December 31, 2000.


                                       14
<PAGE>

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 December  31,  2000,  Compuces  has  advanced  the  Company  approximately
$294,071.  This amount has been treated as a capital  investment  and  therefore
bears no interest.

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 issued by ICES.

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  resources.  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.  If  additional  funds are raised by the issuance of debt or other
equity  instruments,  the Company may be subject to certain  limitations  in its
operations,  and the issuance of such securities may have rights senior to those
of the then  existing  holders of common  stock.  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.

The  Company  has been  investigating  additional  sources  of  revenue  through
strategic  alliances  and  acquisitions  of  existing  businesses.   Should  the
opportunity  arise where the Company's  management  believes that an acquisition
candidate can be beneficial to future operations,  the Company may seek to raise
additional  capital or to issue additional  shares as necessary to complete such
an acquisition.  The Company may also consider  filing a registration  statement
for its  shares  in order to better  position  the  Company  to  finance  future
operations and acquisitions and to increase stockholder value and liquidity.

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 its entire deferred tax asset to zero.  Accordingly,  there is no benefit
for income taxes in the accompanying financial statements.

The Company  owes IC $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 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 $7,311 at December 31, 2000.


                                       15
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

The Company has  implemented  the  provisions  of  Statement  of Position  98-5,
"Reporting on the Costs of Start-up  Activities,"  effective May 1999. SOP 98-5,
issued by the  Accounting  Executive  Committee  of the  American  Institute  of
Certified  Public   Accountants,   requires  that  the  costs  of  all  start-up
activities,  as defined in the SOP, be expensed as incurred. The adoption of the
provisions  of this SOP did not  materially  impact the results of operations or
the financial position of the Company.

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities."  SFAS  133
establishes  accounting  and  reporting  standards for  derivative  instruments,
including some derivative instruments imbedded in other contracts  (collectively
referred to as derivatives)  and for hedging  activities.  SFAS 133 requires the
recognition of all  derivatives as either assets or liabilities in the statement
of financial  position and the  measurement of those  instruments at fair value.
SFAS No. 133, as amended by SFAS No. 137, is effective  for all fiscal  quarters
of all fiscal  years  beginning  after June 15,  2000.  As the Company  does not
engage or plan to engage in derivative or hedging activities,  there has been no
impact to the Company's results of operations,  financial position or cash flows
upon the adoption of this standard.

In addition,  in December 1999, the SEC Staff issued Staff  Accounting  Bulletin
No. 101, "Revenue Recognition in Financial Statements",  which is required to be
implemented  in the quarter  ended March 31, 2000.  The SEC Staff issued SAB No.
101B in June 2000 to defer the effective date of  implementation  of SAB No. 101
until the fourth  quarter of 2000.  The  Company has adopted SAB No. 101 for its
quarter ended March 31, 2000 with no material  impact on its financial  position
or its results of operations.

In March 2000, the Financial  Accounting  Standards Board issued  Interpretation
No. 44, "Accounting for Certain  Transactions  Involving Stock Compensation," an
interpretation of the Accounting  Principals Board, or APB, Opinion No. 25. This
Interpretation clarifies the application of APB Opinion 25 including:

o     the definition of employee for purposes of applying APB Opinion 25;

o     the criteria for determining whether a plan qualifies as a noncompensatory
      plan;

o     the  accounting  consequence  of various  modifications  to the terms of a
      previously fixed stock option or award; and

o     the accounting for an exchange of stock compensation  awards in a business
      combination

The  Company has adopted  Interpretation  No. 44 with no material  effect on its
financial position or its results of operation.


                                       16
<PAGE>

The Financial  Accounting Standards Board and the Accounting Standards Executive
Committee of the American  Institute of Certified Public  Accountants had issued
certain  accounting  pronouncements  as of  December  31,  2000 that will become
effective in  subsequent  periods;  however,  management of the Company does not
believe that any of those pronouncements  would have significantly  affected the
Company's  financial  accounting  measurements  or disclosures  had they been in
effect  during the years  ended  December  31,  2000,  1999 and the period  from
January  14,  1998  (inception)  to  December  31,  2000  or  that  will  have a
significant affect at the time they become effective.

Item 7. Financial Statements.

      The financial statements listed in the accompanying Index, attached hereto
      at page 26 of this Form 10-KSB, are filed as part of this report.

Item 8. Changes  in  and  Disagreements  with  Accountants  on   Accounting  and
        Financial Disclosure.

      The Company has changed its  certifying  accountants  from Mahoney Cohen &
      Company, CPA, P.C. to J.H. Cohn, LLP on October 4, 2000.



                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act.

The names,  ages and  positions  of all  directors  and  executive  officers  of
Younetwork as of March 29, 2001 are listed below, followed by a brief account of
their business experience during the past five years.


NAME                       AGE      POSITION

Don S. Senerath            31       Chief Executive Officer & Co-Chairperson
Henry Kauftheil            39       Co-Chairperson
Joseph C. Sienkiewicz      44       Chief Financial Officer & Director
Eric Ruder                 35       Vice President & Secretary
Benson Altman              41       Director
Martin Gelber              43       Director

Don S.  Senerath has been  Co-Chairman  of the Board of Directors of the Company
since May 19, 2000 and  Chairman  since  inception in January 1998 until May 19,
2000. Mr.  Senerath has also been the Company's  Chief  Executive  Officer since
October  4,  2000.  Mr.  Senerath  has  been  responsible  for  the  design  and
development of the Younetwork  software  architecture  as well as its deployment
platform.  Mr.  Senerath  is  also a  Chairman  of  IC,  an IT  development  and
management  services  company he  founded  in 1997.  During his tenure at IC, he
managed the development of large-scale  back-end electronic commerce systems for
major  corporations  including AIG and Reader's  Digest,  Inc. From 1994 through
1997,  Mr.  Senerath was the Chief Engineer at Integrated  Media,  Inc. where he
developed Internet  transaction and multi-media systems for GE Capital,  Miramax
Films, NTT America and Glaxo Welcome as well as interactive  television products
for Verizon (formerly Nynex and Bell Atlantic). In 1994, Mr. Senerath received a
Bachelor of Science degree in Electrical  Engineering and Computer  Science from
Cornell University,  where his academic research concentrated on the compression
and delivery of media with applications in marketing and distribution.


                                       17
<PAGE>

Henry  Kauftheil has been  Co-Chairman  of the Board of Directors of the Company
and a director since May 19, 2000, and was Interim Chief Executive  Officer from
such date until October 4, 2000. Mr. Kauftheil has held the position of Chairman
and Chief  Executive  Officer of ICES, an Internet  technology  holding  company
based in New York City, New York since December 30, 1996. Mr. Kauftheil has over
two  decades  of  advertising  and  marketing  experience  including  designing,
printing and mailing  catalogs for companies such as AT&T,  Bulova Watches,  and
ABC Carpet.  ICES is currently host to over 25 enterprises in various industries
including  web  design,  software  and  consulting,  print and  design,  medical
products distribution and directed marketing. Mr. Kauftheil has been featured in
various prestigious publications including Forbes, Business Week On-Line and The
New York Times for his accomplishments.

Joseph C.  Sienkiewicz  has been Chief  Financial  Officer and a director of the
Company since May 19, 2000 and Chief  Financial  Officer of ICES since  November
15, 1999.  Mr.  Sienkiewicz  has extensive  experience  with the  Securities and
Exchange  Commission,  mergers  and  acquisitions,   international  finance  and
operations and financial  systems  implementation.  Immediately prior to joining
ICES, Mr. Sienkiewicz served as Chief Financial Officer of Atwood Richards,  Inc
from February 1996 to September 1999, a $500 million international  multilateral
trading  organization  with  offices  in 29  countries.  From  1995 to 1996  Mr.
Sienkiewicz  served as Chief Financial Officer at Ogden  Corporation's  Aviation
Services Group; restructuring the group through acquisitions, joint ventures and
closing of operations  worldwide.  Mr.  Sienkiewicz was employed by Revlon,  Inc
from 1992  through  1995 and held the  position of Chief  Financial  Officer and
General  Manager of their Retail Group in 1995. He has also served in management
accounting positions at KPMG, The Great A&P Tea Company and Corning,  Inc. He is
a Certified Public  Accountant in New York and New Jersey, a member of the AICPA
and holds a MS in Federal  Taxation from Pace  University and a BS in Accounting
from  Seton  Hall  University.  Mr.  Sienkiewicz  also  serves  on the  board of
directors of various non-profit organizations.

