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 June 30, 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)

--------------------------------------------------------------------------------
              (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 July 23, 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 JUNE 30, 2001

                                      INDEX

<TABLE>
<CAPTION>
                                                                         Page
                                                                        Number
<S>       <C>                                                            <C>
Part I:   Financial Information

Item 1    Financial Statements

          Condensed Balance Sheets as of June 30, 2001
          (unaudited) and December 31, 2000.............................   -3-

          Condensed  Statements of  Operations  for the
          Three And Six Months Ended June 30,  2001
          and 2000 and for the period  January 14, 1998
          (inception) to June 30, 2001 (unaudited)......................   -4-

          Condensed  Statements of Stockholders' Equity
          (Deficiency) for the Six Months Ended
          June 30, 2001 and for the period January 14, 1998
          (inception) to June 30, 2001 (unaudited)......................   -5-

          Condensed  Statements  of Cash Flows for the
          Six Months Ended June 30, 2001
          and 2000 and for the period January 14, 1998
          (inception) to June 30, 2001 (unaudited).....................    -8-

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

Item 2    Management's Discussion and Analysis of Financial
          Condition and Results of Operations..........................   -14-

Part II:  Other Information

Item 1    Legal Proceedings............................................   -18-

Item 2    Changes in Securities and Use of Proceeds....................   -18-

Item 3    Defaults Upon Senior Securities..............................   -18-

Item 4    Submission of Matters to a Vote of Security Holders..........   -18-

Item 5    Other Information............................................   -18-

Item 6    Exhibits and Reports on Form 8-K.............................   -18-

Signatures.............................................................   -19-

</TABLE>


                                       2
<PAGE>

                               YOUNETWORK CORPORATION
                           (A Development Stage Company)
                              Condensed Balance Sheets
                     As of June 30, 2001 and December 31, 2000

<TABLE>
<CAPTION>
                                                                               June 30, 2001           December 31,
                                                                                (Unaudited)                 2000
                                                                                -----------            -----------

                                       ASSETS
                                       ------
<S>                                                                             <C>                    <C>
Current assets:
  Cash and cash equivalents                                                     $       246            $     2,449
  Net current assets of discontinued operations                                          --                651,711
                                                                                -----------            -----------
                  Total current assets                                                  246                654,160
                                                                                -----------            -----------

Security deposits                                                                        --                 49,756
                                                                                -----------            -----------
                  Total other assets                                                     --                 49,756
                                                                                -----------            -----------

                                                                                $       246            $   703,916
                                                                                ===========            ===========

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

Current liabilities:
  Notes payable - stockholders                                                      100,000                100,000
  Note payable - ICES, Inc.                                                         269,295                     --
  Accrued interest payable - ICES, Inc.                                              19,643                     --
  Accounts payable                                                                   66,023                 74,974
  Other current liabilities                                                          29,984                 33,365
  Net current liabilities of discontinued operations                                314,578                     --
                                                                                -----------            -----------
                  Total current liabilities                                         799,523                208,339
                                                                                -----------            -----------

Due to related party - International Computing, LLC                                 194,966                194,966
Accrued interest payable - International Computing, LLC                              13,160                  7,311
Note payable - ICES, Inc.                                                                --                190,450
Accrued interest payable - ICES, Inc.                                                    --                  6,595
Due to Related Party - other                                                             --                 17,602
                                                                                -----------            -----------
                  Total other liabilities                                           208,126                416,924
                                                                                -----------            -----------
                  Total liabilities                                               1,007,649                625,263
                                                                                -----------            -----------

Commitments and Contingencies

Stockholders' (deficiency)/equity:

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                                         --                 (5,929)
Deficit accumulated during the development stage                                 (4,455,330)            (3,363,345)
                                                                                -----------            -----------
                  Total stockholders' (deficiency) / equity                      (1,007,403)                78,653
                                                                                -----------            -----------

