SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

(Mark One)

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

      For the Quarterly period ended March 31, 2001.

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

      For the transition period from ________ to ___________

Commission File Number 0-25238

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

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

                  18 West 18th Street, New York, New York 10011
--------------------------------------------------------------------------------
                     (Address of Principal Executive Office)

                                 (212) 647-8901
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

                     115 East 23rd, New York, New York 10010
--------------------------------------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

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

Yes [x]  No [ ]

      State the  number of shares  outstanding  of each of  issuer's  classes of
common equity,  as of the latest  practicable  date: As of May 14, 2001,  10,968
shares of Registrant's Class B Common Stock,  $.0001 par value, were outstanding
and 223,827,132 shares of Registrant's  Class C Common Stock,  $.0001 par value,
were outstanding.


<PAGE>


                             YOUNETWORK CORPORATION
              10-QSB FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                      INDEX

                                                                           Page
                                                                          Number

Part I: Financial Information

Item 1  Financial Statements

   Condensed Balance Sheets as of March 31, 2001 (unaudited) and
   December 31, 2000 ....................................................   -3-

   Condensed Statement of Operations for the Three Months Ended
   March 31, 2001 and 2000 and for the period January 14, 1998
   (Inception) to March 31, 2001 (Unaudited) ............................   -4-

   Condensed Statements of Stockholders' Equity (Deficiency) for the
   Three Months Ended March 31, 2001 and for the period January 14, 1998
   (Inception) to March 31, 2001 (Unaudited) ............................   -5-

   Condensed Statements of Cash Flows for the Three Months Ended
   March 31, 2001 and 2000 and for the period January 14, 1998
   (Inception) to March 31, 2001 (Unaudited) ............................   -8-

   Notes to Condensed Unaudited Financial Statements ....................  -10-

Item 2 Management's Discussion and Analysis of Financial
   Condition and Results of Operations ..................................  -16-

Part II: Other Information

Item 1 Legal Proceedings ................................................  -20-

Item 2 Changes in Securities and Use of Proceeds ........................  -20-

Item 3 Defaults Upon Senior Securities ..................................  -20-

Item 4 Submission of Matters to a Vote of Security Holders ..............  -20-

Item 5 Other Information ................................................  -21-

Item 6 Exhibits and Reports on Form 8-K .................................  -21-

Signatures ..............................................................  -22-


                                       2
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                            Condensed Balance Sheets
                   As of March 31, 2001 and December 31, 2000

                                     ASSETS
                                     ------

<TABLE>
<CAPTION>
                                                                           March 31, 2001      December 31, 2000
                                                                            (Unaudited)
                                                                           --------------      -----------------
<S>                                                                        <C>                    <C>
Current assets:
  Cash and cash equivalents                                                $     2,657            $     2,449
  Due from related parties                                                      95,500                 66,450
                                                                           -----------            -----------
                    Total current assets                                        98,157                 68,899
                                                                           -----------            -----------

Property and equipment, net                                                    396,408                472,761
                                                                           -----------            -----------

Other assets:
  Software development costs, net                                              277,274                323,486
  Software license, net                                                         15,090                 37,726
  Security deposits                                                            100,126                187,452
  Other assets                                                                  15,600                 21,074
  Intangible assets, net                                                        17,361                 19,444
                                                                           -----------            -----------
                  Total other assets                                           425,451                589,182
                                                                           -----------            -----------

                                                                           $   920,016            $ 1,130,842
                                                                           ===========            ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY/(Deficiency)
                -------------------------------------------------

Current liabilities:
  Current portion of capital lease obligations                             $   165,013            $   254,440
  Notes payable - stockholders                                                 100,000                100,000
  Revolving credit line - ICES                                                 292,035                   --
  Accrued interest payable - related parties                                    22,862                   --
  Accounts payable                                                             223,434                247,460
  Other current liabilities                                                     35,167                 33,365
                                                                           -----------            -----------
                      Total current liabilities                                838,511                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                194,966
                                                                           -----------            -----------
                      Total other liabilities                                  194,966                416,924

                                                                           -----------            -----------
                      Total liabilities                                      1,033,477              1,052,189
                                                                           -----------            -----------

Comittments and Contingencies

Stockholders' equity/(deficiency):

Common stock:

