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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|ý | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

Commission File No. 0-17973

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I-LINK INCORPORATED(Name of registrant as specified in its charter)

Florida

52-2291344(State or other jurisdiction
of incorporation or organization)

(I.R.S. Employer
Identification Number)


13751 S. Wadsworth Park Drive, Suite 200, Draper, UT 84020 (801/576-5000)(Address and telephone number of principal executive offices)

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

Securities
registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $.007 par value.

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 twelve months (or for such 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
ý    No o

Check
if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.    o

The
aggregate market value of Common Stock held by non-affiliates based upon the closing price on March 28, 2002, as reported by the Electronic Bulletin Board, was
approximately $9,092,000.

As
of March 28, 2002, there were 116,549,547 shares of Common Stock, $.007 par value, outstanding.

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PART I

Item 1. Description of Business.

Overview

I-Link is an integrated voice and data communications company focused on developing and deploying its proprietary, software-defined communications
platform which unites traditional telecommunications capabilities with data IP (Internet Protocol) systems to converge telecommunication, wireless, paging, voice-over-IP (VoIP)
and Internet technologies. As such, our software defined communication platform simplifies communications, increases communication capabilities via enhanced applications, and lowers overall
communication costs.

Through
our software defined platform, I-Link provides enhanced telecommunications services on a wholesale and retail basis. In addition, we license our software-defined
platform and related applications to third parties for deployment and operation in foreign counties. We also provide traditional circuit-switched long distance telecommunication services to
end-users via our wholly-owned subsidiary, WorldxChange Corp.a facilities-based telecommunication carrier.

History

In 1994, I-Link began as an Internet service provider (ISP) with a business model built around providing both network access and value-added services.
I-Link quickly identified that the emerging Internet Protocol (IP) environment was a promising basis for enhanced service delivery, and soon turned to designing and building an IP
telecommunication platform consisting of I-Link proprietary software, hardware and leased telecommunication lines. The goal was to create a platform with the quality and
reliability necessary for voice transmission. By 1996, I-Link released its first IP-based service called "Fax-4-Less." This service provided users with
a more efficient and cost-effective way to distribute facsimile information.

In
1997, I-Link started offering enhanced services over a mixed IP-and-circuit-switched network platform. These services offered a blend of
traditional and enhanced communication services and combined the inherent cost advantages of the IP-based network with the reliability of the existing public switched telephone network
(PSTN). The suite of services included a one number "follow me" service, long distance calling, unified messaging, conference calling, message broadcasting, and web-based interface to
manage messages and maintain personal account settings. In 1997 we formed our subsidiary I-Link Worldwide, LLC through which we began marketing our products and services thorough a network
marketing channel.

In
August 1997, I-Link acquired MiBridge, Inc. (MiBridge), a New Jersey-based communications technology company engaged in the design, development, integration
and marketing of a range of software telecommunication products that support multimedia communications over the PSTN, local area networks (LAN) and IP networks. Historically, MiBridge concentrated its
development efforts on compression systems such as voice- and fax-over-IP. As part of I-Link, MiBridge continued to develop patent-pending technologies combining
sophisticated compression capabilities with IP telephony technology. The acquisition of MiBridge permitted us to accelerate the development and deployment of IP technology across our network platform.

In
1998, we first deployed our real-time, IP communications network platform. With this new platform, all core-operating functions such as switching, routing, and
media control, became software-driven. This new platform represented the first nationwide, commercially viable VoIP platform of its kind. Following the launch of its software-defined VoIP platform in
1998, I-Link has continued to refine and enhance the platform to make it even more efficient and capable for our partners and customers.

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In
February 2000, we transitioned our direct-sales marketing program to Big Planet, Inc. (Big Planet), a subsidiary of Nu Skin Enterprises, Inc., whereupon Big
Planet became one of our wholesale customers. The transition of the network marketing sales channel to Big Planet has allowed us to focus our efforts on the expansion of the VoIP platform and the
development and deployment of new enhanced services and products, while at the same time maintaining existing channels for retail sales.

On
March 1, 2001, I-Link became a majority-owned subsidiary of Counsel Communications, LLC (subsequently reorganized and renamed Counsel Springwell Communications
LLC), which is a majority-owned subsidiary of Counsel Corporation, (collectively, Counsel). Related to our new association with Counsel, on April 17, 2001, I-Link acquired
WebToTel, Inc. (WebToTel), a subsidiary of Counsel, and also its subsidiary, Nexbell Communications Inc. (Nexbell), in a stock-for-stock transaction. Nexbell was
sold in December 2001.

In
June 2001, our wholly owned subsidiary WorldxChange purchased certain assets and assumed certain liabilities of WorldxChange Communications, Inc. from a bankruptcy
proceeding. WorldxChange is a facilities-based telecommunications carrier that provides international and domestic long-distance service to retail customers. Telecommunication services
provided by WorldxChange consist primarily of a dial-around product that allows a customer to make a call from any phone by dialing a 10-10-XXX prefix. WorldxChange
markets its services through consumer mass marketing techniques, including direct mail and direct response television and radio. WorldxChange also utilizes a network of independent commission agents
recruited through its multi-level marketing programs to retain and attract new customers.

Today,
I-Link remains focused on delivering dedicated VoIP applications to our partners and customers through our software-defined network platform. With over seven years
experience developing VoIP technologies, I-Link offers a proven and time-tested solution for companies who wish to enter the enhanced communications market. At present,
I-Link continues to actively market itsOne Numberand I-LinkHomeservices
through wholesale partnerships, and licenses its enhanced services platform to partners and service providers at home and abroad who wish to offer voice services without incurring high development
costs.

Our Current Software-Defined Platform

I-Link's software-defined platform is an end-to-end service delivery solution that meets a market need for a single platform
to minimize deployment costs and system integration challenges, while offering enhanced communication capabilities typically available through multivendor solutions. The platform consists of a
softswitch-enabled, real-time IP communications network that acts as a single, reliable, service delivery point for network and application services. It allows current telecommunications
carriers to introduce new services and capabilities to customers by bridging existing networks with IP networks. For emerging carriers, I-Link's platform enables quick and inexpensive
entry into the telecommunications and enhanced services markets without the high costs associated with purchasing new equipment and network infrastructure. Finally, through I-Link's
GateLink application programming interface (API), our wholesale customers and licensees are able to quickly develop and deploy customized communication applications designed to operate on our
platform.

I-Link's Softswitch

I-Link's softswitch is the operating system that ties together all of the core services available to our wholesale customers, end users and
third-party applications developers. Much like a PC's operating system integrates diverse hardware elements (i.e., disk drive, monitor, network interface card and memory) into a cohesive unit,
I-Link's softswitch integrates communication elements into enhanced communication services. Included within the softswitch capabilities are connection services, voice recognition,
interactive voice response (IVR) services, text-to-speech services, unified messaging,

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conference call services, operation support systems (OSS) and other application servers and communication elements created by us and/or other third-party applications developers. Our softswitch is
readily scalable and can be quickly and successfully deployed on any existing IP network without incurring the significant costs in new components or infrastructure typically associated with expanding
a telecommunication network. It provides existing carriers with the ability to bridge between disparate networks, applications, and customers.

The GateLink API

Our GateLink API is a powerful set of developer tools that serves as the mechanism for creating new applications, user services and solutions that can be hosted
within our softswitch-enabled RTIP Network, which is defined and discussed below. Companies determined to build real-time communication services face many challenges, such as developing
the solution, building the network in which the solution will operate, and defining the OSS (operations support system) to properly provision and bill for the new services. Our GateLink API greatly
simplifies this process by allowing software developers to focus on developing their own applications without worrying about the other requirements of I-Link's softswitch RTIP Network.
Once the application is developed it can be certified by us and deployed within the RTIP Network.

The
GateLink API is our mechanism to create new value and stimulate growth from other communications services providers over time. GateLink allows third-party developers to create
applications that operate on our softswitch-enabled RTIP Network. These applications deliver monthly recurring charge (MRC) revenues as well as minute-traffic revenues to I-Link. With the
GateLink API, we are able to facilitate the creation of new communications applications that open new business opportunities, market segments, and distribution channels.

I-Link's RTIP Network

Our real-time IP communications network (RTIP Network) consists of a fully-integrated, nationwide, dedicated network of I-Link equipment
and leased telecommunications lines augmented by our IP softswitch software. The RTIP Network is an IP-based network like the Internet; however, it is dedicated for use only by us and our
customersanIntranet. It provides the necessary operational platform for the enhanced service applications developed by us and any
third-party applications developers who partner with us. The RTIP Network is a packet-based network composed of an IP backbone that ties together local loop dial-up and broadband
connections via major hubs strategically located in major metropolitan areas throughout the United States. Each of these hubs is comprised of off-the-shelf hardware elements
and I-Link's proprietary software. The RTIP Network is able to integrate signaling systems such as SS7, Wireless, Public Switch Telephone Networks (PSTN), the Internet, and next generation
network protocols such as SIP, MGCP, and H323 into one interoperable platform. The architecture and technological approach used by the RTIP Network has resulted in cost and capability breakthroughs
unattainable through traditional circuit switch telecommunications networks. It does all
this while maintaining the high voice-quality and reliability associated with traditional circuit switch networks. See Figure 1A more detailed description of the RTIP Network.

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IP Network Diagram

RTIP Diagram

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Our technology enables a user to employ his/her existing telephone, fax machine, pager or modem to achieve high-quality communications with other conventional communications
equipment, while exploiting the capabilities of IP technology. The RTIP Network is comprised of leased and dedicated lines carrying telecommunications transmissions converted into a data format
(TCP/IP). Network access points known as gateways are comprised of sophisticated communications equipment and proprietary software. We call these gateways Communication Engines, or CE's. These are
used to integrate our Intranet with the traditional telecommunications network. The CE's, including the software, represent our patent-pending technology. Through them, the RTIP Network receives
traffic from the public switched telephone network as a TDM stream (time division multiplexing) and converts it to IP data packets. The data is converted from the PCM (pulse code modulation) format
standard, which is the traditional telephony standard, to our proprietary coding. Our proprietary coding can distinguish among and handle voice, fax and modem communications differently. Voice is
compressed using a voice coder or codec, while fax and modem traffic is demodulated/modulated. The data can then be stored (such as recording a message), altered (as in changing a fax call from 14400
BPS to 9600 BPS) or redistributed to multiple recipients (as in the case of conferencing). Our gateways are flexible such that the RTIP Network can readily integrate with other carriers' protocols and
infrastructure. Accordingly, we are capable of leveraging the access infrastructure of other carriers, resellers, and Internet service providers (ISPs) and wholesaling our enhanced services to these
providers and their customers while avoiding the need to build additional access infrastructure.