                                                                                $       246            $   703,916
                                                                                ===========            ===========
</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 And Six Months Ended June 30, 2001 and 2000
        and for the Period January 14, 1998 (inception) to June 30, 2001
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                                                     For the Period
                                                  Three Months     Three Months     Six Months       Six Months     January 14, 1998
                                                 Ended June 30,   Ended June 30,   Ended June 30,   Ended June 30,   (inception) to
                                                     2001             2000             2001            2000           June 30, 2001
                                                 --------------   --------------   --------------   --------------  ----------------
<S>                                              <C>              <C>              <C>              <C>               <C>
Revenue                                          $          --    $          --    $          --    $          --     $          --

General and administrative expenses                     23,549           45,589           49,706          132,530           351,161
                                                 -------------    -------------    -------------    -------------     -------------

Operating loss                                         (23,549)         (45,589)         (49,706)        (132,530)         (351,161)

Interest expense                                        (9,941)          (1,860)         (18,897)          (1,860)          (32,803)
Interest income                                            184               11              184              252            11,419
                                                 -------------    -------------    -------------    -------------     -------------
Loss from continuing operations                        (33,306)         (47,438)         (68,419)        (134,138)         (372,545)
                                                 -------------    -------------    -------------    -------------     -------------

Loss from discontinued operations (net
  of income taxes)                                    (234,698)        (700,755)        (394,846)        (971,352)       (3,454,065)

Loss on disposal of discontinued
  operations (net of income taxes)                    (628,720)              --         (628,720)              --          (628,720)
                                                 -------------    -------------    -------------    -------------     -------------
Net loss                                         $    (896,724)   $    (748,193)   $  (1,091,985)   $  (1,105,490)    $  (4,455,330)
                                                 =============    =============    =============    =============     =============

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

Weighted average of common shares
  outstanding - basic and diluted                  223,827,132      131,285,043      223,827,132       86,082,496
                                                 =============    =============    =============    =============
</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)
               For the Six Months Ended June 30, 2001 and for the
              Period January 14, 1998 (inception) to June 30, 2001
                                   (unaudited)

<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            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
                                        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
  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>
                                                     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

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

<CAPTION>

                                       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

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>



                                                               Class A                        Class B
                                                       ----------------------         ---------------------
                                                       Shares              $          Shares             $
                                                       ----------------------         ---------------------

<S>                                                     <C>                 <C>        <C>              <C>
Totals brought forward                                  7,052               1          1,058             --

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

Don Senerath Loan                                          --              --             --             --

To reverse IC accrual which was
  forgiven                                                 --              --             --             --

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

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                (8,980)            (1)          8,980              1

Net loss                                                   --              --             --             --
                                                       ----------------------         ---------------------
Balance, December 31, 2000                                 --              --         10,968              1

Payment in connection with equity transaction              --              --             --             --

Net loss                                                   --              --             --             --
                                                       ----------------------         ---------------------
Balance, June 30, 2001                                     --             $--         10,968        $     1
                                                       ======================         =====================

<CAPTION>

                                                                                                                  Deficit
                                                                                               Receivable in    Accumulated
                                                             Class C              Additional    Connection      During the
                                                     ---------------------         Paid-in      with Equity     Development
                                                     Shares             $          Capital      Transaction        Stage
                                                     ---------------------       ----------    -------------    ------------

<S>                                              <C>                 <C>         <C>                <C>        <C>
Totals brought forward                             44,120,052          4,412      2,710,656             --      (1,884,346)

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             --              --

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

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

Net loss                                                   --             --             --             --      (1,478,999)
                                                  --------------------------      ---------         ------    -------------
Balance, December 31, 2000                        223,827,132         22,383      3,425,543         (5,929)     (3,363,345)

Payment in connection with equity transaction              --             --             --          5,929              --

Net loss                                                   --             --             --             --      (1,091,985)
                                                  --------------------------      ---------         ------    -------------
Balance, June 30, 2001                            223,827,132   $     22,383      3,425,543         $   --    $ (4,455,330)
                                                  ==========================      =========         ======    =============