Class A - par value $.0001 per share:
  Authorized - 1,500,000 shares, none outstanding
Class B - par value $.0001 per share:
  Authorized - 1,500,000 shares
  Issued and outstanding - 10,968 shares                                             1                      1
Class C - par value $.0001 per share:
  Authorized - 247,000,000 shares
  Issued and outstanding - 223,827,132 shares                                   22,383                 22,383
Additional paid-in capital                                                   3,425,543              3,425,543
Receivable in connection with equity transaction                                (2,782)                (5,929)
Deficit accumulated during the development stage                            (3,558,606)            (3,363,345)

                                                                           -----------            -----------
                Total stockholders' equity / (deficiency)                     (113,461)                78,653
                                                                           -----------            -----------

                                                                           $   920,016            $ 1,130,842
                                                                           ===========            ===========
</TABLE>

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


                                       3
<PAGE>

                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                       Condensed Statements of Operations
               for the Three Months Ended March 31, 2001 and 2000
       and for the Period January 14, 1998 (Inception) to March 31, 2001
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                            For the Period
                                                               Three Months           Three Months         January 14, 1998
                                                              Ended March 31,       Ended March 31,         (Inception) to
                                                                   2001                  2000                March 31, 2001
                                                              ---------------       ---------------        ----------------
<S>                                                           <C>                    <C>                    <C>
Revenue                                                       $      40,050          $          --          $     106,500

General and administrative expenses                                 216,694                289,555              1,633,022
                                                              -------------          -------------          -------------

Operating loss                                                     (176,644)              (289,555)            (1,526,522)

Interest (expense)  income:
  Interest expense                                                  (18,617)               (18,987)              (118,861)
  Interest income                                                        --                    241                 11,235

Loss from continuing operations                                    (195,261)              (308,301)            (1,634,148)

Loss from discontinued operations (net
  of income taxes)                                                       --                (49,007)            (1,924,458)
                                                              -------------          -------------          -------------
Net loss                                                      $    (195,261)         $    (357,308)         $  (3,558,606)
                                                              =============          =============          =============

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

Weighted average of common shares outstanding -
basic and diluted                                               223,827,132             41,862,495
                                                              =============          =============
</TABLE>

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


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                                Receivable in
                                                Class A        Class B             Class C         Additional    Connection
                                           ----------------------------------------------------      Paid-in     with Equity
                                           Shares     $    Shares    $      Shares         $         Capital     Transaction
                                           ------------------------------------------------------------------------------------
<S>                                          <C>       <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         59      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
  stock 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           --

</TABLE>

<TABLE>
<CAPTION>
                                                          Deficit
                                                        Accumulated
                                                         During the     Treasury Stock
                                                        Development     ---------------
                                                           Stage           Shares   $            Total
                                                       ------------------------------------------------
<S>                                                    <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
  stock 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>


                                       5
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                Receivable in
                                                Class A        Class B             Class C         Additional    Connection
                                           ----------------------------------------------------      Paid-in     with Equity
                                           Shares     $    Shares    $      Shares         $         Capital     Transaction
                                           ------------------------------------------------------------------------------------
<S>                                        <C>        <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           --

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

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

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          1       16,698           --

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

Conversion of George Santacroce
  2,000,000 shares of common stock
  on May 1, 2000                              --      --     --     --     2,000,000        200       59,800           --

                                           ------------------------------------------------------------------------------------
Totals carried forward                     7,052       1  1,058     --    44,120,052      4,412    2,710,656           --
</TABLE>


<TABLE>
<CAPTION>
                                                          Deficit
                                                        Accumulated
                                                         During the     Treasury Stock
                                                        Development     ---------------
                                                           Stage           Shares   $            Total
                                                       ------------------------------------------------
<S>                                                    <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

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

Conversion of Facilties Solutions                             --          --        --              --

Issuance of  50,000 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)                        --          --        --          16,699

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

Conversion of George Santacroce
  2,000,000 shares of common stock
  on May 1, 2000                                              --          --        --          60,000

                                                      -------------------------------------------------
Totals carried forward                               (1,884,346)          --        --         830,723

</TABLE>


                                       6
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                Receivable in
                                                Class A        Class B             Class C         Additional    Connection
                                           ----------------------------------------------------      Paid-in     with Equity
                                           Shares     $    Shares    $      Shares         $         Capital     Transaction
                                           ------------------------------------------------------------------------------------
<S>                                        <C>        <C> <C>      <C>   <C>            <C>      <C>              <C>
Totals brought forward                     7,052       1  1,058     --    44,120,052      4,412    2,710,656           --

Conversion of Frank Mulchahy 25,000
  shares of common stock (at
  $.60 per share)                             --      --     --     --        25,000          3       14,997           --