Unlike
the traditional telecommunication network, the RTIP Network uses TCP/IP as its communication protocol. This is the same protocol used by the Internet for
computer-to-computer communication. We utilize TCP/IP because of the potential for interoperability between diverse technologies. This protocol provides for
I-Link's software-defined platform to integrate fax, voice, e-mail, websites, video conferencing, speech recognition servers, intelligent call processing servers, Internet
Information servers, and other technologies in an efficient way. Not all of these technologies are currently implemented within our softswitch or the RTIP Network. However, because communication is
being carried over a TCP/IP protocol these solutions can be integrated into our offerings at a fraction of the cost of traditional telecommunication implementations. The advantage of communication via
the TCP/IP protocol is that it allows for efficient integration of many enhanced information services as noted above. We do not need to build all of the services that are presented to the user; the
platform can easily integrate additional services because the communication protocol offers interoperability between all types of conventional communication equipment. The other advantage to TCP/IP is
that the cost of integration is substantially less as a result of network design. New services, enhancements and updates can be enabled at a central location and linked automatically to a subscriber's
packet of services, thus eliminating the costs and time restrictions of installing the enhancement at each physical facility. The result of these benefits is lower cost with greater capabilities.

Cost Advantages

The cost advantages realized from the creation and deployment of enhanced services over the RTIP Network are two-fold: (a) lower transmission
costs, and (b) lower capital infrastructure costs. Lower transmission costs result from the inherent maximization of capacity in an IP-based packet-switch architecture (like the
Internet and I-Link's RTIP Network) as opposed to traditional circuit-switch telecommunication architecture. A packet-switch network converts the information being carried (such as a voice
call) into a series of data packets and is able to fill the entire capacity of the network with these data packets simultaneously during transmission. A traditional circuit-switch network processes a
single call at a time. Simply put, an IP-based, packet-switch network makes more efficient use of its fixed-cost capacity than does a traditional circuit-switch network.

The
second component of cost advantages is lower capital infrastructure costs. With a traditional, enhanced-services platform, incorporating new functionality, such as conference
calling, requires new

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software/hardware to be purchased and installed by the communications provider. Integration is then essential so that the new components can work alongside the traditional telecommunications switch.
(A switch is a large, sophisticated piece of telecommunications equipment through which calls are routed. It has a given capacity of calls that can simultaneously be handled). The traditional switch,
which is unable to process anything but low-level signals, must pass an incoming call for conferencing (in our example) to a special conference call switch for processing. These types of
special switches are expensive and can cost hundreds of thousands of dollars each. An IP-based platform distinguishes itself in this situation because the transmission of signals within
the RTIP Network is converted to an IP signal. Therefore, the given enhanced service signaling (conference calling in our example) occurs within a software-defined network. As such, it can be handled
through standard personal computers, rather than a hardware- and/or equipment-defined network which requires specialized, redundant, costly telecommunications switches for each enhanced service
offered. Due to the nature of our platform, I-Link can provide users additional services at a fraction of the cost of a traditional communication services provider because we allow
customers to avoid the capital expense of acquiring, installing and servicing an array of special switches. Lower cost in both the cost of transmission and the capital infrastructure to provide the
services, results in lower costs to the customer.

Flexible Integration

In a traditional telecommunications network, each servicevoicemail, fax mail, conference calling, single number forwardingmust be
processed through one or more separate, non-integrated switches and a separate number is assigned for each service. For example, "Call this number to send me a fax." "Call this number for
my voice mail." "Call this number for a conference call." Knowing this, imagine the complexity inherent to both providers and customers who wish to take advantage of many enhanced services.
I-Link readily simplifies this problem. Because I-Link's services are provided within an IP environment and hosted on a software-defined network, all of our services can be
easily integrated through one switch and operate viaonecustomer number. This is not only critical for unifying today's communications, but provides
for the easy integration of additional services as they are developed and introduced.

I-Link
intends to leverage the expanded capabilities and capacity of our softswitch-plus-RTIP-Network. Our goal is to sell our core
technologies to other telecommunications service providers and application developers on a wholesale basis as well as to the residential, SOHO (small office/home office) and SME
(small-to-medium enterprise) markets. We also plan to continue licensing our softswitch-enabled RTIP Network technology for use in international markets.

Advantages of Our Softswitch Enabled RTIP Network

We believe telecommunication service providers want to increase their competitive edge by expanding their ability to provide enhanced communication products to
current and new customers while at the same time decreasing the costs of network expansion and operation. With new IP-based platforms and technology, carriers are often forced to purchase
separate components versus an end-to-end solution in order to provide their customers with enhanced telecommunication services. In this instance, each component may come from a
different manufacturer and address only one element of their intended network and/or service delivery platform. For example, a carrier might decide to purchase a unified messaging system; but the
carrier must also evaluate how to deploy the system within the context of adopting new VoIP gateways, softswitch platforms, billing systems, provisioning systems, network management and support
systems, and other independent, but related, components.

I-Link's
converged solution provides the advantage of an end-to-end service delivery platform. Even existing carriers can benefit from
I-Link's platform by using it to bridge between disparate networks, applications, and customers. With emerging carriers, the platform offers fast and low-cost network
deployment. For both of these markets, I-Link's platform acts as a single, real time, reliable,

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service delivery point for network and application services. Through licensing agreements, these benefits are made available to existing and emerging international carriers who wish to seek the same
advantages I-Link has achieved within the United States.

Current Applications

I-Link currently has several applications operating on our software-enabled RTIP Network, primarily I-Link One Number and MyACD.

I-Link One Number

I-Link One Number (formerly know as V-Link) is one of the applications hosted and operated on our softswitch-enabled, RTIP
Network. It is a powerful suite of basic and enhanced telecommunications services created to meet the communication needs of residential SOHO and SME customers. I-Link One
Number services include:



Subscribers
access their I-Link One Number service through an assigned local and/or toll-free (800) number (this becomes a single, convenient
telephone number through which others can call and fax the subscriber). Once inside the I-Link One Number enhanced communications environment, all of the subscriber's
communications functions are handled over the softswitch-plus-enabled-RTIP Network, with its associated benefits and capabilitiesregardless of the call
origination point. For example, long distance calls are routed primarily through the RTIP Network, and secondarily through the traditional public switched telephone network to ensure full geographic
coverage. In addition to long distance
calling capability, entering the I-Link One Number communications environment affords the user a multitude of enhanced capabilities without the need for any special equipment.
Once the communications session is established by logging-in to I-Link One Number from any telephone, a subscriber has the ability to perform multiple operations
within the session (such as multiple long distance calls, call screening, voice mail, fax, and conference calling).

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MyACD

In January, 2002, I-Link began hosting an application known as MyACD. Developed by a third-party, MyACD was created using I-Link's
proprietary network API (Gatelink). It is an automated call distribution system (ACD) application that manages all of the communication needs of contact centers or call centers. Telephone calls,
e-mail, faxes, chat requests and call-back requests are all handled by the MyACD application hosted on the softswitch-enabled RTIP Network. This application distinguishes
itself by providing a universal queue for all contact media. MyACD does not require the customer to purchase or maintain hardware and allows agents to work from remote locationsall a
remote agent needs is a telephone and a PC with an Internet connection.

Distribution Channels

Wholesale

Wholesale distribution channels allow I-link to leverage our established software-defined platform and services with customers wishing to provide
end-users with enhanced communication products. Such wholesale partners use (or lease from us) their own sales, billing, customer care and collection services. The wholesale channel
consists of two types of partners: telecommunications service providers and third-party application developers and their customers.



We sell our enhanced services products, such as One Number, on a wholesale basis to telecommunications service providers. Big Planet is an example of an
I-Link customer in this arena. Big Planet buys the service capability from I-Link and then, in turn, sells the enhanced services to its retail
customers. Big Planet has non-exclusive, world-wide rights to market and sell I-Link products and services through its network marketing (sometimes referred to as
multi-level marketing) sales channel to residential and small business users.

In
the future, we intend to continue to sell I-Link's enhanced services on a wholesale basis to service providers such as Big Planet, as well as other service providers such
as CLECs (Competitive Local Exchange Carriers), ILECs (Independent Local Exchange Carriers), and ISPs (Internet Service Providers). These telecommunications service providers can bundle
I-Link One Number and any additional, third-party-developed services by connecting to the RTIP Network through one of our hubs located strategically throughout the United States.



We provide application-hosting services to third-party applications developers and their respective customers on a wholesale basis. Third-party developers who
create new applications and solutions using I-Link's GateLink API are able to host these services within our softswitch-enabled RTIP Network. These hosted services are then made available
to the developers' channel of distribution and customers. Using our RTIP Network to host new applications greatly simplifies and expedites getting new services to market. In managing these
relationships, I-Link has entered into revenue sharing agreements whereby we receive a portion of future sales and recurring monthly revenues. An example of a third-party application
currently hosted on I-Link's platform is MyACD.

Retail

We market our enhanced communications services directly to retail customers primarily through two methods, enterprise marketing and direct acquisition of retail
customer bases.

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Enterprise Marketing

I-Link is currently marketing our enhanced communications services to businesses and associations (called enterprises) for personal use by their
employee/member base. The Enterprise solution provides a communications hook-up between a company's existing telecommunications system and I-Link's RTIP Network (typically
through a T-1 or other similar telecommunications line connection). This enables a company's employees to have direct, two-digit ("00") access to
I-Link One Number services and other third-party communications applications available on our RTIP Network via their existing
telecommunications system and telephone numbers. It also provides for direct, interoffice, four-digit extension capabilities between multiple locations worldwide.



We intend to accelerate the expansion of our customer base through the strategic acquisition of existing customer bases and/or the acquisition of service
providers controlling existing customer bases. This strategy is in the exploratory phase and there is no assurance that we will be successful in the acquisition of other customer bases or acquisition
of other service providers.

Competition

I-Link's Enhanced Communication Products

The market for business communications services is extremely competitive. We believe I-Link's ability to compete in this market will depend upon a
number of factors. These include the pricing policies of competitors and suppliers; capacity, reliability, availability and security of the RTIP Network infrastructure; market presence and channel
development; introductions of new products and services into the marketplace; ease of access to and navigation of the Internet or other such IP networks; our ability to support existing and emerging
industry standards in the future; our ability to balance network demand with the fixed expenses associated with network capacity; and industry and general economic trends.

While
we believe there is currently no competitor in the North American market providing I-Link's capabilities in the same manner afforded by our softswitch-enabled RTIP
Network, there are many companies that offer communications services, and therefore compete with us for potential customers. Current competitors range from large telecommunications companies and
carriers such as AT&T, MCI Worldcom, Sprint, Excel, Leve13 and Qwest, to other VoIP carriers including iBasis, ITXC, and small, regional resellers of telephone line access. Similarly, our solution
competes with companies providing basic Internet telephony. These companies, as well as others, including manufacturers of hardware and software used in the business communications industry, have
announced plans to develop future products and services that are likely to compete with our products on a more direct basis. As competition grows, it is possible that future competitors will be better
capitalized than I-Link and may control significant market share in their respective industry segments.