<CAPTION>
                                                Treasury Stock
                                              -------------------
                                              Shares           $           Total
                                              -------------------         -------

<S>                                                                       <C>
Totals brought forward                          --             --         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                                       --             --
                                              -------------------    -------------
Net loss                                        --             --      (1,478,999)

Balance, December 31, 2000                      --             --          78,653

Payment in connection with
  equity transaction                                           --           5,929

Net loss                                        --             --      (1,091,985)
                                              -------------------    -------------
Balance, June 30, 2001                          --            $--    $ (1,007,403)
                                              ===================    =============
</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 Six Months Ended June 30, 2001 and 2000 and
          for the Period January 14, 1998 (inception) to June 30, 2001
                                   (unaudited)

<TABLE>
<CAPTION>

                                                                                         Period from January
                                                            Six Months      Six Months       14, 1998
                                                          Ended June 30,  Ended June 30, (inception) to June
                                                               2001           2000           30, 2001
                                                          --------------  -------------- -------------------
<S>                                                        <C>            <C>            <C>
Cash flows from operating activities:
  Net loss                                                 $(1,091,985)   $(1,105,490)   $(4,455,330)
Adjustments to Reconcile Net Loss to Net Cash
  Used in Operating Activities:
    Loss from discontinued operation                         1,023,566        971,352      4,082,785
    Changes in Other Assets and Liabilities:
    Accounts payable                                           (56,038)      (380,381)    (1,426,261)
    Due to related parties                                       1,295        145,797        232,803
    Other current liabilities                                   (3,381)        41,217         29,984
                                                           -----------    -----------    -----------
     Net cash used in operating activities
       of continuing operations                               (126,543)      (327,505)    (1,536,019)
                                                           -----------    -----------    -----------

Cash flows from investing activities:
   Purchase of property and equipment                               --        (13,925)      (280,810)
   Software development costs                                       --             --       (516,545)
   Loan to stockholder                                              --         12,201             --
   Purchase of software license                                     --             --       (270,276)
   Net Application (Payment) of security deposits              131,326             --        (55,870)
                                                           -----------    -----------    -----------
     Net cash provided by (used in)
       investing activities                                    131,326         (1,724)    (1,123,501)
                                                           -----------    -----------    -----------

Cash flows from financing activities:
   Proceeds from issuance of common stock                           --        248,500      2,514,670
   Net Proceeds from note payable - ICES                        78,845             --        269,295
   Payment on loan to International Computing, LLC                  --         (5,034)        (5,034)
   Proceeds from notes payable-stockholders                         --        140,000        340,000
   Proceeds from receivable in connection
     with equity transaction                                     5,929             --          5,929
   Payments of capital lease obligations                       (91,760)       (92,790)      (465,094)
                                                           -----------    -----------    -----------
     Net cash provided by (used in) financing activities        (6,986)       290,676      2,659,766
                                                           -----------    -----------    -----------

Net increase (decrease) in cash and cash equivalents            (2,203)       (38,553)           246

Cash and cash equivalents, beginning of period                   2,449         41,127             --
                                                           -----------    -----------    -----------
Cash and cash equivalents, end of period                   $       246    $     2,574    $       246
                                                           ===========    ===========    ===========

</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


Interest paid                             $  11,585      $  32,220     $  75,748
                                          =========      =========     =========
  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                       $      --      $  25,000     $ 325,000
                                          =========      =========     =========
Contribution to capital for
  liabilities forgiven                           --      $ 415,000     $ 415,000
                                          =========      =========     =========
Issuance of warrants for
  leasehold improvements                         --             --     $  11,000
                                          =========      =========     =========
Issuance of warrants for acquisition of
  software development costs                     --             --     $  38,000
                                          =========      =========     =========
Issuance of warrants for portion of
  computer equipment lease                       --             --     $  54,748
                                          =========      =========     =========

                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.  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  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 of the Company
at $1.00 per share.