Eric Ruder has been Vice  President,  Secretary  and a director  of the  Company
since May 19, 2000 and has served as  Associate  General  Counsel for ICES since
February  28,  2000.  Prior to joining  ICES,  Mr. Ruder has been engaged in the
private  practice of corporate,  commercial  and  securities law in New York for
approximately seven years with the law firms of Shulte, Roth & Zabel LLP, Akabas
& Cohen, and Graham & James LLP.


                                       18
<PAGE>

Mr.  Ruder  received  his JD in 1993 from the Fordham  University  School of Law
where he served as an  Assistant  Editor of the Fordham Law Review and  received
the American Jurisprudence Award in Constitutional Law. Mr. Ruder graduated from
the University of California at Berkeley with high honors in 1987.

Benson Altman has been a director of the Company since May 19, 2000.  Mr. Altman
was recently appointed President of ValueVenture.com  LLC, a subsidiary of ICES,
in January 2001.  Mr. Altman has previously  served as a business  consultant in
charge of real estate  acquisitions  for  Universal  Equities,  Inc., a New York
based investment firm from 1994 to 1999. Prior to his involvement with Universal
Equities,  Mr. Altman independently  managed or consulted for several companies,
most recently for Phoenix Shipping Supplies, Inc. located in Montreal, Canada.

Martin Gelber has served as a director since May 19, 2000. He also has been Vice
President  of ICES since June 1999.  Mr.  Gelber had been engaged in the private
practice of corporate,  commercial  and  securities law in New York for close to
twenty  years  with the law firms of  Stroock & Stroock & Lavan;  Feit & Ahrens;
Klein & Solomon LLP, prior to joining ICES in April,  1999. Mr. Gelber graduated
from Yeshiva  College,  summa cum laude,  in 1977, and received his J.D. in 1981
from NYU School of Law,  where he  graduated  cum laude  Order of the Coif,  and
received the prestigious American Jurisprudence Award in Contract Law.

The Company's directors receive no cash compensation for their services as board
members  and are  not  reimbursed  for  expenses  incurred  in  connection  with
attending  board  meetings.  All  directors  hold  office  until the next annual
meeting of the  stockholders  and until their  successors have been duly elected
and qualified.  Executive  officers are elected by and serve at the direction of
the  board of  directors.  There are no  family  relationships  among any of our
directors or executive officers.

Compliance with Section 16(a) of the Exchange Act.

The Company does not have a class of securities  registered  pursuant to Section
12 of the Securities Exchange Act of 1934, as amended;  therefore, the Company's
officers,  directors and affiliates are not subject to the reporting obligations
set forth in Section 16(a) of the Exchange Act.

Item 10. Executive Compensation.

Summary Compensation Table

The following table sets forth  information  with respect to compensation to the
Company's Chief Executive Officer.  No executive officer of the Company received
an aggregate salary, bonus and other compensation which exceeded $100,000 during
each of the fiscal years ended December 31, 2000, 1999 and 1998.


                                       19
<PAGE>

<TABLE>
<CAPTION>

                                          Annual Compensation                       Long-Term Compensation
                                                                         Restricted   Securities
  Name and Principal                 Other               Other Annual      Stock      Underlting     LTIP       All Other
       Position           Year    Salary (1)    Bonus    Compensation      Awards    Options/SARs   Payouts   Compensation
       --------           ----    ----------    -----     ------------     ------    ------------   -------   ------------
<S>                       <C>      <C>           <C>          <C>         <C>             <C>         <C>         <C>
Don Senerath, CEO (2)     2000       -0-         -0-          -0-            -0-          -0-         -0-         -0-

George Santacroce (3)     2000     $40,000       -0-          -0-         2,000,000       -0-         -0-         -0-
                          1999     $20,000       -0-          -0-           100,000       -0-         -0-         -0-
</TABLE>

(1)   Excludes  perquisites and other personal benefits that in the aggregate do
      not exceed 10% of each of such individual's total salary and bonus.

(2)   Mr. Senerath  became the Chief  Executive  Officer on October 4, 2000. Mr.
      Senerath has agreed to perform  services without  compensation  until such
      time as cash flow from operations permits or the Company is able to obtain
      additional financing.

(3)   Mr.  Santacroce  joined  Younetwork in November of 1999 and terminated his
      employment on May 1, 2000. Pursuant to this termination of employment, Mr.
      Santacroce  was issued  2,000,000  shares in lieu of all other  options or
      agreements.

None of the Company's  current  executive  officers served as such during fiscal
years 1999 or 1998, all such officers other than Mr. Senerath being appointed as
of May 2000.

Neither the Chief Executive Officer nor any other executive officer has received
any restricted stock awards, options or stock appreciation rights in 2000.

Currently the Company does not have any employment agreements.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

Set forth below is a table  showing,  as of March 29, 2001, the number of shares
of common stock owned beneficially by (i) each person owning more than 5% of the
outstanding  shares of common stock,  (ii) each  director of the Company,  (iii)
each officer of the Company and (iv) all officers and directors as a group.  The
percentage  provided  in the  percent  of class  column is based on  224,579,132
shares of common stock issued and  outstanding  as of March 29, 2001,  including
518,000  vested  stock  options to purchase  common  stock.  The address of each
beneficial owner is c/o Younetwork Corporation,  18 West 18th, Street, New York,
New York 10011.


                                       20
<PAGE>

                                                  Amount and Nature
       Name and Address of                          of Beneficial        Percent
      Beneficial Owner (1)     Title of Class       Ownership (2)       of Class
      --------------------     --------------       -------------       --------
Don S. Senerath                Class C Common         12,045,000          5.4%
Compuces, Inc                  Class C Common        179,682,080         80.0%
Henry Kauftheil (3)            Class C Common           -0-               -0-
Joseph C. Sienkiewicz (3)      Class C Common           -0-               -0-
Eric Ruder (3)                 Class C Common           -0-               -0-
Benson Altman                  Class C Common           -0-               -0-
Martin Gelber (3)              Class C Common           -0-               -0-

All Officers and Directors
as a Group (3)                 Class C Common        190,751,528         85.4%


(1)   Except as otherwise  stated,  the persons named in this table,  based upon
      information  provided by these  persons,  have sole voting and  investment
      power with respect to all shares of common stock owned by them

(2)   Beneficial  ownership is determined  in  accordance  with the rules of the
      Securities  and Exchange  Commission.  In  computing  the number of shares
      beneficially  owned  by a  person  and the  percentage  ownership  of that
      person,  shares of common  stock  which is issuable  upon the  exercise of
      warrant or stock option which is presently  exercisable  or which  becomes
      exercisable  within 60 days of March 29,  2001,  are  deemed  outstanding.
      Percentage of  beneficial  ownership is based upon  224,579,132  shares of
      Class C common stock  outstanding  as of March 29, 2001. To our knowledge,
      except  as set  forth  in the  footnotes  to this  table  and  subject  to
      applicable  community  property  laws,  each person named in the table has
      sole  voting and  investment  power  with  respect to the shares set forth
      opposite such person's name.

(3)   Mr. Kauftheil is the Chairman of Compuces and ICES. Mr. Sienkiewicz is the
      Chief Financial  Officer of Compuces and ICES. Mr. Ruder is Vice President
      of Compuces.  Mr. Gelber is Vice  President  and General  Counsel of ICES.
      Except for Mr.  Kauftheil,  each of the  foregoing  individuals  disclaims
      beneficial ownership of the shares of the Company held by Compuces.

Item 12. Certain Relationships and Related Transactions

On May 19, 2000,  the Company sold to Compuces  shares of the Company's  Class C
common stock in an amount constituting, after giving effect to such sale, 80% of
the  Company's  outstanding  shares of Class C common  stock on a fully  diluted
basis. See "Market for Common Equity and Related  Stockholders  Matters - Recent
Sales of Unregistered  Securities" and  Management's  Discussion and Analysis or
Plan of  Operation - Liquidity  and  Capital  Resources".  ICES owns 100% of the
issued share capital of Compuces.