WorldxChange Dial Around Product

The market for long distance providers is very competitive. I-Link's subsidiary, WordxChange, believes that providing multilingual customer service
and advertising materials offers agents and customers familiarity and comfort. This will translate into differentiation within the long distance market for WorldxChange. WorldxChange expects to
provide high-quality, yet competitive, long distance to customers of all nationalities, focusing specifically on international termination.

WorldxChange
has a very active agent program. WorldxChange has a multi-level marketing division with agents across the United States. A competitive edge is WorldxChange's Representative
Advisory Board comprised of 13 xPectations Representatives from our agent base and WorldxChange employees.

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Round table discussions are conducted on a regular basis. WorldxChange believes the xPectations division is one of the most exciting and positive programs in the industry today.

WorldxChange
also is very active in the marketing of new customers via direct mail and mass public media. WorldxChange had a direct mail campaign in the later part of 2001 wherein it
distributed over 75 million pieces of material.

WorldxChange's
main competitors are Excel Communications, ACN, Cognigen, Vartec and Telecom USA. These competitors provide a variety of services that are in direct competition with us
from offering residential and commercial customer's competitive long distance, 800 service, flat rate and dial-around services.

Government Regulation

Non-Regulated Enhanced Services.

General.Traditionally, the Federal Communications Commission (FCC) has sought to encourage the development of enhanced
services as well as Internet-based services by keeping such activities free of unnecessary regulation and government influence. Specifically in the area of telecommunications policy and the use of the
Internet, the FCC has refused to regulate most on-line information services under
the rules that apply to telephone companies. This approach is consistent with the passage of the Telecommunications Act of 1996 (1996 Act), which expresses a Congressional intent "to preserve the
vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation."

Federal.Since 1980, the FCC has refrained from regulating value-added networks (VANs), software or computer equipment that
offer customers the ability to transport data over telecommunications facilities. By definition, VAN operators purchase transmission facilities from facilities-based carriers and resell them packaged
with packet transmission and protocol conversion services. Under current rules, such operators are excluded from regulation that applies to telecommunications carriers under Title II of the 1996 Act.

In
the wake of the 1996 Act, however, the FCC is revisiting many of its past decisions. The FCC could impose common carrier regulation on some of the transport and resale
telecommunications facilities used to provide telecommunications services as a part of an enhanced or information service package. The FCC also may conclude that our protocol conversions, computer
processing and interaction with customer-supplied information are insufficient to afford us the benefits of the "enhanced service" classification, and thereby may seek to regulate some of our
operations as common carrier/telecommunications services. The FCC could conclude that such decisions are within its statutory discretion, especially with respect to voice services. In
December 1999, for example, the FCC found that it had regulatory authority over ILEC advanced services. In addition, the FCC is considering whether IP telephony services and networks should be
made available to persons with disabilities and whether providers of these services and networks must comply with the FCC rules for persons with disabilities.

With
the exception of certain circuit switched telecommunication services, all of our services utilize a proprietary Internet protocol network involving the provision of information
services, which we believe, qualifies as an exemption from common carrier regulation under current FCC rules. Historically, the FCC has not regulated companies that provide the software and hardware
for Internet telephony or other Internet data functions as common carriers or telecommunications service providers. Moreover, in May 1997 the FCC determined that information and enhanced
service providers are not required to contribute to federal Universal Service Funding mechanisms. This decision was later reaffirmed in April of 1998 in an FCC report to Congress.

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Notwithstanding
the current state of the rules, the FCC's potential jurisdiction over the Internet is broad because the Internet relies on wire and radio communications facilities and
services over which the FCC has long-standing authority. The FCC's framework for "enhanced services" confirms that the FCC has authority to regulate computer-enriched services, but
provides that carrier-type regulation would not serve the public interest. Only recently has this general deregulatory approach been questioned within the industry.

An
early example of deregulatory pressure is in the March 1996 initiative of America's Carriers Telecommunications Association (ACTA), a trade association primarily comprised of
small and medium-size interexchange carriers. ACTA filed a petition with the FCC requesting the FCC to regulate Internet and IP telephony. ACTA argued that providers of software that
enables real-time voice communications over the Internet should be treated as common carriers and subject to the regulatory requirements of Title II of the 1996 Act. The FCC sought comment
on the request, but has never issued a decision.

On
April 10, 1998, the FCC submitted a report to Congress describing the effect of its classification of information and telecommunications services on contributions to universal
service charge funds. In this report, the FCC reiterated its conclusions that information services, and Internet access services, in particular, are not subject to telecommunications service
regulation or universal service contribution requirements. The FCC did, however, indicate its belief that certain gateway-based IP telephony services may be the functional equivalent of a
telecommunications service. The FCC deferred a definitive resolution of this issue until it could examine a specific case of phone-to-phone IP telephony. Senators from several
states with large rural areas expressed concern that migration of voice services to the Internet could erode the contribution base for universal service subsidies. Continuing pressure from those
Senators to reclassify Internet telephony as a telecommunications service, rather than an information service is likely. If reclassification occurs, Internet telephony will be subjected to a
regulatory assessment for universal service contributions.

On
April 5, 1999, Qwest (formerly US West) filed a Petition for Expedited Declaratory Ruling with the FCC in which Qwest seeks a declaration that interexchange carriers (IXCs)
that provide phone-to-phone IP telephony are telecommunications service providers whose services are subject to access charges. The crux of the Petition claims that because
there is no net protocol conversion in messages sent and received by IXCs and as IXCs claim to provide voice telephony, IP telephony does not qualify as an enhanced service under FCC rules. Qwest did
not press the matter and, to date, the FCC has not issued a public notice requesting comment on the petition. We cannot predict what the Commission will rule or when. If Qwest pursues the petition and
is successful, the FCC could rule that IP telephony service providers are obligated to pay interstate access charges to local telephone companies for originating and terminating interstate calls.

Any
FCC ruling that Internet-based service providers should be subject to some level of Title II regulation could affect the manner in which we operate, to the extent we use the Internet
to provide facsimile or voice capabilities. Any FCC ruling would also result in additional costs to achieve compliance with federal common carrier requirements. With the passage of the 1996 Act, the
precise dividing line or overlap between "telecommunications" and "information" services as applied to Internet-based service providers is uncertain. Consequently, our activities may be subject to
evolving rules as the FCC addresses novel questions presented by the increased use of the Internet to offer services that appear functionally similar to traditionally-regulated telecommunications
services. At this time, it is impossible to determine what effect, if any, such regulations may have on the our future operations.

State.While states have generally declined to regulate enhanced services, their ability to regulate the provision of
intrastate enhanced services remains an uncertain possibility. For instance, Qwest petitioned Colorado and Nebraska for a ruling that IP telephony providers must pay access charges for

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intrastate calls. The proceeding was dismissed in Colorado and a decision was never reached in Nebraska. In two recent interconnection decisions, Colorado and Nebraska declined to classify IP
telephony as switched access traffic subject to access charges. But a recent Florida interconnection arbitration decision ruled differently. If state regulators or legislators regulate the provision
of intrastate enhanced services it may negatively impact our ability to provide enhanced services in any state that assesses access or universal service charges against us.

Regulated Telecommunication Services

General.We believe some of the services we provide are subject to the provisions of the 1996 Act, the regulations
promulgated thereunder, as well as the applicable laws and regulations of the various states administered by the relevant state authorities. While the recent trend in the U.S., for both federal and
state regulation of telecommunication service providers has been toward less regulation rather then more, the FCC and relevant state authorities continue to regulate telecommunication carriers and the
terms and conditions under which telecommunication services are provided.

Federal.The FCC modifies its regulations of telecommunication carriers from time to time. In October 1996, the FCC
adopted an order eliminating the requirement for non-dominant carriers like our subsidiaries I-Link Communications, Inc. and WorldxChange Corp. to file and maintain
tariffs with the FCC for domestic interstate services. In March 2001, the FCC issued an order requiring non-dominant carriers to remove their international exchange service tariffs
from the FCC by January 28, 2002. We believe we are in compliance with the FCC's detariffing orders and that achieving such compliance did not materially impact us.

In
1997 the FCC issued an order implementing those provisions of the 1996 Act which promote universal telephone service (the USF Order). The USF Order requires interstate
telecommunication carriers to contribute toward a fund for schools and libraries, a fund for rural health care and a fund to develop regions characterized by low income levels and high
telecommunication costs (collectively USF). Our USF contributions are assessed based on certain end user telecommunication revenues, which we calculate in accordance with the FCC's legislative rules.
The amounts we contribute to USF may be billed to our end-users and we have elected to pass those charges along to our end user customers. If we continue to bill these amounts to our
end-user customers, our customers may chose to purchase similar services from our competitors. If we elect not to bill these amounts to our end-user customers, our profit
margins may be less.

During
the past year the FCC increased the USF contribution percentages. Originally in May 2001 and subsequently in February 2002, the FCC proposed changes to the USF
regulations that, if adopted, would alter the basis on which the we determine our USF contributions and the ability and means by which such contributions may be recovered from our customers. For
example, although the FCC has not proposed to prevent carriers from passing USF charges through to customers, the FCC has proposed to limit the extent to which carrier costs for administering USF
charges may be passed through to customers. These changes or other regulatory changes adopted by the FCC could have a significant negative effect upon the Company.

State.In addition to regulation by the FCC, the majority of the states require us to register or apply for certification
prior to initiating intrastate interexchange telecommunications services. To date the Company's subsidiaries I-Link Communications, Inc. and WorldxChange Corp. are authorized
through certification to provide intrastate interexchange telecommunications services. These subsidiaries are subject to the obligations that the applicable state laws place on all similarly
certificated carriers including the regulation of services, the payment of regulatory fees and the preparation and submission of reports. If state regulators or legislators change current regulations
or adopt new regulations it may negatively impact our ability to provide telecommunication services.

12

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Delivery of Services over Existing Switched Telecommunications Networks

A portion of I-Link's communications services are delivered over existing switched telecommunications networks through our subsidiaries,
I-Link Communications, Inc. and WorldxChange, both long distance telecommunications carriers that provide long distance service to all 50 states of the United States. Access to the
switched telephone network is a necessary component of the RTIP Network to ensure full geographic coverage of the RTIP Network in lesser-populated geographic areas that are not serviced by one of the
RTIP Network's Hubs. I-Link maintains traditional switch facilities in Dallas, Los Angeles, Phoenix, and Salt Lake City.

WorldxChange
maintains traditional switch facilities in San Diego, Chicago, Dallas, Guam, Hawaii, Los Angeles, Miami, New York, San Francisco and Washington D.C.

Item 2. Description of Property.

I-Link leases approximately 31,650 square feet of space for office and other facilities in Draper, Utah pursuant to commercial leases with original
terms of five to seven years. These leases expire between 2003 and 2005 subject to our right to extend for an additional five years. The current aggregate base rent is approximately $41,000 per month.
I-Link also leases several other co-location facilities throughout the United States to house its Communication Engines. Such spaces vary in size and length of term.
We currently sublease approximately 12,000 square feet on a month to month basis at approximately $14,000 per month.