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").  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  became 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. 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.  Pursuant to
this  agreement,  Compuces has  advanced  $300,000 to the Company as of June 30,
2001.  Until  April  17,  2001,  Compuces  was  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.  Pursuant to a subscription agreement dated April
17,  2001,  ICES  remains the owner of 87.4% of the shares in  Compuces.  Edward
Foster,  currently  serving as President  and Chief  Operating  Officer of ICES,
Chief  Executive  Officer of Compuces and as a Director of the Company  ("Edward
Foster"),  owns 5.1%, or 500,000, of the shares of Compuces. The remaining 7.5%,
or 725,000 shares are owned by outside investors.

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 its
website  and  related  on-line  business,  the  outstanding  rebates can only be
exchanged for cash. At June 30, 2001, $5,267 of such rebates are outstanding.

Commencing in July 2000,  the Company had been deriving  revenue from  licensing
the use of the Company's system components and from providing hosting management
services to related  parties.  This strategic shift to a managed  infrastructure
company had sought 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. As of April
15, 2001,  the Company  suspended its host  management  operations  and began to
search  for a  strategic  partner to lease its  facility  and  computer  related
assets.

Effective  April  15,  2001,  the  Company  entered  into an  agreement  whereby
International  Computing,  LLC, a Delaware  limited  liability  company  ("IC"),
agreed to fully lease the computer  equipment,  software  and facility  from the
Company  on a cost basis  under a  month-to-month  lease.  On May 15,  2001,  IC
notified the Company that it was  terminating  this leasing  arrangement.  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  a  Director  of  the  Company
("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 and on May
15, 2001 assigned its 70% interest in IC to Compuces.


                                       10
<PAGE>

As a result,  the Company has terminated all business  activities  effective May
15, 2001.

Accordingly, all operations and financial activities associated with the hosting
management services business have been classified as discontinued operations and
the Company has written off all  computer  hardware  and  software,  capitalized
intangibles and other assets associated with this business on May 15, 2001.

The  condensed  financial  statements  included  in this Form  10-QSB  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 the 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 June 30, 2001
and for the three months and six months ended June 30, 2001 and 2000 reflect, in
the opinion of management,  all 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.

RECLASSIFICATIONS

Certain  amounts in the 2000  financial  statements  have been  reclassified  to
conform to the 2001 presentation.

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  financial  statements.  Actual  results could differ from these
estimates.

LOSS PER SHARE

Basic loss per share  calculations  are based on the weighted  average number of
common shares outstanding including common stock equivalents.  Since the Company
had a net loss for the three  and  six months  ended  June  30,  2001 and  2000,
respectively,  and for the  period  from  inception  through  June 30,  2001 the
assumed  effects of the exercise of options and warrants  would be  antidilutive
and therefore have been excluded.

Note 2 - GOING CONCERN

The Company has incurred significant net losses and currently has limited assets
and no operations from which it can provide operating capital.  As a result, the
Company  has  terminated  all  business  activities   effective  May  15,  2001.
Accordingly,  there  are  substantial  doubts  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.  The  Company is seeking to
obtain additional capital to reactivate its business or acquire or merge with an
operating  entity actively  engaged in a business which  generates  revenues and
that can provide  capital and managerial  leadership to enable it to continue in
existence.  The Company has no particular  acquisitions or financing  sources in
mind and has not entered into any negotiations regarding such a transaction.  As
of the date of this quarterly report, none of the Company's officers,  directors
or affiliates  have engaged in any  substantive  contact or discussion  with any
representative of any company regarding the possibility of a transaction between
the Company and such other company. Any equity financing or business combination
transaction  would most likely  result in a  significant  issuance of shares and
substantial dilution to present stockholders of the Company.


                                       11
<PAGE>

Should the Company be unable to acquire  additional  capital to  reactivate  its
business or acquire or merge with an operating  entity that can provide  capital
and managerial leadership to enable it to continue in existence, the Company may
be forced to liquidate, wind up its affairs and dissolve.