                                       21
<PAGE>

IC,  formerly  known as Digital Pulp  Technologies,  LLC  provides  software and
system  integration  consultation  services  in  connection  with the  Company's
efforts to build its website and to develop its proprietary tracking technology.
ICES and an entity  partially  owned by Don S.  Senerath,  the  Company's  Chief
Executive  Officer,  own IC. For the period from inception  through December 31,
1998, the Company paid IC $89,425 for such  consulting  service.  In March 1999,
the  Company  entered  into an oral  agreement  with IC to  continue  to provide
software and systems  integration  consultation  services to the Company,  which
will be paid  $50,000  per  month for such  service  through  completion  of the
proprietary software development.  A total of $250,000 was paid pursuant to this
agreement,  and the  outstanding  amount  of  $194,966  has been  reported  as a
long-term obligation of the Company.

On November 1, 1999,  the Company  entered  into an  employment  agreement  with
George Santacroce to serve as the Company's Chief Executive Officer. The term of
the agreement was until October 31, 2001. Mr. Santacroce was entitled to receive
a base compensation of $120,000 for the first nine months following  November 1,
1999 and  commencing  August 1, 2000 through the end of the term was entitled to
receive a base  salary at a rate of  $400,000  per annum,  payable in arrears in
equal  installments.   The  employment   agreement  contained  a  provision  for
performance based bonuses,  including  non-qualified stock options, as well as a
non-compete  clause for a period of six months  following the termination of Mr.
Santacroce's  employment.  In addition,  if the Company terminated the agreement
without cause, Mr.  Santacroce would be entitled to a severance payment equal to
the amount of $20,000 multiplied by the number of months of employment completed
prior to termination up to a maximum of $180,000. If Mr. Santacroce's employment
was terminated without cause after nine months of the term, or the agreement was
not extended for an additional  term, the severance  payment was to be $180,000.
He also received  stock  options for 2,000,000  shares of common stock at prices
ranging  from  $1.10 to $8.00 per share,  which  vest over a period of  eighteen
months  and a  restricted  stock  award  of  100,000  shares.  Pursuant  to  the
termination  of Mr.  Santacroce's  employment  with the Company in May 2000, all
obligations  between  the  Company  and  Mr.  Santacroce   terminated,   and  in
consideration Mr. Santacroce was issued 2,000,000 shares of common stock in lieu
of all other  options or  agreements.  In  addition,  the  Company is to pay Mr.
Santacroce $5,000 for six consecutive months commencing January 2001.

In  December  1998,  Dalia  Silverman,  the  wife of a former  director,  and an
unrelated third party,  purchased  8,910,000 Class C shares and received options
to purchase,  along with such shares,  an additional 27% of the Company's common
stock.  In March of 1999, the two  individuals  exercised their options and each
received an additional 739,726 Class C shares. See "Market for Common Equity and
Related Stockholders Matters - Recent Sales of Unregistered Securities".


                                       22
<PAGE>

The Company  owes IC $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 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 $7,311 at December 31, 2000.

The Company has provided hosting management services to various  subsidiaries of
ICES during the year ended December 31, 2000 totaling $66,450.

The Company has entered into a management  services agreement on October 1, 2000
with ICES at a cost of $2,500  per month for  certain  administrative  functions
provided to the Company,  which  include  accounting,  tax,  legal and marketing
services. The expenses totaled $7,500 during the fourth quarter, which is unpaid
at December 31, 2000.


Item 13. Exhibits, List and Reports on Form 8-K.

(a) List of Exhibits

2.1    Agreement  and Plan of Merger,  dated  February  3, 1999,  by and between
       Younetwork  Corp., a New York corporation and Younetwork  Corporation,  a
       Delaware   corporation   (incorporated  by  reference  to  the  Company's
       registration statement on Form SB-2 (file No 333-71949).

2.1.1  Stock  Purchase  Agreement  dated  as of May  19,  2000  by  and  between
       Compuces, Inc. and Younetwork (incorporated by reference to the Company's
       previously filed Roport on Form 8-K dated June 4, 2000).

3.1    Certificate of Incorporation of Registrant,  as amended  (incorporated by
       reference to the Company's  registration statement on Form SB-2 (file No.
       333-71949).

3.2    By-Laws  of  Registrant  (incorporated  by  reference  to  the  Company's
       registration statement on Form SB-2 (file No. 333-71949).

4.1    Specimen  certificate  representing  Registrant's  class A  common  stock
       (incorporated  by reference to the  Company's  registration  statement on
       Form SB-2 (file No. 333-71949).

4.2    Specimen  certificate  representing  Registrant's  class B  common  stock
       (incorporated  by reference to the  Company's  registration  statement on
       Form SB-2 (file No. 333-71949).

4.3    Specimen  certificate  representing  Registrant's  class C  common  stock
       (incorporated  by reference to the  Company's  registration  statement on
       Form SB-2 (file No. 333-71949).

10.1   Stockholders' Agreement, dated December 4 1998 (incorporated by reference
       to  the  Company's   registration   statement  on  Form  SB-2  (file  No.
       333-71949).


                                       23
<PAGE>

10.2   Stock  and   Warrant   Purchase   Agreement,   dated   December  4,  1998
       (incorporated  by reference to the  Company's  registration  statement on
       Form SB-2 (file No. 333-71949).

10.3   Agreement  between  Muze,  Inc.  and  Younetwork,  dated  January 7, 1999
       (incorporated  by reference to the  Company's  registration  statement on
       Form SB-2 (file No. 333-71949).

10.4   Agreement  between Qwest  International  Inc. (a successor in interest to
       LCI International  Telecom Corp.),  dated March 6, 1998  (incorporated by
       reference to the Company's  registration statement on Form SB-2 (file No.
       333-71949).

10.5   Agreement between Baker & Taylor, Inc. and Younetwork, dated July 9, 1998
       (incorporated  by reference to the  Company's  registration  statement on
       Form SB-2 (file No. 333-71949).

10.6   1999 Stock  Option  Plan  (incorporated  by  reference  to the  Company's
       registration statement on Form SB-2 (file No. 333-71949).

10.7   Master lease agreement between Leasing Technologies,  Inc. and Younetwork
       Corporation,  dated  April 15, 1999  (incorporated  by  reference  to the
       Company's registration statement on Form SB-2 (file No. 333-71949).

10.8   Employment   agreement   between  George   Santacroce   and   Younetwork.
       (incorporated  by reference to the  Company's  1999 Annual Report on Form
       10-KSB (file No. 333-71949)

10.9   Promissory notes between Dalia Silverman and Younetwork. (incorporated by
       reference to the  Company's  1999 Annual  Report on Form 10-KSB (file No.
       333-71949)

10.10  Promissory   notes  between   Kleoplatra   Georgiades   and   Younetwork.
       (incorporated  by reference to the  Company's  1999 Annual Report on Form
       10-KSB (file No. 333-71949)

10.11* Lease   agreement   between  Waltox   Corporation,  N.V.  and  Younetwork
       Corporation, dated July 2, 1999.

10.12* Lease agreement between Elk Investors and Younetwork  Corporation,  dated
       April 3, 1998.

* Filed with this Form 10-KSB

(b) Reports on Form 8-K

The Company  filed one report on Form 8-K on October 5, 2000  reporting a change
in the Company's certifying accountant.  No financial statements were filed with
that report.

(c)  Financial Statements and Independent  Auditor's Report included herein: See
     Index on page 26


                                       24
<PAGE>

                                   SIGNATURES

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

                             YOUNETWORK CORPORATION


                                          By: /s/ Don S. Senerath
                                              ----------------------------------
                                          Title:  Chief Executive Officer
                                                  (Principal Executive Officer)


                                          By: /s/  Joseph C. Sienkiewicz
                                              ----------------------------------
                                          Title:  Chief Financial Officer
                                                  (Principal Financial Officer)

Date: April 6, 2001

       In accordance with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

Date: April 6, 2001                       /s/  Henry Kauftheil
                                          --------------------
                                          Co-Chairman of the Board of Directors


Date: April 6, 2001                       /s/  Don S. Senerath
                                          --------------------
                                          Chief Executive Officer and
                                          Co-Chairman of the Board of Directors


Date: April 6, 2001                       /s/  Joseph C. Sienkiewicz
                                          --------------------------
                                          Chief Financial Officer and Director


Date: April 6, 2001                       /s/  Benson Altman
                                          ------------------
                                          Director


Date: April 6, 2001                       /s/  Martin Gelber
                                          ------------------
                                          Director


                                       25
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)

                                      Index
                                      -----
                                                                           Page
                                                                           -----