I-Link
currently leases and occupies approximately 4,100 square feet of office space in Phoenix, Arizona, pursuant to a commercial lease dated June 1, 2000. The lease
term is for five years commencing June 2000 beginning with a current base rent of approximately $6,600 per month.

On
October 6, 2000, I-Link purchased an office building located in Salt Lake City, Utah consisting of approximately 14,250 square feet. We occupy the first floor of
the building and lease the second floor pursuant to a commercial lease, dated June 1997. The lessee's lease term is for five years commencing June 1997 with a base rent of $7, 411. The
building is subject to a promissory note, which is secured by a trust deed against the building and a certificate of deposit in the amount of $200,000.

I-Link
rents approximately 3,600 square feet of office space in Eatontown, New Jersey at a cost of approximately $5,200 per month which expires December 31, 2002. The
property is subleased through December 31, 2002 at approximately $5,200 per month.

WorldxChange
rents approximately 24,312 square feet of office space in San Diego, California under a five-year commercial lease dated August 1, 1997 at a cost of
approximately $25,000 per month.

13

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Item 3. Legal Proceedings.

I-Link Incorporated v. Red Cube International AG, and Red Cube, Inc., Case No. 2:01CV0049C, United States District Court,
District of Utah, Central Division.



In the Arbitration Matter of Red Cube International AG, v. I-Link Incorporated, before the American Arbitration Association, New York, New
York, AAA # 50 T 117 0002B 01.



Steven J. Little, dba, Freedom Enterprises v. I-Link Worldwide, LLC, Medcross, Inc., I-Link Incorporated, John Does
I-X, Civil No. 990908018, in The Judicial District Court of the Third Judicial Court in and For Salt Lake County, State of Utah and Steven J. Little, dba, Freedom Enterprises v. I-Link Worldwide,
L.L.C., Medcross, Inc., I-Link Incorporated, before the
American Arbitration Association, Case No. 81 181 00118 00 VSS.



14

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We
are involved in litigation relating to claims arising out of our operations in the normal course of business, none of which is expected, individually or in the aggregate, to have a
material adverse affect on us.

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

No matter was submitted during the fourth quarter of the fiscal year ended December 31, 2001, to a vote of the Company's security holders.

PART II

Item 5. Market for I-Link Incorporated's Common Stock and Related Stockholder Matters.

Price Range of Common Stock

I-Link's common stock was delisted from The Nasdaq Small-Cap Market, effective October 1, 2001 and is now traded on the
OTC-Electronic Bulletin Board under the symbol ILNK. We have no current plans to apply for listing of any preferred shares, warrants or any of our other securities.

The
following table sets forth the high and low prices for our common stock for the period as quoted on Nasdaq from January 1, 2000 to September 30, 2001 and on the
Electonic Bulletin Board from October 1, 2001 to December 31, 2001 (as reported by Commodity Systems, Inc.) based on interdealer quotations, without retail markup, markdown,
commissions or adjustments and may not represent actual transactions:

Quarter Ended

High

LowMarch 31, 2000

$
20.00

$
2.75June 30, 2000


11.88


2.00September 30, 2000


5.91


2.00December 31, 2000


3.53


0.75March 31, 2001

$
1.22

$
0.25June 30, 2001


0.75


0.38September 30, 2001


0.57


0.19December 31, 2001


0.24


0.07


On
March 28, 2002, the closing price for a share of our common stock was $0.25.

Holders

As of July 23, 2001 (the record date for our last shareholders meeting), we had approximately 620 stockholders of common stock of record and approximately
16,000 beneficial owners.

Dividends

To date, we have not paid and do not anticipate that we will pay dividends on our common stock in the foreseeable future. As of December 31, 2001, we do
not have any preferred stock outstanding which has any preferential dividend. Preferred stock dividends in the amount of $0, $196,333 and $351,868 were paid in 2001, 2000 and 1999, respectively, in
common stock (non-cash) on the converted shares of Series F redeemable preferred stock. A preferred stock dividend in the amount of $630,313 was paid in 2001 in common stock
(non-cash) on the Class C preferred stock.

Item 6. Selected Financial Data.

The following selected consolidated financial information was derived from the audited consolidated financial statements and notes thereto. The information set
forth below is not necessarily

15

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indicative of the results of future operations and should be read in conjunction with Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations and the
Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K.

|                                                           |                                            | 2001                      |             | 2000       |             | 1999        |            | 1998       |             | 1997       |           
|---------------------------------------------------------- | ------------------------------------------ | ------------------------- | ----------- | ---------- | ----------- | ----------- | ---------- | ---------- | ----------- | ---------- | ----------
|Statement of Operations Data:                              |                                            |                           |             |            |             |             |            |            |             |            |           
|Revenues:                                                  |                                            |                           |             |            |             |             |            |            |             |            |           
|                                                           | Telecommunications services                |                           | $           | 74,887,557 |             | $           | 18,300,548 |            | $           | 26,440,017 |           
|                                                           | Marketing services                         |                           |             |           |             |             | 463,740    |            |             | 3,672,988  |           
|                                                           | Technology licensing and development       |                           |             | 5,696,893  |             |             | 8,972,828  |            |             | 2,506,701  |           
|                                                           | Other                                      |                           |             | 2,025,585  |             |             | 2,667,039  |            |             |           |           
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|                                                           |                                            | Net sales                 |             |            | 82,610,035  |             |            | 30,404,155 |             |            | 32,619,706
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|Operating expenses:                                        |                                            |                           |             |            |             |             |            |            |             |            |           
|                                                           | Telecommunications network expenses        |                           |             | 62,652,227 |             |             | 24,958,320 |            |             | 20,373,209 |           
|                                                           | Marketing services costs                   |                           |             |           |             |             | 456,354    |            |             | 5,400,149  |           
|                                                           | Selling, general, administrative and other |                           |             | 61,442,573 |             |             | 29,086,550 |            |             | 26,098,700 |           
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|                                                           |                                            | Total operating expenses  |             |            | 124,094,800 |             |            | 54,501,224 |             |            | 51,872,058
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|Operating loss                                             |                                            |                           | (41,484,765 | )          |             | (24,097,069 | )          |            | (19,252,352 | )          |           
|Other income (expense)                                     |                                            |                           | (4,104,678  | )          |             | (1,655,109  | )          |            | (4,906,936  | )          |           
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|Loss from continuing operations                            |                                            |                           | (45,589,443 | )          |             | (25,752,178 | )          |            | (24,159,288 | )          |           
|Loss from discontinued operations                          |                                            |                           |            |            |             |            |            |            | (500,000    | )          |           
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|Loss before extraordinary gain                             |                                            |                           | (45,589,443 | )          |             | (25,752,178 | )          |            | (24,659,288 | )          |           
|Extraordinary gain on extinguishment of debt               |                                            |                           | 1,092,818   |            |             |            |            |            |            |            |           
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|Net loss                                                   |                                            | $                         | (44,496,625 | )          | $           | (25,752,178 | )          | $          | (24,659,288 | )          | $         
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|Loss from continuing operations applicable to common stock |                                            | $                         | (30,373,607 | )          | $           | (27,398,996 | )          | $          | (33,086,262 | )          | $         
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|Net loss per common sharebasic and diluted:               |                                            |                           |             |            |             |             |            |            |             |            |           
|Loss from continuing operations                            |                                            | $                         | (0.31       | )          | $           | (1.03       | )          | $          | (1.55       | )          | $         
|Loss from discontinued operations                          |                                            |                           |            |            |             |            |            |            | (0.02       | )          |           
|Gain from extraordinary gain                               |                                            |                           | 0.01        |            |             |            |            |            |            |            |           
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|                                                           |                                            | Net loss per common share |             | $          | (0.30       | )           | $          | (1.03      | )           | $          | (1.57     
|                                                           |                                            |                           |             |            |             |             |            |            |             |            |           
|Balance Sheet Data:                                        |                                            |                           |             |            |             |             |            |            |             |            |           
|Working capital                                            |                                            | $                         | (29,251,249 | )          | $           | (30,060,766 | )          | $          | (1,318,640  | )          | $         
|Property and equipment, net                                |                                            |                           | 21,023,696  |            |             | 10,983,273  |            |            | 7,019,361   |            |           
|Net assets (liabilities) of discontinued operations        |                                            |                           |            |            |             |            |            |            | (82,629     | )          |           
|Total assets                                               |                                            |                           | 46,780,149  |            |             | 21,657,492  |            |            | 21,658,199  |            |           
|Long-term obligations                                      |                                            |                           | 31,222,207  |            |             | 2,801,592   |            |            | 9,658,525   |            |           
|Stockholders' equity (deficit)                             |                                            |                           | (36,997,854 | )          |             | (28,839,061 | )          |            | (11,049,897 | )          |           

16

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During 1997, we formed a wholly owned subsidiary, I-Link Worldwide, L.L.C. (Worldwide), through which we launched a network marketing
channel to market our telecommunications services and products. On February 15, 2000, we signed a strategic marketing and channel agreement with Big Planet, a wholly owned subsidiary of Nu Skin
Enterprises, Inc. Under the terms of the agreement, our independent network marketing sales force (the IRs) transitioned to Big Planet, and Big Planet was granted non-exclusive
worldwide rights to market and sell our products and services through the
network marketing (sometimes referred to as Multi-Level) sales channel to residential and small business users. Our other sales channels into the residential, small business, and other markets are
unaffected by the agreement with Big Planet. The impact on the results of operations included a termination of marketing service revenues and marketing service costs effective February 15,
2000. Additionally, telecommunication service revenues decreased as we sold our services to the same subscribers through Big Planet at wholesale prices. The reduction in telecommunications service
revenues was partially offset by a reduction in commissions paid to IRs related to telecommunication services revenues.

On
April 17, 2001, we acquired WebToTel Incorporated and its subsidiaries (including Nexbell Communications Inc.) in a stock for stock transaction. However, as WebToTel
(which was a subsidiary of Counsel) and I-Link were under common control of Counsel (the majority shareholder of I-Link) as of March 1, 2001 (the date Counsel obtained
its ownership in I-Link), we have accounted for the acquisition on an accounting method consistent with the pooling-of-interests method of accounting as of
March 1, 2001. Accordingly, we have included the financial results of WebToTel and its subsidiaries subsequent to March 1, 2001. See "Results of Operations".

On
June 4, 2001, I-Link Incorporated, through its wholly owned subsidiary WorldxChange Corp. (WorldxChange), purchased certain assets and assumed certain liabilities
of WorldxChange Communications, Inc. from a bankruptcy proceeding. WorldxChange is a facilities-based telecommunications carrier that provides international and domestic
long-distance service to retail customers. Telecommunication services provided by WorldxChange consist primarily of a dial-around product that allows a customer to make a call
from any phone by dialing a 10-10-XXX prefix.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Information

This report contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and information relating to I-Link that are based on management's exercise of business judgment as well as
assumptions made by and information currently available to management. When used in this document, the words "anticipate," "believe," "estimate," "expect," and "intend" and words of similar import,
are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are
subject to certain risks and uncertainties as noted below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could
differ materially from those anticipated in these forward-looking statements.