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       (5,929)

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           --

Conversion of Class A Shares to
  Class B Shares                          (8,980)     (1) 8,980      1            --         --           --           --

Net loss                                      --      --     --     --            --         --           --           --

                                           ------------------------------------------------------------------------------------
Balance, December 31, 2000                    --      -- 10,968      1   223,827,132     22,383    3,425,543       (5,929)

Payment in connection with
  equity transaction                          --      --     --     --            --         --           --        3,147

Net loss                                      --      --     --     --            --         --           --            0

Balance (deficiency), March 31, 2001          --    $ -- 10,968    $ 1   223,827,132   $ 22,383    3,425,543     $ (2,782)
                                           ====================================================================================
</TABLE>



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

Conversion of Frank Mulchahy 25,000
  shares of common stock (at
  $.60 per share)                                            --            --     --          15,000

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)                                                 --            --     --         294,071

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

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

Conversion of Class A Shares to
  Class B Shares                                             --            --     --              --

Net loss                                             (1,478,999)           --     --      (1,478,999)


Balance, December 31, 2000                           (3,363,345)           --     --          78,654

Payment in connection with
  equity transaction                                         --            --     --           3,147

Net loss                                               (195,261)           --     --        (195,261)

Balance (deficiency), March 31, 2001               $ (3,558,606)           --   $ --      $ (113,461)
                                                   =========================================================
</TABLE>

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


                                       7
<PAGE>


                             YOUNETWORK CORPORATION
                          (A Development Stage Company)
                       Condensed Statements of Cash Flows
             for the Three Months Ended March 31, 2001 and 2000 and
          for the Period January 14, 1998 (Inception) to March 31, 2001
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                        Period form
                                                                             Three          Three       January 14,
                                                                             Months         Months         1988
                                                                             Ended          Ended      (Inception)
                                                                            March 31,      March 31,     March 31,
                                                                              2001           2000          2001
                                                                          ------------   -----------    ------------
<S>                                                                        <C>            <C>            <C>
Cash flows from operating activities:
  Net loss                                                                $  (195,261)   $  (357,308)   $(3,558,606)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Loss from discontinued operations                                                         49,007      1,924,458
    Depreciation and amortization                                             122,565        122,056        800,064
    Amortization of software license                                           22,636         44,933        255,186
    Amortization of other assets                                                2,083                        20,413
    Warrants and common stock issued for services                                                            29,510
  Changes in Other Assets and Liabilities:
    Other assets                                                                5,474         12,135         26,118
    Due from related parties                                                                                (66,450)
    Accounts payable                                                          (24,026)       134,114        632,505
    Interest payable on loans                                                   8,956                        22,862
    Due to ICES                                                                                              17,602
    Due to related parties                                                    (46,652)       (52,768)       153,348
    Other current liabilities                                                   1,802         30,192         35,167
    Net cash used in operating activities of discontinued operations                        (224,007)    (1,804,458)
                                                                          -----------    -----------    -----------
     Net cash used in operating activities of continuing operations          (102,423)      (241,646)    (1,512,281)
                                                                          -----------    -----------    -----------
Cash flows from investing activities:
    Purchase of property and equipment                                                       (12,925)      (280,810)
    Software development costs                                                                   (70)      (516,545)
    Loan to stockholder                                                                       (8,103)
    Purchase of software license                                                                           (270,276)
    Payment of security deposits                                               87,326                       (99,870)
                                                                          -----------    -----------    -----------
     Net cash provided by (used in) investing activities of
      continuing operations                                                    87,326        (21,098)    (1,167,501)
                                                                          -----------    -----------    -----------
Cash flows from financing activities:
    Proceeds from issuance of common stock                                                   196,700      2,514,670
    Proceeds from revolving credit line - ICE                                 101,585                       292,035
    Payment on loan to International Computing, LLC                                                          (5,034)
    Proceeds from notes payable stockholders                                                 110,000        340,000
    Proceeds from receivable in connection with equity transaction              3,147                         3,147
    Payments of capital lease obligations                                     (89,427)       (63,614)      (462,379)
                                                                          -----------    -----------    -----------
     Net cash provided by financing activities of continuing operations        15,305        243,086      2,682,439
                                                                          -----------    -----------    -----------
Net increase (decrease) in cash and cash equivalents                              208        (19,658)         2,657

Cash and cash equivalents, beginning of period                                  2,449         41,127
                                                                          -----------    -----------    -----------
Cash and cash equivalents, end of period                                  $     2,657    $    21,469    $     2,657
                                                                          ===========    ===========    ===========
</TABLE>