Report of Independent Public Accountants J.H. Cohn LLP                      F-1

Independent Auditor's Report of
  Mahoney Cohen & Company, CPA, P.C.                                        F-2

Balance sheet as of December 31, 2000                                       F-3

Statements of Operations  for the Years Ended December 31,
  2000 and 1999 and for the Period January 14, 1998 (Inception)
  to December 31, 2000                                                      F-4

Statements of  Stockholders'  Equity for the Years Ended
  December  31, 2000 and 1999 and for the Period January 14,
  1998 (Inception) to December 31, 2000                                     F-5

Statements of Cash Flows for the Years Ended  December 31, 2000
  and 1999 and for the Period January 14, 1998 (Inception) to
  December 31, 2000                                                         F-8

Notes to Financial Statements                                               F-10

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders
Younetwork Corporation

We have audited the  accompanying  balance  sheet of Younetwork  Corporation,  a
development stage company,  as of December 31, 2000, and the related  statements
of operations,  stockholders'  equity and cash flows for the year then ended and
for the period from January 14, 1998  (inception)  to December  31, 2000.  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 audits. The financial  statements of Younetwork  Corporation,  a development
stage  company,  for the year ended  December  31,  1999 and for the period from
January 14, 1998 (inception) to December 31, 1999 were audited by other auditors
whose  report  dated March 7, 2000  expressed  an  unqualified  opinion on those
statements with an explanatory  paragraph  relating to the Company's  ability to
continue  as a going  concern.  Our  opinion on the  statements  of  operations,
stockholders'  equity  and cash  flows for the  period  from  January  14,  1998
(inception)  to December  31, 2000 as it relates to the period  January 14, 1998
(inception)  to  December  31,  1999 is  based  solely  on the  report  of other
auditors.

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

In our opinion,  the 2000 financial statements referred to above present fairly,
in all material respects,  the financial position of Younetwork  Corporation,  a
development  stage  company,  as of  December  31,  2000,  and  its  results  of
operations  and its cash  flows  for the year  then  ended  in  conformity  with
accounting principles generally accepted in the United States of America. In our
opinion,  based on our audit and the report of other auditors, the statements of
operations, stockholders' equity and cash flows, present fairly, in all material
respects, the results of operations and cash flows of Younetwork Corporation,  a
development  stage company,  for the period from January 14, 1998 (inception) to
December 31, 2000, in conformity with accounting  principles  generally accepted
in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial  statements,  the Company is in the  development  stage,  has incurred
losses  since  inception of  $3,363,345  and expects to incur net losses for the
foreseeable  future.  At December  31, 2000,  the Company had a working  capital
deficit of $566,366.  These factors raise  substantial doubt about the Company's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also described in Note 1. These financial  statements do not include
any adjustments that might result from the outcome of the uncertainty.


                                                     J. H. Cohn LLP

Roseland, New Jersey
March 26, 2001


                                      F-1
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

The Board of Directors
YouNetwork Corporation

We have audited the accompanying statements of operations,  stockholders' equity
and cash flows of YouNetwork  Corporation,  a development stage company, for the
year  ended  December  31,  1999  and for  the  period  from  January  14,  1998
(inception)  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 the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the 1999 financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Younetwork
Corporation,  a development stage company,  for the year ended December 31, 1999
and for the period from January 14, 1998  (inception)  to December 31, 1998,  in
conformity with generally accepted accounting principles.






                                       /s/  Mahoney Cohen & Company, CPA, P.C.
                                            ----------------------------------
                                            Mahoney Cohen & Company, CPA, P.C.


New York, New York
March 7, 2000


                                      F-2
<PAGE>

                          YOUNETWORK CORP
                   (A Development Stage Company)
                           Balance Sheet
                      As of December 31, 2000

                               ASSETS
                                                               December 31, 2000
                                                               -----------------
Current assets:
  Cash and cash equivalents                                       $     2,449
  Due from related parties                                             66,450
                                                                  -----------
                    Total current assets                               68,899
                                                                  -----------
Property and equipment, net                                           472,761

Other assets:
  Software development costs, net                                     323,486
  Software license, net                                                37,726
  Security deposits                                                   187,452
  Other assets                                                         21,074
  Intangible assets, net                                               19,444
                                                                  -----------
                  Total other assets                                  589,182
                                                                  -----------
                                                                  $ 1,130,842
                                                                  ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current portion of capital lease obligations                    $   254,440
  Notes payable - stockholders                                        100,000
  Accounts payable                                                    247,460
  Other current liabilities                                            33,365
                                                                  -----------
                      Total current liabilities                       635,265
                                                                  -----------

Revolving credit line - ICES                                          190,450
Accrued interest payable - related parties                             13,906
Due to related party - other                                           17,602
Due to related party - International Computing, LLC                   194,966
                                                                  -----------
                      Total other liabilities                         416,924
                                                                  -----------
                      Total liabilities                             1,052,189
                                                                  -----------
Commitments and contingencies
Stockholders' equity:
Common stock:
Class A - par value $.0001 per share:
  Authorized - 1,500,000 shares
  Issued and outstanding - 8,980 shares                                     1
Class B - par value $.0001 per share:
  Authorized - 1,500,000 shares
  Issued and outstanding - 1,988 shares                                    --
Class C - par value $.0001 per share:
  Authorized - 247,000,000 shares
  Issued and outstanding - 223,827,132 shares                          22,383
Additional paid-in capital                                          3,425,543
Receivable in connection with equity transaction                       (5,929)
Deficit accumulated during the development stage                   (3,363,345)
                                                                  -----------
Total stockholders' equity                                             78,653
                                                                  -----------
                                                                  $ 1,130,842
                                                                  ===========

           See accompanying Notes to Financial Statements


                                      F-3
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                            Statements of Operations
                 for the Years Ended December 31, 2000 and 1999
      and for the Period January 14, 1998 (Inception) to December 31, 2000

<TABLE>
<CAPTION>
                                                                                      For the Period
                                                    Year Ended       Year, Ended     January 14, 1998
                                                   December 31,     December 31,      (Inception) to
                                                       2000             1999        December 31, 2000
                                                  -------------    -------------    -----------------
<S>                                               <C>              <C>                <C>
Revenue                                           $      66,450    $          --      $      66,450

General and administrative expenses                     853,104          461,251          1,416,328
                                                  -------------    -------------      -------------
Operating loss                                         (786,654)        (461,251)        (1,349,878)

Interest (expense) income:
  Interest expense                                      (64,252)         (34,017)          (100,244)
  Interest income                                            --           11,235             11,235
                                                  -------------    -------------      -------------
Interest (expense) income, net                          (64,252)         (22,782)           (89,009)

Loss from continuing operations                        (850,906)        (484,033)        (1,438,887)

Loss from discontinued operations (net
  of income taxes)                                     (628,093)      (1,237,490)        (1,924,458)
                                                  -------------    -------------      -------------
Net loss                                          $  (1,478,999)   $  (1,721,523)     $  (3,363,345)
                                                  =============    =============      =============
Net loss per share:
Loss from continuing operations                           (0.01)           (0.01)
Loss from discontinued operations                            --            (0.03)
                                                  -------------    -------------
Net loss per common share, basic and diluted      $       (0.01)   $       (0.04)
                                                  =============    =============
Weighted average of common shares outstanding -
basic and diluted                                   155,238,269       39,423,603
                                                  =============    =============
</TABLE>

                 See accompanying Notes to Financial Statements


                                      F-4
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                       Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                Class A           Class B                Class C          Additional
                             --------------    --------------     --------------------      Paid-in
                             Shares     $      Shares     $       Shares         $          Capital
                             -------------------------------------------------------------------------
<S>                          <C>      <C>      <C>      <C>       <C>           <C>        <C>
Issuance of 24,090,000
  shares of common
  stock on January 22,
  1998 for cash (at
  less than $.01 per share)     --    $  --       --    $  --     24,090,000    $ 2,409    $    (2,209)

Issuance of 8,910,000
  shares of common
  stock on December 4,
  1998 for cash
  (at $.02 per share)           --       --       --       --      8,910,000        891        199,109

Net loss                        --       --       --       --             --         --             --
                             -------------------------------------------------------------------------
Balance,
  December 31, 1998             --       --       --       --     33,000,000      3,300        196,900