Although
we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize. Many factors could cause actual results to
differ materially from our forward looking statements. Several of these factors include, without limitation:



17

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We
undertake no obligation and do not intend to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of any unanticipated events.

Results of Operations

When reviewing the operating results for 2001 compared to 2000, and 2000 compared to 1999, it is important to note three significant changes in our operations
that occurred in 2001 and 2000. Namely:



18

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As
a result of this agreement with Big Planet, we ended our involvement in the network-marketing channel and Big Planet became our single largest customer.

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

Revenues

Telecommunications service revenue increased $56,587,009 to $74,887,557 in 2001 as compared to $18,300,548 in 2000. The increase is primarily due to three events,
namely:

These
increases in telecommunications services revenues were offset by decreases in revenue of approximately $6 million, which was primarily related to the transition of our
network-marketing channel to Big Planet in February 2000. The decline in revenue related to Big Planet was due to a decrease in revenues related to the transitioning of our former network
marketing channel from a retail channel to a wholesale channel and a continued decline in the number of subscribers with Big Planet.

Marketing
services revenue, which included revenue primarily from independent representatives for promotional and presentation materials and ongoing administrative support decreased
$463,740 to $0 in 2001 as compared to $463,740 in 2000. The decrease was a result of transition of this network-marketing channel to Big Planet in February 2000, which caused marketing service
revenues to cease.

19

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Technology licensing and development revenue decreased $3,275,935 to $5,696,893 in 2001 as compared to $8,972,828 in 2000. During 2001 and 2000, the revenues were primarily from a
$10,000,000 licensing agreement in May 2000 between Red Cube and I-Link that is being recorded over a twenty-four month period. Accordingly, $5,000,000 and $3,333,333
were recorded in 2001 and 2000, respectively. As of December 31, 2001, the unearned balance of $1,666,667 has been recorded as unearned revenue. During 2001, we licensed our platform and
I-Link One Number technology to a company for use in Korea. Revenues from the sale are recognized over the expected life of the contract and accordingly we recognized $680,000
in 2001. During 2000, revenues of $4,000,000 were recorded related to two licensing agreements that did not recur in 2001. The additional overall decrease in technology licensing revenue was due to
other licensing agreements in 2000 that did not recur in 2001. As of December 31, 2001, we had unearned revenue of $1,986,675 which will be recognized as revenue in 2002. Technology licensing
revenue will vary from year to year based on timing of technology licensing and development projects and payments.

Other
revenues in 2001 decreased $641,454 to $2,025,585 as compared to $2,667,039 in 2000. During 2000, other revenues also included royalties of $400,000 from the sale of Indavo units
to a company that did not use the Indavo units over the I-Link Network. There were no comparable sales of Indavo in 2001 nor do we expect any future revenues from the Indavo product.
Decreases in other revenues relating to customer care, billing and accounts receivable services performed for our single largest customer accounted for the balance of the decrease in other revenues.
Revenues from these types of services vary from period to period based upon services requested.

Operating costs and expenses

Telecommunication network expense increased $37,693,907 in 2001 to $62,652,227 as compared to $24,958,320 for 2000. These expenses include the costs related to
the continuing development and deployment of our communication network and expenses related to the generation of telecommunication service revenue. The primary increase was related to inclusion of
network expense ($36,009,197) related to the dial-around business that we began to offer June 4, 2001 when we acquired certain assets and liabilities of WorldxChange
Communications, Inc. The remaining increase in telecommunication network expense was due to the inclusion of the expense associated with the METS product in 2001 in addition to increased
expenses in 2001 related to the network build-out that began in late 2000. In late 2001 we determined it was not economically justifiable to continue to maintain a significant part of our
fixed network, specifically, leased lines for origination and termination from our backbone network. Instead of using these leased lines for origination and termination, it was determined that given
current revenue levels, it would be more economical to originate and terminate traffic on our subsidiary's (WorldxChange) network which we began to do in late 2001 and anticipate
that transition will be completed in April 2002. We anticipate that this transition will result in net savings in network expenses of $400,000 to $600,000 per month beginning in
April 2002.

Marketing
service costs decreased $456,354 to $0 in 2001 as compared to $456,354 for 2000. The decrease in expense is directly related to the transition of the network-marketing channel
to Big Planet Inc. in February 2000, which resulted in the cessation of marketing service revenues and accordingly the related expenses.

Selling,
general and administrative expense increased $18,482,715 to $36,836,446 in 2001 as compared to $18,353,731 in 2000. The primary components of the net increase were additional
selling, general and administrative cost of approximately $20,366,000 related to the WorldxChange dial-around business that began June 4, 2001. Further increases relating to
WebToTel were offset by a reduction in other corporate expenses relating to the workforce reductions in January, May and December of 2001 including reduction in facilities, materials, etc. and other
cost cutting measures instituted by management. The effect of the workforce reductions at I-Link in 2001and the sale of Nexbell in

20

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December in 2001 will serve to further reduce non-WorldxChange selling, general and administrative expenses in 2002.

The
provision for doubtful accounts increased $3,953,522 to $4,066,690 in 2001 as compared to $113,168 in 2000. The increase was directly due to necessary provisions for doubtful
accounts associated with two sources of revenues. During 2001 we recorded an allowance for accounts receivable from a major customer in the amount of $975,000 due to the termination of their agreement
and pending arbitration. Additional reserves of $2,861,000 were recorded related to commencement of WorldxChange's dial-around business on June 4, 2001. Further increases relate to
the WebToTel (primarily the METS product) acquisition included in our financial statements after March 1, 2001.

Depreciation
and amortization increased $3,717,472 to $10,116,790 in 2001 as compared to $6,399,318 in 2000. The increase is primarily due to depreciation of $2,286,150 relating to
WorldxChange assets and $1,066,000 from amortization of goodwill acquired in the WebToTel acquisition.

Research
and development decreased $1,887,740 to $2,332,593 in 2001 as compared to $4,220,333 in 2000. The decrease was primarily a result of our decision to consolidate our research
operations at our headquarters in Draper, Utah and to curtail research and development activities in 2001 in order to concentrate our financial resources on sales and marketing of existing products.
Research and development is expected to be less in 2002 than in 2001 as we continue to focus our financial resources on sales and marketing of existing products.

During
the third quarter of 2001, we performed a review of the products we offer and their contribution to our Company and our overall strategy. As of September 30, 2001, our
analysis
determined that it was not economically justified to continue to maintain a portion of the Company's network related to leased lines used for local access origination and Nexbell's METS product.
Accordingly, we performed an impairment analysis of the goodwill recorded in connection with the acquisition of WebToTel and subsidiaries. The analysis was performed in response to projected losses on
the METS product acquired in the WebToTel acquisition. Additionally, subsequent to September 30, 2001, the Board of Directors approved a plan to discontinue offering the METS product. As a
result of this review, an $8,040,054 impairment charge was recorded during the third quarter.

Other income (expense)

Interest expense increased $3,271,960 to $4,774,636 in 2001 as compared to $1,502,676 in 2000. We recorded non-cash interest expense of $1,518,443 in
2001 related to the amortization of a beneficial conversion feature on convertible debt with Counsel and amortization of the discount related to the value of warrants issued to Counsel in connection
with a loan. In addition to the non-cash interest, WorldxChange's debt accounted for interest of approximately $1,233,000 on debt to Counsel, capital leases and a revolving credit
facility. Interest on other debt increased approximately $520,000 as a result of increased average balances of debt outstanding, primarily on debt to Counsel.

Interest
and other income decreased $406,117 to $81,015 in 2001 as compared to $487,132 in 2000. The decrease was primarily due to a decrease in the average balance of cash on hand in
2001 as compared to 2000.

In
December 2001 and subsequent to the time we recorded the impairment of goodwill charges related to Nexbell as discussed above, we sold our subsidiary Nexbell to an unrelated
party. The sale was a sale of Nexbell's stock and accordingly the assets and liabilities of Nexbell were assumed by the purchaser with no further financial obligation on our part. At the time of the
sale, the liabilities exceeded the assets of Nexbell and accordingly we have recorded a gain on sale of subsidiary in the amount of $588,943 (the amount by which the liabilities of Nexbell exceeded
its assets).

21

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A
settlement expense of $639,565 was recorded in 2000. This expense is the result of an obligation to issue 129,519 shares of common stock in exchange for certain trading restrictions
imposed on JNC Opportunity Fund Ltd. (JNC) in relation to the common stock to be issued to JNC pursuant to a settlement and release agreement entered into in February 2000. There was no
comparable expense in 2001.

Extraordinary gain

An extraordinary gain on extinguishment of debt was recorded in the fourth quarter of 2001. In the third quarter of 2001, Nexbell was in default on two leases and
at the time of settlement we were liable for $1,272,818. As the liability was settled for $180,000 in the fourth quarter of 2001, we recorded the extraordinary gain in the amount of $1,092,818.

Year Ended December 31, 2000 Compared to the Year Ended December 31, 1999

Revenues

Net operating revenue in 2000 and 1999 included three primary sources of revenue which were: (1) telecommunications service; (2) marketing services
which began in June 1997 (and terminated in February 2000see "Results of Operations" above) and included revenues from the network marketing channel, including revenues from
independent representatives for promotional and presentation materials and national conference registration fees; and (3) technology licensing and development revenues related to communications
software that supports multimedia communications over PBX, LAN's and the Internet. In 2000, we also had revenues from other sources including customer services such as billing, accounts receivable
processing, customer care and special consulting services which were primarily associated with the transition of the network marketing channel to Big Planet in the first quarter of 2000.

Telecommunication
service revenues decreased $8,139,469 to $18,300,548 in 2000 as compared to $26,440,017 in 1999. The decrease is a direct result of the agreement with Big Planet
effective February 15, 2000. Before February 15, 2000, our telecommunication services revenues were primarily dependent upon the sales efforts of IRs functioning within a
network-marketing channel of distribution. These revenue sources were recorded at retail. Under terms of the Big Planet agreement, our independent network marketing sales force transitioned to Big
Planet. This resulted in a substantial decrease in telecommunication services revenues for the year 2000 as revenues from subscribers migrating from retail sales to the sale of services to the same
subscribers through Big Planet at wholesale prices. While a significant portion of the revenues converted to wholesale, we retained a portion of Big Planet's subscriber base on a retail-billing basis,
for which Big Planet is paid a commission. Revenues billed to customers of Big Planet have decreased due to the decline in rate per minute billed of approximately 32% due to the transition from retail
to wholesale, combined with a decrease in subscriber base and lower than expected new subscriber acquisitions. Big Planet accounted for 46% of our telecommunication services revenue in the fourth
quarter of 2000. Part of the decrease in telecommunications services revenues billed through Big Planet, our largest wholesale customer, was offset by $3,230,000 in revenues generated from Gatelink
partners primarily in the last half of 2000. The percentage of telecommunication services revenue from our second largest customer during the fourth quarter was 32%.