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. Although the Company can
borrow an additional  $480,705  pursuant to the terms of the said note, ICES may
restrict or discontinue advancing funds to the Company due to its termination of
operations.

Note 3 - AMORTIZATION OF SOFTWARE DEVELOPMENT COSTS

Amortization of software  development costs of $23,106 and $46,212 for the three
months ended June 30, 2001 and 2000,  respectively,  and $69,318 and $92,424 for
the six months  ended  June 30,  2001 and 2000,  respectively,  is  included  in
discontinued operations. The Company has recognized only 45 days of amortization
in the three months  ended June 30,  2001,  for the period up until May 15, 2001
when the Company  terminated  all  business  activities.  From  January 14, 1998
(inception)  to date,  amortization  of $300,377  is  included  in  discontinued
operations.

Note 4 - DEPRECIATION AND AMORTIZATION

Depreciation and amortization of property,  equipment and leasehold improvements
of $38,176  and  $76,352  for the three  months  ended  June 30,  2001 and 2000,
respectively,  and  $114,528 and $152,190 for the six months ended June 30, 2001
and 2000, respectively,  is included in discontinued operations. The Company has
recognized  only 45 days of  depreciation  and  amortization in the three months
ended  June 30,  2001,  for the  period up until May 15,  2001 when the  Company
terminated all business  activities.  From January 14, 1998 (inception) to date,
depreciation   and   amortization   of  $559,767  is  included  in  discontinued
operations.

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 $41,217 for the three  months
ended June 30, 2001 and 2000, respectively,  and $37,726 and $82,434 for the six
months ended June 30, 2001 and 2000,  respectively,  is included in discontinued
operations. The Company has recognized only 45 days of amortization in the three
months  ended  June 30,  2001,  for the  period up until  May 15,  2001 when the
Company terminated all business activities. From January 14, 1998 (inception) to
date,  capitalized license  amortization of $270,276 is included in discontinued
operations.

Note 5 - DISCONTINUED OPERATIONS

In June 2000, the Company  suspended its web site and related  on-line  business
operations.

Subsequently,  the Company had 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  had, at nominal  cost,  been
modified to be fully functional and scaleable as an eCommerce  hosting platform.
Therefore,  these  investments  and associated  costs had not been classified as
discontinued  operations and an impairment  loss had not been recognized at June
30, 2000.

The Company suspended its host management service business activities  effective
April 15, 2001 and terminated all business operations effective May 15, 2001.

Accordingly, all operations and financial activities associated with the hosting
management services business have been classified as discontinued operations and
the Company has written off all  computer  hardware  and  software,  capitalized
intangibles and other assets associated with this business on May 15, 2001.


                                       12
<PAGE>

In addition,  the Company has presented the assets and  liabilities  relating to
its discontinued  operations  separately in the accompanying  condensed  balance
sheets  as  of  June  30,  2001  and  December  31,  2000.  Net  current  assets
(liabilities) of discontinued operations are comprised as follows:


                                        June 30, 2001      December 31, 2000
                                        -------------      -----------------
Due from related parties                $      --              $  66,450
Property and Equipment, net of
  accumulated depreciation                     --                472,761
Software Development Costs, net of
  accumulated depreciation                     --                323,486
Software License, net of
  accumulated amortization                     --                 37,726
Security Deposits                          55,870                137,696
Other Assets                                   --                 21,074
Intangible Assets, net of
  accumulated amortization                     --                 19,444
Accounts payable and
  accrued expenses                       (185,376)              (172,486)
Capital Lease Obligations                (185,072)              (254,440)
                                        ---------              ---------
                                        $(314,578)             $ 651,711
                                        =========              =========

Note 6 - INCOME TAXES

At June 30,  2001,  the  Company  has  federal  and  state  net  operating  loss
carryforwards ("NOLs") of approximately $1,896,000 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 NOLs will expire at various
dates  through  2021. A deferred tax asset has not been  recognized  at June 30,
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  $758,000 with
respect to these federal and state NOLs.