Issuance of 4,630,000
  shares of common
  stock on March 22, 1999
  for cash (at
  $.01 per share)               --       --       --       --      4,630,000        463        462,537

Exercise of common
  stock purchase
  warrants for no cash
  proceeds in
  accordance with anti-
  dilutive provisions           --       --       --       --      1,479,452        148           (148)

Issuance of 2,050,000
  shares of common
  stock on April 19, 1999
  for cash (at $.50
  per share)                    --       --       --       --      2,050,000        205      1,024,795

Issuance of warrants
  for Web Site design           --       --       --       --             --         --         38,000

Issuance of warrants
  for portion of
  computer equipment lease      --       --       --       --             --         --         54,748

Issuance of 595,000
  shares of common
  stock on August 19,
  1999 for cash
  (at $1 per share)             --       --       --       --        595,000          9        594,941

Issuance of 29,000
  shares of common
  stock on October 13,
  1999 for cash
  (at $1 per share)             --       --       --       --         29,000          3         28,997

Issuance of 6,400
  shares of common
  stocks on October 1,
  1999 for advertising
  (at $1 per share)             --       --       --       --          6,400          1          6,399

Issuance of warrants
  for leasehold
  improvements                  --       --       --       --                                   11,000

Issuance of 15,000
  shares of common
  stock on November 9,
  1999 for lease broker
  fees (at $1 per share)        --       --       --       --         15,000          2         14,998

Issuance of 25,000
  shares of common
  stock on December 5,
  1999 for cash
  (at $1 per share)             --       --       --       --         25,000          2         24,998

Shares contributed              --       --       --       --             --         --             --

Issuance of 250,000
  shares of common
  stock on November 7,
  1999 for cash
  (at $.50 per share)           --       --       --       --             --         --        125,000
                             -------------------------------------------------------------------------
Totals carried forward          --       --       --       --     41,829,852      4,183      2,583,165

<CAPTION>
                                                 Deficit
                               Receivable in   Accumulated
                                Connection     During the        Treasury Stock
                                with Equity    Development     -------------------
                                Transaction       Stage         Shares     $              Total
                                ------------------------------------------------------------------
<S>                               <C>          <C>                <C>        <C>       <C>
Issuance of 24,090,000
  shares of common
  stock on January 22,
  1998 for cash (at
  less than $.01 per share)                    $        --           --      $  --     $       200

Issuance of 8,910,000
  shares of common
  stock on December 4,
  1998 for cash
  (at $.02 per share)                                   --           --         --         200,000

Net loss                                          (162,823)          --         --        (162,823)
                                ------------------------------------------------------------------
Balance,
  December 31, 1998                               (162,823)          --         --          37,377

Issuance of 4,630,000
  shares of common
  stock on March 22, 1999
  for cash (at
  $.01 per share)                                       --           --         --         463,000

Exercise of common
  stock purchase
  warrants for no cash
  proceeds in
  accordance with anti-
  dilutive provisions                                   --           --         --              --

Issuance of 2,050,000
  shares of common
  stock on April 19, 1999
  for cash (at $.50
  per share)                                            --           --         --       1,025,000

Issuance of warrants
  for Web Site design                                   --           --         --          38,000

Issuance of warrants
  for portion of
  computer equipment lease                              --           --         --          54,748

Issuance of 595,000
  shares of common
  stock on August 19,
  1999 for cash
  (at $1 per share)                                     --           --         --         595,000

Issuance of 29,000
  shares of common
  stock on October 13,
  1999 for cash
  (at $1 per share)                                     --           --         --          29,000

Issuance of 6,400
  shares of common
  stocks on October 1,
  1999 for advertising
  (at $1 per share)                                     --           --         --           6,400

Issuance of warrants
  for leasehold
  improvements                                          --           --         --          11,000

Issuance of 15,000
  shares of common
  stock on November 9,
  1999 for lease broker
  fees (at $1 per share)                                --           --         --          15,000

Issuance of 25,000
  shares of common
  stock on December 5,
  1999 for cash
  (at $1 per share)                                     --           --         --          25,000

Shares contributed                                      --      250,000         --

Issuance of 250,000
  shares of common
  stock on November 7,
  1999 for cash
  (at $.50 per share)                                   --     (250,000)        --         125,000
                                ------------------------------------------------------------------
Totals carried forward                            (162,823)          --         --       2,424,525
</TABLE>


                                       F-5
<PAGE>

                 Statements of Stockholders' Equity (Continued)

<TABLE>
<CAPTION>
                                Class A           Class B                Class C          Additional
                             --------------    --------------     --------------------      Paid-in
                             Shares     $      Shares     $       Shares         $          Capital
                             -------------------------------------------------------------------------
<S>                          <C>      <C>      <C>      <C>       <C>           <C>        <C>
Totals brought forward          --       --       --       --     41,829,852      4,183      2,583,165

Issuance of 22,500
  shares of common
  stock on November 30,
  1999 for cash
  (at $1 per share)             --       --       --       --         22,500          2         22,498

Registration costs
  incurred                      --       --       --       --             --         --       (218,530)

Issuance of 7,052
  shares of Class A
  common stock               7,052        1       --       --             --         --          7,051

Issuance of 1,058
  shares of Class B
  common stock                  --       --    1,058       --             --         --          1,058

Net loss                        --       --       --       --             --         --             --
                             -------------------------------------------------------------------------
Balance,
  December 31, 1999          7,052        1    1,058       --     41,852,352      4,185      2,395,242

Issuance of 50,000
  shares of common
  stock on April 20,
  2000 to Frank
  Carone for cash (at
  $1 per share)                 --       --       --       --         50,000          5         49,995

Issuance of 50,000
  shares of common
  stock on April 20,
  2000 to Union
  Resources Enterprises,
  Ltd. for cash (at $1
  per share)                    --       --       --       --         50,000          5         49,995

Issuance of 30,000
  shares of common
  stock on April 20,
  2000 to Andrew
  Hirschberg for cash
  (at $1 per share)             --       --       --       --         30,000          3         29,997

Issuance of 50,000
  shares of common
  stock on April 20,
  2000 for cash
  (at $1 per share)             --       --       --       --         50,000          5         49,995

Issuance of 25,000
  shares of common
  stock on April 20,
  2000 to Basic
  Investments for cash
  (at $1 per share)             --       --       --       --         25,000          3         24,997

Issuance of 25,000
  shares of common
  stock on April 20,
  2000 to Isaac
  Sternheim for cash
  (at $1 per share)             --       --       --       --         25,000          3         24,997

Issuance of 16,700
  shares of common
  stock on April 20,
  2000 to Kevin
  Gallagher for cash
  (at $1 per share)             --       --       --       --         16,700          2         16,698

Adjustment to rebate
  payable                       --       --       --       --             --         --         (1,058)

Conversion of F
  Mulchahy -- Domain
  name                          --       --       --       --         10,000          1          9,999

Conversion of George
  Santacroce 2,000,000
  shares of common stock        --       --       --       --      2,000,000        200         59,800
                             -------------------------------------------------------------------------
Totals carried forward       7,052        1    1,058       --     44,109,052      4,411      2,710,657

<CAPTION>
                                                 Deficit
                               Receivable in   Accumulated
                                Connection     During the        Treasury Stock
                                with Equity    Development     -------------------
                                Transaction       Stage         Shares     $              Total
                                ------------------------------------------------------------------
<S>                               <C>          <C>                <C>        <C>       <C>
Totals brought forward                            (162,823)          --         --       2,424,525

Issuance of 22,500
  shares of common
  stock on November 30,
  1999 for cash
  (at $1 per share)                                     --           --         --          22,500

Registration costs
  incurred                                              --           --         --        (218,530)

Issuance of 7,052
  shares of Class A
  common stock                                          --           --         --           7,052

Issuance of 1,058
  shares of Class B
  common stock                                          --           --         --           1,058

Net loss                                        (1,721,523)          --         --      (1,721,523)
                                ------------------------------------------------------------------
Balance,
  December 31, 1999                             (1,884,346)          --         --         515,082

Issuance of
  shares of common
  stock on April 20,
  2000 to Frank
  Carone for cash (at
  $1 per share)                                         --           --         --          50,000

Issuance of 50,000
  shares of common
  stock on April 20,
  2000 to Union
  Resources Enterprises,
  Ltd. for cash (at $1
  per share)                                            --           --         --          50,000