Marketing
services revenue, which included revenue from independent representatives for promotional and presentation materials, WebCentre, and ongoing administrative support decreased
$3,209,248 to $463,740 in 2000 as compared to $3,672,988 in 1999. The decrease was the result of the transition of this network-marketing channel to Big Planet in February 2000. With this
transition, marketing service revenues ceased.

22

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Technology
licensing and development revenue increased $6,466,127 to $8,972,828 in 2000 as compared to $2,506,701 in 1999. Revenue from this source will vary from year to year based on
timing of technology licensing and development projects and royalties from products previously licensed. During 2000, our increase in these revenues stemmed primarily from the following sources:



Other
revenues in 2000 of $2,667,039 includes $2,203,693 relating to customer care, billing and accounts receivable services performed for wholesale customers. During 2000, other
revenues also included royalties of $400,000 from the sale of Indavo units through a distributor to a company that will not use the Indavo units over our network.

Operating costs and expenses

Telecommunications network expenses increased $4,585,111 to $24,958,320 in 2000 as compared to $20,373,209 in 1999. The increase is related to the costs of
continuing development and deployment of our communication network and expenses related to the telecommunication service revenue. While variable costs per minute remained comparable to 1999 variable
costs, fixed costs increased as we continued to build our RTIP network. While network costs associated with telecommunications services revenues increased, the transition from retail to
wholesale-based revenues resulted in decreased per minute revenue. However, we continued to incur the same network costs.

Marketing
services costs decreased $4,943,795 to $456,354 in 2000 as compared to $5,400,149 in 1999. These costs directly relate to our marketing services revenue that began late in the
second quarter of 1997 and include commissions and the costs of providing promotional and presentation materials and ongoing administrative support of the network-marketing channel. When we
transferred this network-marketing channel to Big Planet in February 2000, marketing service costs ceased.

Selling,
general and administrative expenses increased $5,924,775 to $18,353,731 in 2000 as compared to $12,428,956 in 1999. In 2000, we added significant infrastructure in the form of
employees and facilities in anticipation of fulfilling obligations to various business partners including Red Cube. The increase in 2000 expenses was partly a result of the cost of this added
infrastructure. In 2000, we also entered into various transactions that contributed to this increase in the form of increased outside services. In January 2001, we had a strategic work force
reduction in order to reduce overhead and streamline operations.

The
provision for doubtful accounts decreased $3,589,908 to $113,168 in 2000 as compared to $3,703,076 in 1999. The decrease is directly related to two items:



23

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Depreciation
and amortization increased $916,679 to $6,399,318 in 2000 as compared to $5,482,639 in 1999. The increase is primarily associated with increased expenditures related to
continued expansion of our RTIP Network.

In
1999 we recorded a write-down of capitalized software costs of $1,847,288 which did not recur in 2000.

Research
and development costs increased $1,583,592 to $4,220,333 in 2000 as compared to $2,636,741 in 1999. The increase is associated with our telecommunication network research and
development efforts and development of new products and technologies.

Other income (expense)

Interest expense decreased $3,583,465 to $1,502,676 in 2000 as compared to $5,086,141 in 1999. Interest expense in 1999 was significantly greater than in 2000 due
to the accretion of debt discount (non-cash expense of $3,125,000 in 1999) related to certain warrants granted in connection with $8,000,000 in loans from Winter Harbor. In 1999, there was
also $627,000 of interest expense on other debt instruments that were converted to equity in 1999.

Interest
and other income increased $307,927 to $487,132 in 2000 as compared to $179,205 in 1999. The increase was primarily due to interest earned in 2000 on higher average cash
balances on hand during 2000 as compared to 1999.

A
settlement expense of $639,565 was recorded in 2000. This expense is the result of an obligation to issue 129,519 shares of common stock in exchange for trading restrictions imposed on
JNC Opportunity Fund Ltd. (JNC) in relation to the common stock to be issued to JNC pursuant to a settlement and release agreement entered into in February 2000. The settlement and
release agreement settled litigation between JNC and us over unconverted Series F preferred stock held by JNC. The amount of this expense was based upon the market price of our common stock on
May 24, 2000 when the common stock was issued. There was no comparable expense in 1999.

Liquidity and Capital Resources

Cash and cash equivalents as of December 31, 2001 were $4,662,532 and the working capital deficit was $29,251,249 (which includes debt to our parent
company, Counsel, of $17,540,140 and deferred revenue of $1,986,675). Cash used in operating activities during 2001 was $29,282,791 compared to cash provided by operations of $1,869,355 in 2000 and
cash used in operations of $10,381,925 in 1999. The decrease in cash provided by operating activities in 2001 compared to 2000 was primarily due to an increase in our net loss and the difference in
cash receipts and revenue recognition related to unearned revenue. The increase in cash from operations in 2000 as compared to 1999 was primarily due to $20,000,000 received from Red Cube for
licensing and prepayment for future services, of which $16,552,259 remained as unearned revenues at December 31, 2000.

Net
cash used by investing activities in 2001 was $15,410,328 as compared to $6,881,466 in 2000 and $1,585,299 in 1999. The net increase in cash used by investing activities in 2001 as
compared to 2000 was primarily due to a $13,681,000 purchase of WorldxChange assets, which purchase was offset by a reduction in the purchase of furniture, fixtures, equipment and software of
$4,947,888. Additionally, we received $233,787 in cash as part of the WebToTel acquisition, which was a stock-for-stock transaction. The net increase in cash used by investing
activities in 2000 as compared to 1999 was due to an increase in purchases of furniture, fixtures equipment and software of $4,863,055 and a decrease of
$412,649 in cash flows from maturing restricted certificates of deposit and $20,463 from discontinued operations.

Financing
activities in 2001 provided net cash of $47,200,023 as compared to $4,171,735 in 2000 and $13,594,301 in 1999. Cash provided in 2001 included net cash borrowings from notes
payable to a

24

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related party (Counsel) of $41,420,320 and net borrowing from a revolving line of credit of $6,996,604. Additionally, I-Link received $15,579 from the sale of I-Link common
stock under its employee stock purchase plan. During 2001 we repaid $1,232,480 in long-term debt and capital lease obligations. Cash provided in 2000 included $4,341,659 from exercise of
options and warrants and employee purchases under the employee stock purchase plan. During 2000, we repaid $145,720 in long-term debt and capital lease obligations and used $24,204 in our
discontinued operations. Cash provided in 1999 included $8,200,000 from long-term debt, $7,116,408 net proceeds from the sale of preferred stock and $5,000 from the exercise of stock
options and warrants. During 1999, we repaid $1,727,107 of long-term debt and capital lease obligations.

We
incurred a net loss from continuing operations of $45,589,443 for the year ended December 31, 2001, and as of December 31, 2001 had an accumulated deficit of
$166,763,782. We anticipate that revenues generated from our continuing operations will not be sufficient during 2002 to fund ongoing operations, the continued expansion of our private
telecommunications network facilities, product development and manufacturing, and anticipated growth in subscriber base. As described below, several events have occurred in 2002 that affect our
ability to obtain the additional necessary funds and reduce liabilities requiring funds for our continuing operations in 2002.

Current Position/Future Requirements

During 2002, we plan to use available cash to fund the development and marketing of I-Link products and services. We anticipate that cash received
related to revenues from all sources of continuing operations will grow in 2002 and will increasingly contribute to meeting our cash requirements. However, we anticipate that we will need financial
resources in excess of cash from revenue sources from continuing operations. In late 2001, we determined it was not cost justifiable to maintain a significant part of our fixed network, specifically,
the leased lines for call origination and termination from our backbone network. Instead of using these leased lines for origination and termination, it was determined that, given current revenue
levels, it would be more economical to originate and terminate traffic on our subsidiary's (WorldxChange) network, which we began to do in late 2001. We anticipate the transition will be completed in
April 2002, and that this transition will result in monthly net savings of $400,000 to $600,000 per month beginning in April 2002. In addition to the anticipated cost savings, Counsel
Corporation and its subsidiary Counsel Springwell Communications LLC have committed to fund, through long-term inter-company advances or equity contribution, all capital investment,
working capital or other operational cash requirements of I-Link through April 15, 2003.

While
we believe that the aforementioned sources of funds will be sufficient to fund operations into 2002, we anticipate that additional funds will be necessary from public or private
financing markets to successfully integrate and finance the planned expansion of our business communications services, product development and manufacturing, and to discharge our financial
obligations. The availability of these capital sources will depend on prevailing market conditions, interest rates, and our financial position and results of operations. There can be no assurance that
such financing will be available, that we will receive any additional proceeds from the exercise of outstanding options and warrants or that we will not be required to arrange for additional debt,
equity or other financing.

Other Items

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the

25

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pooling-of-interests method. We believe that the adoption of SFAS 141 will not have a significant impact on our financial statements.

In
July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which is effective for fiscal years beginning after December 15, 2001.
SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions upon adoption for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the testing for
impairment of existing goodwill and other intangibles. We believe that the adoption of SFAS 142 will not have a significant impact on our financial statements.

In
August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," effective for years beginning after June 15, 2002. SFAS 143
addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset,
except for certain obligations of lessees. We believe that the adoption of SFAS 143 will not have a significant impact on our financial statements.

In
August 2001, the FASB issued the SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144 addresses financial
accounting and reporting for the disposal of long-lived assets. SFAS 144 is effective for fiscal years beginning after December 15, 2001. We believe that the adoption of
SFAS 144 will not have a significant impact on our financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Our exposure to market risk is limited to interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. Our cash
equivalents are invested with high quality issuers and limit the amount of credit exposure to any one issuer. Due to the short-term nature of the cash equivalents, we believe that we are
not subject to any material interest rate risk. We did not have any foreign currency hedges or other derivative financial instruments as of December 31, 2001.

We
do not enter into financial instruments for trading or speculative purposes and do not currently utilize derivative financial instruments. Our operations are conducted primarily in
the United States and as such are not subject to material foreign currency exchange rate risk.

26

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Item 8. Financial Statements.

See Consolidated Financial Statements beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None

PART III

Item 10. Directors, Executive Officers, Promoters, and Control Persons; Compliance with Section 16(a) of the Exchange Act.

As
of March 14, 2002, the Board of Directors had seven members. Our Articles of Incorporation, as amended, provide that the Board of Directors be divided into three classes and
that each director shall serve a term of three years. The term of office of Mr. Wasserson and Mr. Shimer, both Class I directors will expire at the 2002 annual shareholder's
meeting. The term of office of Messrs. Toh, Heaton and Silber, Class II directors, will expire at the 2003 annual meeting of shareholders. The term of office of Mr. Chirite and
Mr. Reichmann, the Class III directors, will expire at the annual meeting of shareholders in 2004.