Note 7 - NOTES PAYABLE AND RELATED PARTY TRANSACTIONS

The Company had provided hosting management services to various  subsidiaries of
ICES  totaling $0 and $40,050 for the three and six months  ended June 30, 2001,
respectively.

The Company has borrowed  $78,845 from ICES during the six months ended June 30,
2001 and has incurred interest expense in the amount of $7,017 and $13,048 under
the  Revolving  Promissory  Note during the three and six months  ended June 30,
2001, respectively. At June 30, 2001, the Company owes ICES $269,295 and accrued
interest of $19,643 under this note.

The Company has two non-interest bearing promissory notes payable of $60,000 and
$40,000 outstanding at June 30, 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 under this note and the Company is
in negotiations to extend its payment terms.

The Company has a non-interest bearing promissory note to 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
has occurred. Interest expense to IC for this debt totaled $2,924 and $5,849 for
the three and six months  ended June 30,  2001,  respectively,  and total amount
outstanding is $13,160 at June 30, 2001.

Until July 21, 2000, IC was 100% owned by Steadfast. Pursuant to a Unit Purchase
Agreement dated July 21, 2000,  ICES acquired 70% of the membership  units in IC
from Steadfast and on May 15, 2001 assigned its 70% interest in IC to Compuces.


                                       13
<PAGE>

From April 15, 2001 until May 15, 2001,  the Company had  subleased  100% of its
space to IC, at cost,  including  its  computer  system.  The total cost of this
sublease  amounted to $22,957 for this period of time, for which the Company had
invoiced IC. Prior to April 15, 2001, the Company  subleased its entire space to
ICES, at cost, and subleased,  from ICES, minimal space relating to its computer
facilities  room,  also at cost.  This sublease  expense totaled $424 and $3,351
during the three and six months  ended June 30, 2001,  respectively.  The leases
for the  facility  and  computer  system  components  remain  in the name of the
Company and the  Company is  obligated  under these  leases.  The  landlord  has
obtained a final  judgment of possession in connection  with the real  property,
and the Company is currently  negotiating a settlement with the landlord.  There
are no guarantees for these leases by either ICES or IC.

The Company 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 and $15,000 during the three and six months ended June
30, 2001, respectively.

On June 30, 2001, intercompany receivables from certain indirect subsidiaries of
ICES  totaling  $143,340  were written off as  uncollectible  as these  specific
related parties were determined to be insolvent. The amounts written off were IC
($62,440),  itract, LLC ($3,150),  CoreActive ACG, LLC ($20,700) and SiteAffect,
LLC ($57,050).

Note 8 - COMMITMENTS AND CONTINGENCIES

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.  As of June
30, 2001, the Company has made the three required  payments  totaling  $5,000 in
accordance with the agreed payment terms. The July 2001 payment has not yet been
made and the Company is delinquent  and in breach of the  settlement  agreement.
The total balance due of $22,514 has been accrued in the Net Current Liabilities
of Discontinued Operations.

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. On May 8, 2001, a Marshall of the City of
New York  served a notice of  eviction  on the  Company,  which  notice  was not
enforced. As of June 30, 2001, the Company has paid the December 2000 rent, made
payments  totaling  $10,000 and applied the entire  security  deposit of $44,256
against the unpaid balance  through May 15, 2001. The remainder of May and June,
totaling  $18,196,  is  currently  in  arrears,  along  with  the  July  rent of
approximately $12,000.

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     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.

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.


                                       14
<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.

Until April 17, 2001,  Compuces was 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.  Pursuant to a subscription agreement dated April
17,  2001,  ICES  remains the owner of 87.4% of the shares of  Compuces.  Edward
Foster,  President and Chief Operating Officer of ICES,  Compuces and a Director
of the  Company  ("Edward  Foster"),  owns 5.1%,  or  500,000,  of the shares of
Compuces. The remaining 7.5%, or 725,000 shares are owned by outside investors.

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.