Issuance of 30,000
  shares of common
  stock on April 20,
  2000 to Andrew
  Hirschberg for cash
  (at $1 per share)                                     --           --         --          30,000

Issuance of 50,000
  shares of common
  stock on April 20,
  2000 for cash
  (at $1 per share)                                     --           --         --          50,000

Issuance of 25,000
  shares of common
  stock on April 20,
  2000 to Basic
  Investments for cash
  (at $1 per share)                                     --           --         --          25,000

Issuance of 25,000
  shares of common
  stock on April 20,
  2000 to Isaac
  Sternheim for cash
  (at $1 per share)                                     --           --         --          25,000

Issuance of 16,700
  shares of common
  stock on April 20,
  2000 to Kevin
  Gallagher for cash
  (at $1 per share)                                     --           --         --          16,700

Adjustment to rebate
  payable                                               --           --         --          (1,058)

Conversion of F
  Mulchahy -- Domain
  name                                                  --           --         --          10,000

Conversion of George
  Santacroce 2,000,000
  shares of common stock                                --           --         --          60,000
                                ------------------------------------------------------------------
Totals carried forward                          (1,884,346)          --         --         830,723
</TABLE>


                                      F-6
<PAGE>

                 Statements of Stockholders' Equity (Continued)

<TABLE>
<CAPTION>
                                Class A           Class B                Class C          Additional
                             --------------    --------------     --------------------      Paid-in
                             Shares     $      Shares     $       Shares         $          Capital
                             -------------------------------------------------------------------------
<S>                          <C>      <C>      <C>      <C>       <C>           <C>        <C>
Totals brought forward       7,052        1    1,058       --     44,109,052      4,411      2,710,657

Conversion of Frank
  Mulchahy 25,000
  shares of common stock
  (at $.6 per share)            --       --       --       --         25,000          3         14,997

Conversion of Facilities
  Solutions                     --       --       --       --         11,000          1             (1)

Don Senerath Loan               --       --       --       --             --         --        300,000

To reverse IC accrual
  which was forgiven            --       --       --       --             --         --        115,000

Issuance of 179,682,080
  shares of Compuces, Inc.
  for cash (at $.0017
  per share)                    --       --       --       --    179,682,080     17,968        282,032

Issuance of 1,928 shares
  of Class A common stock    1,928       --       --       --             --         --          1,928

Issuance of 930 shares
  of Class B common stock       --       --      930       --             --         --            930


Net loss                        --       --       --       --             --         --             --
                             -------------------------------------------------------------------------
Balance,
  December 31, 2000          8,980        1    1,988       --    223,827,132     22,383      3,425,543
                             =========================================================================

<CAPTION>
                                                 Deficit
                               Receivable in   Accumulated
                                Connection     During the        Treasury Stock
                                with Equity    Development     -------------------
                                Transaction       Stage         Shares     $              Total
                                ------------------------------------------------------------------
<S>                             <C>          <C>                <C>        <C>       <C>
Totals brought forward                          (1,884,346)          --         --         830,723

Conversion of Frank
  Mulchahy 25,000
  shares of common stock
  (at $.6 per share)                                    --           --         --          15,000

Conversion of Facilities
  Solutions                                             --           --         --              --

Don Senerath Loan                                       --           --         --         300,000

To reverse IC accrual
  which was forgiven                                    --           --         --         115,000

Issuance of 179,682,080
  shares of Compuces, Inc.
  for cash (at $.0017
  per share)                       (5,929)              --           --         --         294,071

Issuance of 1,928 shares
  of  Class A common stock                               --           --         --           1,928

Issuance of 930 shares
  of Class B common stock                               --           --         --             930

Net loss                                        (1,478,999)          --         --      (1,478,999)
                                ------------------------------------------------------------------
Balance,
  December 31, 2000                (5,929)      (3,363,345)          --         --          78,653
                                ==================================================================
</TABLE>

                 See accompanying Notes to Financial Statements


                                      F-7
<PAGE>

                                YOUNETWORK CORP
                         (A Development Stage Company)
                            Statements of Cash Flows
               for the Years Ended December 31, 2000 and 1999 and
        for the Period January 14, 1998 (Inception) to December 31, 2000

<TABLE>
<CAPTION>
                                                                                Period from
                                                                                January 14,
                                                                                    1998
                                                                               (Inception) to
                                                    Year Ended    Year Ended     Year Ended
                                                    December 31,  December 31,   December 31,
                                                       2000          1999           2000
                                                   ----------------------------------------
<S>                                                <C>           <C>           <C>
Cash flows from operating activities:
  Net loss                                         $(1,478,999)  $(1,721,523)  $(3,363,345)
  Adjustments to reconcile net loss to net
   cash used by operating activities:
    Loss from discontinued operations                  628,093     1,237,490     1,924,458
    Depreciation and amortization                      489,742       180,249       677,499
    Amortization of software license                   127,705       104,845       232,550
    Amortization of other assets                         5,556        12,774        18,330
    Warrants and common stock issued for services                     29,510        29,510
  Changes in Other Assets and Liabilities:
    Prepaid expenses                                    59,308       (59,308)           --
    Other assets                                        20,644           672        20,644
    Due from related parties                           (66,450)                    (66,450)
    Accounts payable                                   542,150       105,157       656,531
    Interest payable on loans                           13,906                      13,906
    Due to ICES Ventures                                17,602                      17,602
    Due to related parties                                           176,850       200,000
    Other current liabilities                          (44,408)       63,044        33,365
    Net cash used in operating activities of
     discontinued operations                          (683,093)   (1,237,490)   (1,979,458)
                                                   -----------   -----------   -----------
       Net cash used in operating activities
         of continuing operations                     (368,244)   (1,107,730)   (1,409,858)
                                                   -----------   -----------   -----------

Cash flows from investing activities:
    Purchase of property and equipment                 (13,925)     (256,958)     (280,810)
    Software development costs                                      (447,120)     (516,545)
    Loan to stockholder                                 12,201       (12,201)           --
    Purchase of software license                                    (270,276)     (270,276)
    Payment of security deposits                                    (183,696)     (187,196)
                                                   -----------   -----------   -----------
       Net cash used in investing activities
         of continuing operations                       (1,724)   (1,170,251)   (1,254,827)
                                                   -----------   -----------   -----------

Cash flows from financing activities:
    Proceeds from issuance of common stock             248,500     2,065,970     2,514,670
    Proceeds from revolving credit line - ICES         190,450                     190,450
    Payment on loan to International Computing          (5,034)                     (5,034)
    Proceeds from notes payable stockholders           140,000       200,000       340,000
    Payments of capital lease obligations             (242,626)     (124,930)     (372,952)
                                                   -----------   -----------   -----------
       Net cash provided by financing activities
         of continuing operations                      331,290     2,141,040     2,667,134
                                                   -----------   -----------   -----------

Net increase (decrease) in cash and cash
  equivalents                                          (38,678)     (136,941)        2,449

Cash and cash equivalents, beginning of period          41,127       178,068            --
                                                   -----------   -----------   -----------
Cash and cash equivalents, end of period           $     2,449   $    41,127   $     2,449
                                                   ===========   ===========   ===========
</TABLE>

               See accompanying Notes to the Financial Statements

                                       F-8
<PAGE>

                      Statements of Cash Flows (Continued)

<TABLE>
<S>                                                  <C>           <C>           <C>
    Supplemental Disclosure of Cash
      Flow Information

  Interest paid                                      $    46,538   $    19,977   $    68,490
                                                     ===========   ===========   ===========

      Supplemental Schedule of Non-Cash
      Investing and Financing Activities

Capital lease obligation incurred for the
  acquisition of equipment                           $        --   $   582,442   $   627,392
                                                     ===========   ===========   ===========
Issuance of Class A common stock for services        $        --   $    21,400   $    21,400
                                                     ===========   ===========   ===========
Issuance of Class C common stock for various costs   $   319,071   $        --   $   319,071
                                                     ===========   ===========   ===========
Contribution to capital for liabilities forgiven     $   415,000   $        --   $   415,000
                                                     ===========   ===========   ===========
Issuance of warrants for leasehold improvements      $        --   $    11,000   $    11,000
                                                     ===========   ===========   ===========
Issuance of warrants for acquisition of
  software development costs                         $        --   $    38,000   $    38,000
                                                     ===========   ===========   ===========
Issuance of warrants for portion of
  computer equipment lease                           $        --   $    54,748   $    54,748
                                                     ===========   ===========   ===========
</TABLE>

               See accompanying Notes to the Financial Statements


                                      F-9
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

Younetwork Corporation, a Delaware corporation (the "Company"), is 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
December 31, 2000 $5,267 of such rebates were outstanding.