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


                                       8
<PAGE>

                      Statements of Cash Flows (Concluded)

        Supplemental Disclosure of Cash Flow Information

<TABLE>
<CAPTION>
                                                                                                        Period form
                                                                             Three          Three      January 14,
                                                                             Months         Months         1988
                                                                             Ended          Ended      (Inception)
                                                                            March 31,      March 31,     March 31,
                                                                              2001           2000          2001
                                                                          ------------   -----------    ------------
<S>                                                                       <C>            <C>            <C>
  Interest paid                                                           $     5,335    $     9,108    $    73,825
                                                                          ===========    ===========    ===========
  Supplemental Schedule of Non-Cash Investing and Financing Activities
Capital lease obligation incurred for the acquisition of equipment                                      $   627,392
                                                                          ===========    ===========    ===========
Issuance of Class A common stock for services                                                           $    21,400
                                                                          ===========    ===========    ===========
Issuance of Class C common stock for various costs                                                      $   319,071
                                                                          ===========    ===========    ===========
Contribution to capital for liabilities forgiven                                                        $   415,000
                                                                          ===========    ===========    ===========
Issuance of warrants for leasehold improvements                                                         $    11,000
                                                                          ===========    ===========    ===========
Issuance of Class C common stock for service mark                                        $    10,000    $    10,000
                                                                          ===========    ===========    ===========
Issuance of warrants for acquisition of software development costs                                      $    38,000
                                                                          ===========    ===========    ===========
Issuance of warrants for portion of computer equipment lease                                            $    54,748
                                                                          ===========    ===========    ===========
</TABLE>

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


                                       9
<PAGE>

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

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.

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 Common Stock,
$.0001 par value per share ("Class B Shares").  Of the total number of the Class
A Shares  registered,  250,000  shares were reserved for issuance of one Class A
share to each of the first 250,000  members at no cost.  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.  This  Registration
Statement became effective in July 1999.

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  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 B Shares.

Compuces  is  a  wholly-owned  subsidiary  of  International  Commerce  Exchange
Systems, 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 not to exceed $300,000.  As of March
31, 2001,  Compuces has advanced the Company  $297,218 for the repayment of such
debts.

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


                                       10
<PAGE>

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 on-line  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.  As a result of the  termination of the
Company's  on-line  business,  members may only choose to have their  previously
earned purchase dividend rebate balances paid in cash. At March 31, 2001, $5,267
of such rebates were outstanding.

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

The condensed financial statements included in this Form 10-Q have been prepared
by the Company,  without  audit,  pursuant to the rules and  regulations  of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles  generally  accepted  in The  United  States  of  America  have  been
condensed, or omitted, pursuant to these rules and regulations. The December 31,
2000  balance  sheet and  statement  of  stockholders'  equity was derived  from
audited financial  statements,  but does not include all disclosures required by
accounting principles generally accepted in The United States of America.  These
unaudited interim condensed  financial  statements should be read in conjunction
with the Company's  financial  statements  and related notes  included in Annual
Report on Form  10-KSB for the year ended  December  31,  2000 as filed with the
Securities and Exchange Commission.

The interim condensed financial statements presented herein as of March 31, 2001
and for the three months then ended, reflect, in the opinion of management,  all
adjustments (which include only normal,  recurring  adjustments) necessary for a
fair  presentation of financial  position and the results of operations and cash
flows for the  periods  presented.  The  results of  operations  for any interim
period are not necessarily indicative of results for the full year.

USE OF ESTIMATES

The  condensed  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  financials  statements.  Actual results could differ from these
estimates.


                                       11
<PAGE>

LOSS PER SHARE

Basic and diluted loss per share  calculations are based on the weighted average
number of common shares  outstanding  including  common stock  equivalents.  The
Company's  basic and diluted  earnings  per share  calculations  are the same as
earnings per share in the accompanying  condensed statements of operations.  The
exercise of options  and  warrants  have been  excluded  in the  calculation  of
diluted earnings per share as the result would be antidilutive.

CHANGES IN CAPITAL

The Company did not receive any proceeds from the sale of its Class A or Class B
shares and, in  accordance  with the terms of the  Registration  Statement,  all
8,980  outstanding Class A shares were converted to Class B shares. As a result,
the Company has 10,968 Class B Shares outstanding at March 31, 2001.

Note 2 - GOING CONCERN

The Company's  condensed  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.  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  condensed 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.