Biographical
information with respect to the present executive officers, directors, and key employees are set forth below. There are no family relationships between any present executive
officers and directors.

|Name              |  | Age (1) |  | Title                                        
|----------------- |  | ------- |  | ---------------------------------------------
|Allan C. Silber   |  | 52      |  | Chairman of the Board                        
|Helen Seltzer     |  | 56      |  | President and CEO (effective January 3, 2002)
|Frank Williams    |  | 45      |  | Executive Vice President                     
|John Rufener      |  | 54      |  | Vice President of Sales                      
|Alex Radulovic    |  | 32      |  | Vice President of Technology                 
|Gary J. Wasserson |  | 45      |  | President of WorldxChange and Director       
|Samuel L. Shimer  |  | 38      |  | Director                                     
|Henry Y.L. Toh    |  | 43      |  | Director                                     
|Albert Reichmann  |  | 72      |  | Director                                     
|Norman Chirite    |  | 40      |  | Director                                     
|Hal B. Heaton     |  | 51      |  | Director                                     

---

Allan
C. Silber, Chairman of the Board. Mr. Silber was elected to the Board of Directors as a Class II director in September 2001 and appointed as chairman of the
board in November 2001. Mr. Silber is the chairman and CEO of Counsel Corporation, which he founded in 1979. Mr. Silber attended McMaster University and received a Bachelor of
Science degree from the University of Toronto.

Helen
Seltzer, President and CEO. Ms. Seltzer joined I-Link as its President and CEO on January 3, 2002. Prior to joining I-Link, Ms. Seltzer
was President, Chief Operating Officer and a Board Member of Messageclick from 1999 to 2001, a company which provided IP messaging solutions for telecommunication providers and enterprises. From 1997
to 1999, Ms. Seltzer was the President of BDM Technologies, an integrated software systems support firm and before that she served as Vice President. From 1994 to 1997, Ms. Seltzer was
Vice President of marketing for Bell Atlantic where she

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oversaw management of Bell Atlantic's access operating unit. Ms. Seltzer also brings with her fourteen years of executive management experience with MCI.

Frank
Williams, Executive Vice President. Mr. Williams brought 19 years telecommunications and information systems management experience to I-Link when he
joined us in September 2000. Prior to joining I-Link, Williams was Chief Information Officer of Tellepsen Corporation, a Houston-based diversified construction services company from
1999 to 2000. He worked at Splitrock Services, Inc. as VP Network Operations from 1998 to 1999. From 1991 to 1998 Mr. Williams was Executive Director of the National Technical Resource
Center of Williams Communications Solutions. He holds a bachelor of business administration degree from Trinity University in San Antonio, Texas.

John
Rufener, Vice President of Sales. Mr. Rufener joined I-Link as our Vice President of Sales in May 2001. Mr. Rufener was Vice President of Marketing
for William Communications in Houston, a fiber communications and hardware company, until 1998. He joined US West (now Qwest) in 1998 as Director of Emerging Markets, a position responsible for the
introduction of new technologies. In 1999, Mr. Rufener assumed major markets responsibility for US West in the states of Nebraska, Iowa and South Dakota. On retirement from US West,
Mr. Rufener served as Vice President of Sales for Convergent Technologies from September 2000 to May 2001.

Alex
Radulovic, Vice President of Technology.Mr. Radulovic has considerable Internet and telecommunications development
experience. He has been employed by I-Link since February 1996. Previously, he was a consultant to IBM for a wide range of AIX Communications projects and was also a development
engineer for Novell's NetWare 386-network operating system. Mr. Radulovic is a co-developer of our patent-pending technology.

Gary
J. Wasserson, Director. Mr. Wasserson was appointed by the Board of Directors as a Class I director on April 15, 2001 to fill a board vacancy. In
May 2001, Mr. Wasserson was appointed CEO of I-Link which position he held until his resignation in December 2001. In June 2001, Mr. Wasserson became
President and CEO of WorldxChange. From 1999 to October 31, 2001, he was been President and Chief Executive Officer of Counsel Communications LLC and since November 1, 2001 he has been a
Managing Director of Counsel Corporation (US)). From 1997 to 1999, he was President and Chief Executive Officer of Call Sciences/Virtel, a major provider of enhanced
telecommunications services deliverable over global intelligent networks. From 1992 to 1997, he was one of the founders of the Pre-Paid Calling Card Industry and served as Chief Executive
Officer of Global Links/GTS, a company instrumental in creating the calling card industry trade association and its regulatory initiatives within the industry. Mr. Wasserson holds a Bachelor's
degree from Babson College.

Samuel
L. Shimer, Director. Mr. Shimer was appointed by the Board of Directors as a Class I director on April 15, 2001 to fill a board vacancy. From 1997 to present
he has been employed by Counsel Corporation, serving as a Managing Director since 1998. Mr. Shimer is currently serving as a director of Counsel Springwell Communications LLC, Counsel's
communications merchant banking affiliate. He also is a director of SAGE BioPharma, another Counsel portfolio company. From 1991 to 1997, Mr. Shimer worked at two merchant banking funds
affiliated with Lazard Frères & Co., Centre Partners and Corporate Partners, ultimately serving as a Principal. Mr. Shimer earned a Bachelor of Science in Economics degree
from The Wharton School of the University of Pennsylvania, and an MBA from Harvard Business School.

Henry
Y.L. Toh,Director. The Board of Directors elected Mr. Toh as a Class II director and as Vice Chairman of the Board of
Directors in April 1992. Mr. Toh became President of I-Link in May 1993, Acting Chief Financial Officer in September 1995 and Chairman of the Board in
May 1996, and served as such through September 1996. Mr. Toh has served as a director of National Auto Credit, Inc. (an originator of sub-prime automobile
financing) from 1998 through the present and Teletouch Communications, Inc., a retail provider of internet, cellular and paging services, beginning in

28

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November 2001. He is also a director of Four M International Inc., a private investment firm. He is a graduate of Rice University.

Albert
Reichmann, Director. Mr. Reichmann was elected to the Board of Directors as a Class III director in September 2001. From 1996 to present, Mr. Reichmann
served as the Chairman and Chief Executive Officer of Heathmount A.E. Corporation, a company established for the creation and development of sports and amusement parks in North America and Asia. He is
the Chairman of Olympia & York Developments Limited, a leading international commercial developer recognized for revitalization projects such as the World Financial Center in New York and
Canary Wharf in London. Mr. Reichmann is internationally recognized for his humanitarian and charitable efforts which range from Armenian earthquake relief to medical relief for child victims
of the Chernobyl nuclear disaster to arranging the first cabinet-level meetings between the governments of Israel and the Soviet Union since the end of the Six-Day War.
Mr. Reichmann holds an honorary Degree of Laws from the Faculty of Administrative Studies of York University. Mr. Reichmann has served on the Steering Committee of York University's
International Management Center located in Budapest, Hungary since 1988 and is an
Advisor to its East-West Enterprise Exchange initiative. Mr. Reichmann is a founder of the Canada-USSR Business Council established in 1989 by intergovernmental
agreement.

Norman
Chirite, Director. Mr. Chirite was elected to the Board of Directors as a Class III director in September 2001. Mr. Chirite is a managing director and
member of the Board of Directors of Counsel Corporation. Prior to joining Counsel Corporation in May 2001, Mr. Chirite was Senior Vice President and General Counsel of Convergence
Holdings Corp., a privately held marketing services and communications company based in Arlington, Virginia. From 1992 to 2000, Mr. Chirite was a partner in the Corporate Department of Weil,
Gotshal & Manges LLP, an international law firm based in New York City, specializing in mergers & acquisitions, corporate finance and private equity transactions. Mr. Chirite also
serves as a director of Iogen Corporation, a privately-held industrial biotechnology firm based in Ottawa, Ontario, Canada. Mr. Chirite received his Bachelor's and Juris Doctor
degrees from the University of Michigan.

Hal
B. Heaton,Director. Dr. Heaton was appointed by the Board of Directors as a Class II director on June 14, 2000
to fill a board vacancy. From 1982 to present he has been a professor of Finance at Brigham Young University and between 1988 and 1990 was a visiting professor of Finance at Harvard University.
Dr. Heaton is a director of MITY Enterprises, Inc., a publicly traded manufacturer of furniture in Orem, Utah. Dr. Heaton holds a Bachelor's degree in Computer Science/Mathematics
and a Master's in Business Administration from Brigham Young University, a Master's degree in Economics and a Ph.D. in Finance from Stanford University.

Each
officer is chosen by and serves at the pleasure of the Board of Directors and holds his or her office until his or her successor shall have been duly chosen and qualified.

Mr. Reichmann
and Mr. Heaton were non-employee independent directors as of December 31, 2001.

There
are no material proceedings to which any director, officer or affiliate of our Company, any owner of record or beneficial owner of more than five percent of any class of voting
securities, or any associate of any such director, officer, affiliate or security holder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our
subsidiaries.

Committees of the Board of Directors

The Committees of the Board of Directors are as follow:

Audit Committee.The audit committee is responsible for making recommendations to the Board of Directors concerning the
selection and engagement of independent certified public accountants and for reviewing the scope of the annual audit, audit fees, and results of the audit. The Audit Committee

29

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also reviews and discusses with management and the Board of Directors such matters as accounting policies, internal accounting controls, and procedures for preparation of financial statements. Its
membership is currently comprised of Mr. Heaton (chairman), Mr. Toh and one vacancy. The Audit Committee held five meetings during the last fiscal year.

Compensation Committee.The compensation committee reviews and approves the compensation for executive employees. Its
membership is currently comprised of Mr. Heaton and two vacancies. The Compensation Committee held one meeting during the last fiscal year.

Finance Committee.The finance committee is responsible for reviewing and evaluating financing, strategic business
development and acquisition opportunities. Its membership is currently comprised of Mr. Heaton and two vacancies. The Finance Committee held two meetings during the last fiscal year.

Special Committee.From time to time the Board of Directors establishes special committees to deal with
non-recurring issues. A special committee was formed in January 2001 to advise the Board of Directors on matters relating to raising funds and capitalization issues.
Mr. Bradford (a former director) was Chairman of the special committee and Messrs. Toh and Heaton were members. The special committee was disbanded in March 2001 after completion
of the Winter Harbor and Counsel Communications transactions. See "Current Position/Future Requirements" and "Certain Relationships and Related Transactions."

We
do not have a nominating committee or any committee serving a similar function.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act) requires our officers and directors, and persons who own more than ten
percent of a registered class of our equity securities, to file reports of ownership and changes in ownership of equity securities of I-Link with the Securities and Exchange Commission
(SEC). Officers, directors, and greater than ten percent shareholders are required by the SEC regulation to furnish us with copies of all Section 16(a) forms that they file.

Based
solely upon a review of Forms 3 and Forms 4 furnished to us pursuant to Rule 16a-3 under the Exchange Act during our most recent fiscal year and Forms 5 with
respect to our most recent fiscal
year, we believe that some forms required to be filed pursuant to Section 16(a) of the Exchange Act were not timely filed, by certain of our officers and directors: Messrs. Chirite,
Reichmann, Shimer, Silber and Wasserson were each late filing their respective Forms 3 upon election to the Company's Board of Directors. All other required forms were filed timely by each of the
Company's officers and directors during the fiscal year ended December 31, 2001.