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.

We did not receive any proceeds from the sale of our Class A or Class B shares.

One Class A share was offered to each of the first  250,000  members at no cost.
The remaining  750,000 Class A shares were reserved for distribution to existing
members based upon referring new members to the consumer network.

Class B shares in our  offering  were offered to a member at a rate of one share
for each $1.00 of a member's purchase  dividend balance,  which may only be paid
with purchase dividends earned by members who purchased products on the consumer
network of our former on-line business.  A purchase dividend balance, or rebate,
was created when a member was credited for a percentage of the value of products
or services  purchased on our former website. A member could have chosen to have
their  purchase  dividend  balance  paid to them in  cash,  purchase  additional
products or services or purchase Class B shares. If a member chose to purchase a
Class B share  with their  purchase  dividend  balance,  the  purchase  dividend
balance was reduced $1.00 for each Class B share purchased.


                                      F-10
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Subsequent to the termination of our on-line business,  a member may only choose
to have their previously earned purchase dividend balance paid to them in cash.

Upon the  issuance  of the  Class A Shares,  the  Company  recorded  a charge to
operations  for promotion  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 made
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  herein,  $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
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 System,
Inc., a Delaware  corporation  ("ICES").  ICES is a privately  held company that
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 December  31, 2000,  Compuces  has  advanced the Company  $294,071 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  activities   associated  with  the  online  business  have  been
classified as discontinued operations.


                                      F-11
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

USE OF ESTIMATES

The  financial  statements  have been  prepared in  conformity  with  accounting
principles  generally  accepted  in The United  States of  America  and as such,
include estimates and assumptions of management that affect the amounts reported
in the financial 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". Under SFAS
109,  deferred  income  taxes are to be provided  for the  effects of  temporary
differences  between the tax basis of assets and  liabilities and their reported
amounts in the financial  statements.  As there are no temporary  differences at
December 31, 2000, deferred taxes have not been provided.

LOSS PER SHARE

The  computation  for  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 earnings per share in the accompanying  statements of operations.
Options and  warrants to purchase  518,000 and 244,000  shares of common  stock,
respectively, have been excluded from the computations of diluted loss per share
for the years ended  December 31, 2000 and 1999,  respectively,  as their effect
would be antidilutive for the respective periods.


                                      F-12
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

CASH  AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. Expenditures for major additions and
betterments are  capitalized.  Maintenance and repairs are charged to operations
as  incurred.  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.  Upon sale
or  retirement  of property  and  equipment,  the related  cost and  accumulated
depreciation  are removed from the accounts and any gain of loss is reflected in
operations.

REVENUE RECOGNITION

Revenue  is  recognized  as the  service  is  provided.  Billings  in advance of
services provided are recorded as deferred revenues.

SOFTWARE DEVELOPMENT COSTS

The Company accounts for its software  development  costs in accordance with the
provisions  of Statement  of Position  98-1,  "Accounting  for Costs of Computer
Software for Internal Use", issued by the American Institute of Certified Public
Accountants  ("SOP  98-1").  Under the  provisions  of SOP 98-1,  certain  costs
incurred in  developing  internal  use  software,  principally  in the  software
application development stage, are eligible for capitalization.

From January 14, 1998  (inception),  the Company  capitalized  $554,545 of costs
incurred related to software application development costs. Such costs are being
amortized on a straight-line  basis over three years commencing October 1, 1999.
To  date,  substantially  all of the  Company's  software  development  has been
conducted by an affiliate, International Computing, LLC ("IC").

The Company  has adopted  guidelines  issued by the  Emerging  Issues Task Force
Issue No.  00-2.  All costs  incurred  in the  planning  stage are  expensed  as
incurred.  Costs  incurred  in the  web  site  application  and  infrastructure,
graphics and content development stage are capitalized.


                                      F-13
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The  Company  applies  the  provisions  of  Statement  of  Financial  Accounting
Standards  No.  107,  "Disclosures  about Fair Value of  Financial  Instruments"
("SFAS  107").  SFAS 107  requires  all  entities to disclose  the fair value of
financial instruments, both assets and liabilities recognized and not recognized
on the balance sheet,  for which it is practicable to estimate fair value.  SFAS
107  defines  fair value of a  financial  instrument  as the amount at which the
instrument could be exchanged in a current  transaction between willing parties.
At  December  31,  2000,  management  believes  the fair value of all  financial
instruments approximated carrying value.

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  courses of  business.  The Company has  incurred
significant net losses. This factor, in addition to a working capital deficiency
and minimal revenue,  raises  substantial  doubt as to the Company's  ability to
continue as a going  concern.  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 as a going concern.
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.

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.  While  operating  under this new  business  plan and until
significant revenues can be generated, the Company intends to keep its operating
overhead at minimal levels by outsourcing all its development, IT management and
sales  functions to qualified third parties,  effectively  making these expenses
variable costs of the revenue model.


                                      F-14
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 3 - PROPERTY AND EQUIPMENT

         Property and equipment consists of:
         Computer equipment                                       $712,730
         Office equipment                                            7,435
         Leasehold improvements                                    197,835
                                                                  --------
                                                                   918,000
         Less accumulated depreciation and
                amortization                                       445,239
                                                                  --------
                                                                  $472,761

Note 4 - CAPITAL LEASE OBLIGATIONS

         Capital lease obligations consist of: Capital lease
         obligations,  payable in monthly installments of
         $22,679,  including interest between 7.45% and
         11%, maturing in December 2001, collateralized by
         specific equipment with a carrying value of $299,961     $264,785

         Less amount representing interest                          10,345
                                                                  --------
                                                                   254,440
         Less current portion                                      254,440
                                                                   -------
                                                                   $     0

Minimum  future lease  payments  under the capital lease as of December 31, 2000
are $254,440 for the year ending December 31, 2001.

The Company  leases  certain  computer  equipment  under an agreement,  which is
classified as a capital lease.  Assets included under capital lease are included
in the balance sheet as follows:


                                      F-15
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements


Note 4 - CAPITAL LEASE OBLIGATIONS (Continued)


         Computer equipment                                         $627,391
         Less accumulated amortization                              (327,430)
                                                                    --------
                                                                    $299,961

Note 5 - NOTES PAYABLE

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  all  other  options  or  agreements  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. No payments have been made and the Company is in negotiations to extend
the payment term under this note.

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 December 31, 2000 is $190,450.  Accrued interest
under this Note totaled $6,595 at December 31, 2000.

The Company has a  non-interest  bearing  promissory  note to Don Senerath,  the
Company's Co-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 purposes.

The Company  owes IC $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 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 $7,311 at December 31, 2000.

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


                                      F-16
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 5 - NOTES PAYABLE (Continued)

Note 6 - AMORTIZATION OF SOFTWARE DEVELOPMENT COSTS

Amortization  of $184,848 and $46,111 for the years ended  December 31, 2000 and
1999,  respectively,  is included in general and administrative  expenses.  From
inception  to  date,  amortization  of  $230,959  is  included  in  general  and
administrative expenses.

Note 7 - DEPRECIATION AND AMORTIZATION

Depreciation and amortization for property, equipment and leasehold improvements
of  $304,894  and  $134,138  for the years  ended  December  31,  2000 and 1999,
respectively, is included in general and administrative expenses. From inception
to date,  depreciation  and  amortization of $446,441 is included in general and
administration expenses.

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 $127,705 and $104,845 for the years ended
December  31,  2000  and  1999,   respectively,   is  included  in  general  and
administrative   expenses.   From   inception  to  date,   capitalized   license
amortization of $232,550 is included in general and administrative expenses.

Note 8 - 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 and Class B Shares.

Subsequently, the Company has decided to terminate its business and redeploy its
infrastructure to provide eCommerce hosting  management  services.  Accordingly,
the  operations and financial  activities  directly  associated  with the online
business have 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.