Commencing in July 2000,  the Company had been deriving  revenue from  licensing
the use of the Company's system components and from providing hosting management
services to related  parties.  This strategic shift to a managed  infrastructure
company had sought 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. As of April
15, 2001,  the Company  suspended its host  management  operations  and began to
search  for a  strategic  partner to lease its  facility  and  computer  related
assets.

Effective  April  15,  2001,  the  Company  entered  into an  agreement  whereby
International  Computing,  LLC, a Delaware  limited  liability  company  ("IC"),
agreed to fully lease the computer  equipment,  software  and facility  from the
Company  on a cost  basis  under a  month-to-month  lease.  On May  15,  2001 IC
notified the Company that it was  terminating  this leasing  arrangement.  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  a  Director  of  the  Company
("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 and on May
15, 2001 assigned its 70% interest in IC to Compuces.

As a result,  the Company has terminated all business  activities  effective May
15, 2001.

PLAN OF OPERATION

The Company is seeking to obtain  additional  capital to reactivate its business
or acquire or merge with an operating  entity actively engaged in business which
generates  revenues and that can provide  capital and  managerial  leadership to
enable it to continue in existence.  The Company has no particular  acquisitions
or financing sources in mind and has not entered into any negotiations regarding
such a  transaction.  As of the  date  of  this  quarterly  report,  none of the
Company's  officers,  directors or  affiliates  have engaged in any  substantive
contact or  discussion  with any  representative  of any company  regarding  the
possibility  of a transaction  between the Company and such other  company.  Any
equity financing or business combination transaction would most likely result in
a  significant   issuance  of  shares  and   substantial   dilution  to  present
stockholders of the Company.


                                       15
<PAGE>

The Company has, and will continue to have, no capital with which to provide the
owners of potential  business  partners or joint  ventures with any  significant
cash or other assets.

In the interim,  the Company intends to reach an accord with each of its vendors
and other creditors based upon the current financial condition of the Company.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2001 COMPARED WITH JUNE 30, 2000

The Company  incurred  general  and  administrative  expenses in its  continuing
operations in the amount of $23,549 during the three months ended June 30, 2001,
a decrease of $22,040 as compared  with the three  months  ended June 30,  2000.
This reduction is principally comprised of occupancy costs ($40,225),  partially
offset by additional expenses for professional and consulting fees ($10,685) and
management fees from ICES ($7,500).

All revenues and operating  expenses  relating to the former hosting  management
services  business for the three  months  ended June 30, 2001 and former  online
business  for the three  months  ended  June 30,  2000 have been  classified  as
discontinued operations.

Discontinued  operations  for the three months ended June 30, 2001  includes the
loss for disposal of assets of $628,720.  The operating expenses of $234,698 for
discontinued operations during the three months ended June 30, 2001 decreased by
$466,057, as compared with the three months ended June 30, 2000, principally due
to the elimination of salaries and certain general and  administrative  expenses
that were exclusive to the online business.

As a result of the above,  the  Company's  net loss was  $896,724  for the three
months ended June 30, 2001,  an increase of  approximately  $148,531  from a net
loss of $748,193 for the three months ended June 30, 2000.

SIX MONTHS ENDED JUNE 30, 2001 COMPARED WITH JUNE 30, 2000

The Company  incurred  general  and  administrative  expenses in its  continuing
operations in the amount of $49,706 during the six months ended June 30, 2001, a
decrease of $82,824 as compared  with the six months ended June 30,  2000.  This
reduction is principally comprised of occupancy costs ($81,869) and professional
fees ($15,955), partially offset by management fees from ICES ($15,000).

All revenues and operating  expenses  relating to the former hosting  management
services  business  for the six  months  ended June 30,  2001 and former  online
business  for the six  months  ended  June 30,  2000  have  been  classified  as
discontinued operations.

Discontinued operations for the six months ended June 30, 2001 includes the loss
for  disposal of assets of $628,720.  The  operating  expenses  of $394,846  for
discontinued  operations  during the six months ended June 30, 2001 decreased by
$576,506,  as compared with the six months ended June 30, 2000,  principally due
to the elimination of salaries and certain general and  administrative  expenses
that were exclusive to the online business.