Note 3 - AMORTIZATION OF SOFTWARE DEVELOPMENT COSTS

Amortization of software  development costs of $46,212 and $46,218 for the three
months ended March 31, 2001 and 2000,  respectively,  is included in general and
administrative  expense. From January 14, 1998 (inception) to date, amortization
of $277,271 is included in general and administrative expenses.


                                       12
<PAGE>

Note 4 - DEPRECIATION AND AMORTIZATION

Depreciation and amortization for property, equipment and leasehold improvements
of $76,353  and  $75,838  for the three  months  ended  March 31, 2001 and 2000,
respectively,  is included in general and administrative  expenses. From January
14, 1998  (inception)  to date,  depreciation  and  amortization  of $522,793 is
included in general and administrative 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 $22,636 and $44,933 for the three  months
ended  March  31,  2001 and 2000,  respectively,  is  included  in  general  and
administrative  expenses. From January 14, 1998 (inception) to date, capitalized
license  amortization  of $255,186  is  included  in general and  administrative
expenses.

Note 5 - DISCONTINUED OPERATIONS

In June 2000, the Company  suspended its web site and related  on-line  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 on-line  business  and
redeploy its  infrastructure to provide eCommerce hosting  management  services.
Accordingly,  the operations and financial  activities  directly associated with
the on-line 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.

Note 6 - INCOME TAXES

At March 31,  2001,  the  Company  has  federal  and state  net  operating  loss
carryforwards  ("NOLs") of approximately  $999,000 for tax purposes that will be
available to offset  future  taxable  income.  At December 31, 2000,  these NOLs
totaled approximately  $804,000. If not used, these carryforwards will expire at
various  dates  through  2021. A deferred tax asset has not been  recognized  at
March 31, 2001 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
$399,000 with respect to these federal and state carryforwards.


                                       13
<PAGE>

Note 7 - NOTES PAYABLE AND RELATED PARTY TRANSACTIONS

The Company has provided hosting management services to various  subsidiaries of
ICES during the three months ended March 31, 2001 totaling $40,050.

The Company has borrowed $101,585 from ICES and has incurred interest expense in
the amount of $6,031 under the Revolving Promissory Note during the three months
ended March 31,  2001.  At March 31, 2001,  the Company  owes ICES  $292,035 and
accrued interest of $12,626 under this note.

The Company has two non-interest bearing promissory notes payable of $60,000 and
$40,000 outstanding at March 31, 2001.

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 on May 1, 2000
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 a  non-interest  bearing  promissory  note to Don Senerath,  the
Company's Co-Chairperson,  Chief Executive Officer and a Director of the Company
("Senerath")  in the amount of $40,000.  This  amount is payable  upon demand by
Senerath to the extent that the Company has funds available for such purposes.

Pursuant to the Stock Purchase Agreement, the outstanding amount due of $194,966
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. Interest expense to IC for this debt totaled $2,924 for the three
months ended March 31, 2001,  and total amount  outstanding  is $10,236 at March
31, 2001.

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

The Company has subleased its 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 expenses
totaled  $2,927 during the three months ended March 31, 2001.  The lease for the
facility 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.


                                       14
<PAGE>

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 three months ended March 31,
2001.

Note 8 - COMMITMENTS AND CONTINGENCIES

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 has  received  written
notification from Globix  Corporation on April 12, 2001 that they have withdrawn
their complaint with respect to outstanding payments due.

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, the
Company has paid the December 2000 rent and has made payments  totaling  $10,000
against the remaining $35,000 due under the judgment.

An action was brought by EIN  Corporation  against  the Company and  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  entered  into a  settlement
agreement on April 30, 2001 for $10,000  payable over eight months.  The Company
made the first required payment of $2,000 on May 1, 2001.

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.


                                       15
<PAGE>

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

The matters discussed in this section contain forward-looking  statements within
the meaning of Section 21E of the  Securities  Exchange Act of 1934, as amended,
and Section 27A of the  Securities  Act of 1933, as amended,  that involve risks
and   uncertainties.   All  statements   other  than  statements  of  historical
information  provided  herein  maybe  deemed to be  forward-looking  statements.
Without  limiting the foregoing,  the words "may",  "will",  "could",  "should",
"intends", "thinks", "believes", "anticipates", "estimates", "plans", "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 and the Company's  Annual Report on Form 10-KSB,  for the year ended
December  31, 2000.  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 and the Form 10-KSB.