                                      F-17
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 8 - DISCONTINUED OPERATIONS (Continued)

Note 9 - INCOME TAXES

At December  31,  2000,  the Company  has federal and state net  operating  loss
carryforwards  ("NOLs") of approximately  $804,000 for tax purposes that will be
available to offset future taxable income. If not used, these carryforwards will
expire  at  various  dates  through  2020.  A  deferred  tax  asset has not been
recognized  at  December  31,  2000 for these NOLs as it is more likely than not
that these deferred tax assets will not be realized.  The amount of deferred tax
assets considered realizable, however, could be increased in the near term based
upon changing  conditions.  The Company has established a valuation allowance of
approximately  $322,000  with  respect  to  these  federal  carryforwards.   The
difference between the statutory rate of 34% and the Company's effective rate of
0% is due to the change in the  valuation  allowance.  The  valuation  allowance
decreased  by  $408,000  during  the year  ended  December  31,  2000 due to the
elimination  of deferred tax assets and  increased  by $664,900  during the year
ended December 31, 1999.

Note 10 - RELATED PARTY TRANSACTIONS

The Company has provided hosting management services to various  subsidiaries of
ICES during the year ended December 31, 2000 totaling $66,450.

The  Company has  borrowed  $48,176  from ICES and has  accrued  interest in the
amount of $4,159  under the  Revolving  Promissory  Note during the three months
ended  December 31, 2000.  At December 31, 2000,  the Company owes ICES $190,450
and accrued interest of $6,595 under this note.

IC,  formerly  known as Digital Pulp  Technologies,  LLC  provides  software and
system  integration  consultation  services  in  connection  with the  Company's
efforts to build its website and to develop its proprietary tracking technology.
ICES and an entity  partially  owned by Don S.  Senerath,  the  Company's  Chief
Executive  Officer,  own IC. For the period from inception  through December 31,
1998, the Company paid IC $89,425 for such  consulting  service.  In March 1999,
the  Company  entered  into an oral  agreement  with IC to  continue  to provide
software and systems  integration  consultation  services to the Company,  which
will be paid  $50,000  per  month for such  service  through  completion  of the
proprietary software development. A total of $250,000 was paid pursuant to this



                                      F-18
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements


Note 10 - RELATED PARTY TRANSACTIONS (Continued)

agreement,  and the  outstanding  amount  of  $194,966  has been  reported  as a
long-term obligation of the Company.

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
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 $7,311 at December 31, 2000.

The Company pays for shared  facilities on a month-to-month  basis from ICES for
its computer  facilities room and is charged its prorata share of such occupancy
expenses  based upon the actual cost  incurred  by ICES.  The  expenses  totaled
$2,357  during the fourth  quarter.  The Company  owes ICES a total of $5,283 at
December 31, 2000 for these expenses.  The lease for the shared facilities is in
the name of the Company and the Company is  obligated  under this lease  through
June 2002. There are no guarantees for this lease by ICES.

ICES Ventures, Inc., a wholly owned subsidiary of ICES, paid certain expenses on
behalf of the Company  during the fourth quarter of 2000 totaling  $4,819.  This
amount is  outstanding at December 31, 2000 and will be repaid to ICES Ventures,
Inc. in 2001.

The Company has entered into a management  services agreement on October 1, 2000
with ICES at a cost of $2,500  per month for  certain  administrative  functions
provided to the Company,  which  include  accounting,  tax,  legal and marketing
services. The expenses totaled $7,500 during the fourth quarter, which is unpaid
at December 31, 2000.

Note 11 - COMMITMENTS AND CONTINGENCIES

Operating Leases:
The  Company  is  currently  obligated  under  an  operating  lease  for  office
facilities in New York City, which expires in June 2002. All payments under this
lease have been paid by ICES and the only cost for the actual space  occupied by
the Company's computer facilities room have been charged to the Company. Minimum
annual future lease payments under this lease are as follows:


                                      F-19
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements


Note 11 - COMMITMENTS AND CONTINGENCIES (Continued)

Year Ending December 31,

           2001                                $132,000
           2002                                  66,000
                                               --------
               Total                           $198,000
                                               ========

Litigation:

The  Company is  involved  in three  lawsuits  arising out of the conduct of its
business.  While the ultimate outcomes of these proceedings  cannot be predicted
with  certainty,  management  believes the overall effect of these lawsuits will
not be material to the Company's financial statements.

The Company had also rented a leased  facility in the Borough of Manhattan,  New
York consisting of  approximately  1,000 square feet of office space,  which was
under a lease that expires April 3, 2003.  The Company has cancelled  this lease
effective  February 1, 2001 pursuant to a negotiated  settlement with the lessor
for $9,000.  The settlement  calls for forfeiture of the $5,500 security deposit
and cash  payments  totaling  $3,500.  This total  liability  of $9,000 has been
accrued for at December 31, 2000

Note 13 - STOCK OPTION PLAN

In October  1999,  the Board of Directors  and the  stockholders  of the Company
approved a Stock Option Plan (the "1999  Plan") which  provides for the granting
of options to purchase up to 4,000,000 shares of common stock, pursuant to which
key  employees,  directors  and  consultants  are eligible to receive  incentive
and/or  non-qualified  stock options.  The exercise  period and price of options
granted  under  the 1999 Plan are  determined  by the  Board of  Directors.  The
exercise price for incentive stock options must not be less than the fair market
value of the shares of common  stock on the date of the grant,  except  that the
exercise price of options  granted to a stockholder  owning more than 10% of the
outstanding  capital  stock may not be less  than 110% of the fair  value of the
common stock at date of grant.

In accordance with the provisions of Accounting  Principles  Board Opinion (APB)
No. 25,  "Accounting  for Stock Issued to Employees," the Company will recognize
compensation  costs as a result of the  issuance of stock  options  based on the
excess,  if any, of the fair value of the underlying  stock at the date of grant
or award (or at an appropriate  subsequent measurement date) over the amount the
employee  must pay to acquire  the stock.  Therefore,  the  Company  will not be
required to  recognize  compensation  expense as a result of any grants of stock
options at an exercise  price that is  equivalent to or greater than fair value.
The Company  will also make pro forma  disclosures,  as required by Statement of
Financial  Accounting  Standards  (SFAS) No. 123,  "Accounting  for  Stock-Based
Compensation,"  of net  income  or  loss  as if a fair  value  based  method  of
accounting  for stock  options had been applied  instead if such amounts  differ
materially from the historical amounts.


                                      F-20
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 13 - STOCK OPTION PLAN (Continued)

On May 1, 2000 the  Company  issued  options to purchase  203,000  shares of the
common stock at $.10 per share that expire in May 2005 to employees. At the time
the options were issued,  the fair value of the Company's common stock was $.002
per share. Accordingly, no compensation costs were recorded.

A summary of applicable  option  activity and related  information  for the year
ended December 31, 2000 is as follows:


                                                                Weighted-Average
                                                  Options         Exercise Price
                                                  -------       ----------------
Options outstanding at January 1, 1999              -0-                -0-
Options granted                                   2,317,500          $2.58
Exercised                                           -0-                -0-
Cancelled                                           -0-                -0-
Options outstanding at December 31, 1999          2,317,500          $2.58
Granted                                             203,000          $0.10
Exercised                                           -0-                -0-
Cancelled                                        (2,002,500)         $2.82
                                                 ----------
Options outstanding at December 31, 2000            518,000          $0.67
                                                 ==========
Options exercisable at December 31, 1999            315,000          $1.04
                                                 ==========
Options exercisable at December 31, 2000            518,000          $0.67
                                                 ==========


The  weighted-average  fair  value of  options  granted  during  1999 was  $.56.
Exercise prices for options outstanding ranged from $.10 to $1.15 as of December
31, 2000. These options expire at various times through May 2005.

The fair value of the  options  granted was  estimated  at the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions for 2000 and 1999:


                                                     2000             1999
                                                     ----             ----
Expected volatility                                  746%             231%
Risk-free interest rate                                6%               6%
Expected years of option life                     3 years        10 months
Expected dividends                                     0%               0%


                                      F-21
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                          Notes to Financial Statements

Note 13 - STOCK OPTION PLAN (Continued)

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the option vesting period.  The effects of applying
SFAS No. 123 for pro forma  disclosures are not likely to be  representative  of
the effects on reported net income or losses for future years. The Company's pro
forma information for the year ended December 31, 1999 follows:

                  Pro forma net loss                          $(1,922,523)

                  Pro forma net loss per share                $      (.05)

Pro forma  information  was not presented  for the year ended  December 31, 2000
because it would have an immaterial effect on the reported loss.


                                      F-22