As a result of the above,  the  Company's  net loss was  $1,091,985  for the six
months ended June 30, 2001, a decrease of approximately  $13,505 from a net loss
of $1,105,490 for the six months ended June 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

Since  inception  the Company has  incurred net losses of  $4,455,330  and has a
working  capital  deficiency  of  $799,277  at June 30,  2001.  The  Company has
terminated all business activities effective May 15, 2001.

During  the  three  months  ended  June  30,  2001,   the  Company's  cash  flow
requirements  were provided  principally  by related party loans of $22,740.  In
order to finance its interim future  operations,  the Company  intends 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 June 30,  2001 is $269,295  excluding  interest.  Although,  the
Company can borrow an  additional  $480,705  from ICES  pursuant to the terms of
said Note,  ICES may restrict or discontinue  advancing funds to the Company due
to its termination of operations.


                                       16
<PAGE>

Interest  expense under this Note totaled $7,017 for the three months ended June
30, 2001,  and the total amount of accrued  interest  outstanding  is $19,643 at
June 30, 2001.

The consideration for the issuance of the Class C shares to Compuces in May 2000
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.  During the three months ended June 30, 2001, Compuces advanced
the Company  $2,782 and,  cumulatively,  $300,000  through June 30,  2001.  This
amount has been treated as a capital investment and therefore bears no interest.

The Company has  historically  financed its operations  through  working capital
provided by related party loans and advances and the private placement of equity
securities.  However,  the  Company's  current  ability to continue  its interim
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. To the extent that additional  capital
is raised  through the sale of equity or debt  securities,  the issuance of such
securities  is most likely to result in  significant  dilution to the  Company's
stockholders.

The Company's principal liquidity requirements involve reaching settlements with
its vendors and other  creditors  in the  reduction or  elimination  of accounts
payable and other  liabilities.  The Company  also  requires  reaching  mutually
satisfactory  settlements with the lessors of its facility and computer hardware
and software. In addition,  unknown or contingent liabilities could require cash
resources in excess of availability.  Management cannot reasonably  estimate the
amount of future  obligations at this time. The Company  intends to address each
of the  foregoing  liquidity  requirements,  as  well  as  continuing  corporate
expenses, with its remaining cash and limited credit resources.

The  Company  has  nominal  cash  and no line of  credit  except  the  Revolving
Promissory  Note with ICES,  nor does it expect to have  another  line of credit
before a merger,  acquisition or equity financing  transaction is effected.  The
Company has no particular  acquisitions or financing sources in mind and has not
entered into any negotiations regarding such a transaction.

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.


                                       17
<PAGE>

                           PART II - OTHER INFORMATION

Item 1     Legal Proceedings.


           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.  As of June 30, 2001, the Company has made
           the three required  payments  totaling  $5,000 in accordance with the
           agreed payment terms. The July 2001 payment has not yet been made and
           the Company is delinquent and in breach of the settlement  agreement.
           The  total  balance  due of  $22,514  has  been  accrued  in the  Net
           Liabilities for Discontinued Operations.

           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.
           On May 8, 2001, a Marshall of the City of New York served a notice of
           eviction on the Company,  which notice was not  enforced.  As of June
           30, 2001, the Company has paid the December 2000 rent,  made payments
           totaling  $10,000 and applied the entire security  deposit of $44,256
           against the unpaid balance through May 15, 2001. The remainder of May
           and June, totaling $18,196,  is currently in arrears,  along with the
           July rent of approximately $12,000.

           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.

Item 5     Other Information.

           None.

Item 6     Exhibits and Reports on Form 8-k.

           (a) Exhibits.

           None.

           (b) Current Reports on Form 8-K.

           On June 21, 2001 the  Registrant  filed a Current Report on Form 8-K
           to report a change in the Board of Directors,  which event  occurred
           on June 15, 2001


                                       18
<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: July 30, 2001


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

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


                                       19