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


                                       16
<PAGE>

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

OVERVIEW

The Company, a Delaware corporation,  was incorporated on January 14, 1998 under
the name  YouNetwork  Corp., a New York  corporation  and,  pursuant to a merger
effective  February 3, 1999, the stockholders of YouNetwork Corp.  exchanged all
of their common stock for 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.  As a result  of the  termination  of its Web Site and
related online business, the outstanding rebates can only be exchanged for cash.
At March 31, 2001, $5,267 of such rebates are outstanding.

The Company did not receive any proceeds from the sale of its Class A or Class B
shares and, in  accordance  with the terms of the  Registration  Statement,  all
8,980  outstanding Class A shares were converted to Class B shares. As a result,
the Company has 10,968 Class B Shares outstanding at March 31, 2001.

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.


                                       17
<PAGE>

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2001 COMPARED WITH MARCH 31, 2000

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

Total  revenues  were  $40,050 for the three  months  ended March 31,  2001,  an
increase of $40,050  over the three  months  ended March 31,  2000.  The Company
incurred  operating  expenses in the amount of $216,694  during the three months
ended March 31,  2001,  a decrease of $72,861 as compared  with the three months
ended  March  31,  2000.  This  reduction  is  principally  comprised  of  lower
accounting   and   legal   fees   ($35,216),   occupancy   expenses   ($26,257),
telecommunications  costs ($9,381),  and depreciation and amortization ($19,700)
partially offset by additional  expenses for early  termination  costs of leased
equipment ($10,000) and management fees from ICES ($7,500).

All revenues and operating  expenses  relating to the former online business for
the three  months  ended March 31,  2000 have been  classified  as  discontinued
operations.

As a result of the above,  the  Company's  net loss was  $195,000  for the three
months  ended March 31, 2001, a decrease of  approximately  $162,000  from a net
loss of $357,000 for the three months ended March 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

Since  inception  the Company has  incurred net losses of  $3,558,606  and has a
working capital deficiency of $740,354 at March 31, 2001.

During  the  three  months  ended  March  31,  2000,  the  Company's  cash  flow
requirements  were provided  principally  by  stockholder  loans of $110,000 and
subscriptions  to purchase Class C Shares of $196,700.  These shares were issued
during the second quarter of 2000.

During  the  three  months  ended  March  31,  2001,  the  Company's  cash  flow
requirements  were provided  principally by related party loans of $101,585.  In
order to finance  its future  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  and  the  total  amount
outstanding  at March 31, 2001 is  $292,035.


                                       18
<PAGE>

Interest expense under this Note totaled $6,031 for the three months ended March
31, 2001,  and the total amount of accrued  interest  outstanding  is $12,357 at
March 31, 2001.

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.
For the three months ended March 31, 2001,  Compuces advanced the Company $3,147
and, cumulatively, $297,218 through March 31, 2001. This amount has been treated
as a capital investment and therefore bears no interest.

The Company  continues to evaluate its operating cost structure and  renegotiate
existing  relationships  in  order to  reduce  expenses,  eliminate  unnecessary
spending and to shift  expenses from fixed to variable.  This  process,  coupled
with services provided by ICES at beneficial rates to the Company,  has resulted
in an overall reduction in expenditures.

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 holders of such issued 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 in which 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 is also considering filing a registration statement
with the  Securities  and Exchange  Commission for its shares in order to better
position  the  Company to finance  future  operations  and  acquisitions  and to
increase stockholder value and liquidity.


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<PAGE>

                           PART II - OTHER INFORMATION

Item 1      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 has received  written  notification  from Globix  Corporation on
            April 12, 2001 that they have withdrawn their complaint with respect
            to outstanding payments due.

            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.

            An action was  brought by EIN  Corporation  against  the Company and
            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  entered into a settlement on April 30, 2001 for $10,000
            payable  over eight  months.  The  Company  made the first  required
            payment of $2,000 on May 1, 2001.

            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 2      Changes in Securities and Use of Proceeds.

            None.

Item 3      Defaults Upon Senior Securities.

            None.

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

            Not applicable.


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<PAGE>

Item 5      Other Information.

            None.

Item 6      Exhibits and Reports on Form 8-k.

            (a) Exhibits.

            None.

            (b) Current Reports on Form 8-K.

            None


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<PAGE>

                                   SIGNATURES

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

                                            YOUNETWORK CORPORATION

Dated: May 14, 2001

                                            By: /s/ Don Senerath
                                                --------------------------------
                                            Chairman & Chief Executive Officer
                                            (Principal Executive Officer)

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


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