Item 11. Executive Compensation

The following table sets forth the aggregate cash compensation paid for services rendered during the last three years by each person serving as our Chief
Executive Officer during the last year and our

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five most highly compensated executive officers serving as such at the end of the year ended December 31, 2001, whose compensation was in excess of $100,000.

|                                                                       |  |                |  |                         |  |            |  |       |  | Long-Term Compensation |  |                      
|---------------------------------------------------------------------- |  | -------------- |  | ----------------------- |  | ---------- |  | ----- |  | ---------------------- |  | ---------------------
|
|
|
|
|Gary J. Wasserson(1)
Former CEO of
    I-Link; CEO of
    WorldxChange |  | 2001
2000
1999 |  | 150,000

             |  | 

      |  | 

 |  | 

                  |  | 

                
|John W. Edwards(2)                                                     |  | 2001
2000
1999 |  | 75,000
225,000
201,115  |  | 

      |  | 

 |  | 

                  |  | 25,000
25,000
230,000
|Frank Williams(3)
Executive VP                                         |  | 2001
2000
1999 |  | 157,000
51,266
        |  | 

      |  | 

 |  | 
60,000
             |  | 

                
|John Rufener(4)
VP Sales                                               |  | 2001
2000
1999 |  | 112,500

             |  | 

      |  | 

 |  | 100,000

            |  | 

                
|James Sas(5)
VP of WorldxChange                                        |  | 2001
2000
1999 |  | 137,500

             |  | 25,000

 |  | 

 |  | 

                  |  | 

                
|Alex Radulovic(6)
VP Technology                                        |  | 2001
2000
1999 |  | 200,000
200,000
164,734 |  | 

      |  | 

 |  | 

                  |  | 
400,000
          

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Option/SAR Grants in Last Fiscal Year (2001)

The following table sets forth certain information with respect to the options granted during the year ended December 31, 2001, for the persons named in
the Summary Compensation Table (the Named Executive Officers):

|Name              |  | Number of Securities
Underlying
Options/SARs Granted (#) |  | Percent of Total
Options/SARs Granted to
Employees in Fiscal Year |   | Exercise or
Base Price
($/Share) |      | Grant Date
Value(1) |   | Expiration
Date
|----------------- |  | -------------------------------------------------------- |  | ----------------------------------------------------------------- | - | -------------------------------- | ---- | ------------------- | - | ---------------
|Gary J. Wasserson |  |                                                         |  |                                                                  |   |                                  |     |                     |   |               
|John W. Edwards   |  | 25,000                                                   |  | 5                                                                 | % | $                                | 0.78 |                     | $ | 11,470         
|Frank Williams    |  |                                                         |  |                                                                  |   |                                  |     |                     |   |               
|John Rufener      |  | 100,000                                                  |  | 20                                                                | % | $                                | 0.60 |                     | $ | 35,210         
|James Sas         |  |                                                         |  |                                                                  |   |                                  |     |                     |   |               
|Alex Radulovic    |  |                                                         |  |                                                                  |   |                                  |     |                     |   |               

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Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values

The following table sets forth certain information with respect to options exercised during 2001 by the Named Executive Officers and with respect to unexercised
options held by such persons at the end of 2001.

|                  |  |   |  |   |  | Number of Securities
Underlying Unexercised
Options/SARs at
FY-End (#) |  |         |  |  
|----------------- |  | - |  | - |  | ---------------------------------------------------------------------- |  | ------- |  | -
|
|
|
|Gary J. Wasserson |  |  |  |  |  |                                                                       |  |        |  | 
|John W. Edwards   |  |  |  |  |  | 1,950,000                                                              |  |        |  | 
|Frank Williams    |  |  |  |  |  | 25,000                                                                 |  | 35,000  |  | 
|John Rufener      |  |  |  |  |  | 16,666                                                                 |  | 83,337  |  | 
|James Sas         |  |  |  |  |  |                                                                       |  |        |  | 
|Alex Radulovic    |  |  |  |  |  | 1,300,000                                                              |  | 100,000 |  | 

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Director Compensation

On the first business day in January each year prior to 2002, each director then serving was to receive an option to purchase 20,000 shares of common stock and
for each committee on which the director serves an option to purchase 5,000 shares of common stock. The exercise price of such options is equal to the fair market value of the common stock on the date
of grant. The directors are also eligible to receive options under our stock option plans at the discretion of the Board of Directors.

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In 2002 the Board voted to only award options to the independent directors in accordance with the above described arrangement. In addition, each independent director will be paid $1,000
for each in-person board meeting attended and $500 for each telephonic board meeting attended.

During
2001, Messrs. Toh and Heaton received $12,500 and $9,000, respectively, for services rendered as part of a special committee in early 2001.

Employment Contracts and Termination of Employment and Change-in-Control Arrangements

On January 3, 2002, an agreement between Springwell Capital Corporation, I-Link, Counsel Springwell Communications LLC (the majority
shareholder of I-Link Incorporated), Counsel Corporation and Helen Seltzer was executed to whereby Ms. Seltzer became I-Link's Chief Executive Officer (CEO). The term of
the agreement is four years at an annual salary of $275,000 base and a minimum bonus of $137,500 and an additional bonus of up to $137,500 based upon performance criteria to be set by the board. In
the event that I-Link becomes a wholly-owned subsidiary of Counsel Springwell Communications LLC, Counsel Springwell Communications LLC agrees that ten percent (10%) of the equity of
I-Link, on a fully-diluted basis, but excluding equity in WorldxChange, will be reserved for issuance to the management of I-Link under an incentive plan to be proposed by
Ms. Seltzer, subject to the approval of the board. Counsel Springwell Communications LLC further agrees that pursuant to such incentive plan, Ms. Seltzer shall be awarded two and
one-half percent (2.5%) of the equity of I-Link on a fully-diluted basis, but excluding any equity in WorldxChange, and that, in the event Ms. Seltzer is reassigned to a
position with an entity directly or indirectly controlled by Counsel Corporation other than I-Link, Ms. Seltzer will receive a similar equity opportunity in her new employment
assignment.

In
addition to serving as CEO of I-Link, Ms. Seltzer agreed to serve as a member of the Management Executive Committee of Counsel Springwell Communications LLC. and
has the right to participate in Counsel Corporation's 2001 Executive Stock Purchase Plan.

On
January 3, 2000, we entered into a three-year employment agreement with Alex Radulovic as Vice President Technology. Pursuant to the terms of the employment
agreement Mr. Radulovic is required to devote substantially all of his working time to our business and affairs. Mr. Radulovic is entitled under his employment agreement to receive
compensation at the rate of $200,000 per year and is entitled to a profitability bonus at the discretion of the Board of Directors and to participate in such fringe benefits as are generally provided
to executive officers. In addition, Mr. Radulovic was granted options to
purchase 400,000 shares of common stock at an exercise price of $2.75 per share based on the market price at the date of grant. Of such options, 33,333 vested immediately and the same amount vest and
become exercisable on the first calendar day of each quarter beginning October 1, 1999. In the event of termination by I-Link or in the event of a violation of a material provision
of the agreement by I-Link which is unremedied for thirty (30) days and after written notice, Mr. Radulovic is entitled to receive, as liquidated damages or severance pay, an
amount equal to the Monthly Compensation (as defined in the corresponding agreement) for twelve months and all options shall thereupon be fully vested and immediately exercisable. The agreement
contains non-competition and confidentiality provisions.

Compensation Committee Interlocks and Insider Participation

Messrs. Heaton, Toh and Reichmann are non-employee directors of I-Link.

Director Stock Option Plan

Our Director Stock Option Plan (the DSOP) authorizes the grant of stock options to our directors. Options granted under the DSOP are non-qualified
stock options exercisable at a price equal to the

33

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fair market value per share of common stock on the date of any such grant. Options granted under the DSOP are exercisable not less than six (6) months or more than ten (10) years after
the date of grant.

As
of December 31, 2001, options for the purchase of 7,002 shares of common stock at prices ranging from $.875 to $3.875 per share were outstanding. As of December 31,
2001, options to purchase an aggregate of 31,623 shares of common stock were exercised. In connection with adoption of the 1995 Director Plans (as hereinafter defined) the Board of Directors
authorized the termination of future grants of options under the DSOP; however, outstanding options granted under the DSOP will continue to be governed by the terms of the DSOP until the options are
exercised or expire.

1995 Director Stock Option Plan

In October 1995, our stockholders approved adoption of our 1995 Director Stock Option and Appreciation Rights Plan, which plan provides for the issuance of
incentive options, non-qualified options and stock appreciation rights (the 1995 Director Plan).

The
1995 Director Plan provides for automatic and discretionary grants of stock options which qualify as incentive stock options (the Incentive Options) under Section 422 of the
Internal Revenue Code of
1986, as amended (the Code), as well as options which do not so qualify (the Non-Qualified Options) to be issued to directors. In addition, stock appreciation rights (the SARs) may be
granted in conjunction with the grant of Incentive Options and Non-Qualified Options. No SARs have been granted to date.

The
1995 Director Plan provides for the grant of Incentive Options and Non-Qualified Options to purchase up to 250,000 shares of common stock (subject to adjustment in the
event of stock dividends, stock splits and other similar events). To the extent that an Incentive Option or Non-Qualified Option is not exercised within the period of exercisability
specified in the 1995 Director Plan, it will expire as to the then-unexercised portion. If any Incentive Option or Non-Qualified Option terminates prior to exercise and during
the duration of the 1995 Director Plan, the shares of common stock as to which such option or right was not exercised will become available under the 1995 Director Plan for the grant of additional
options or rights to any eligible employees. The shares of common stock subject to the 1995 Director Plan may be made available from either authorized but unissued shares, treasury shares, or both.

The
1995 Director Plan also provides for the grant of Non-Qualified Options on a non-discretionary basis. Each option is immediately exercisable for a period of
ten years from the date of grant. We have 190,000 shares of common stock reserved for issuance under the 1995 Director Plan. As of December 31, 2001, options exercisable to purchase 170,000
shares of common stock at prices ranging from $1.00 to $1.25 per share are outstanding under the 1995 Director Plan. As of December 31, 2001, options to purchase 60,000 shares have been
exercised under the 1995 Director Plan.

1995 Employee Stock Option Plan

In October 1995, the stockholders approved adoption of our 1995 Employee Stock Option and Appreciation Rights Plan (the 1995 Employee Plan), which plan
provides for the issuance of Incentive Options, Non-Qualified Options and SARs.

Directors
are not eligible to participate in the 1995 Employee Plan. The 1995 Employee Plan provides for the grant of stock options which qualify as Incentive Stock Options under
Section 422 of the Code, to be issued to officers who are employees and other employees, as well as Non-Qualified Options to be issued to officers, employees and consultants. In
addition, SARs may be granted in conjunction with the grant of Incentive Options and Non-Qualified Options. No SARs have been granted to date.

34

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The
1995 Employee Plan provides for the grant of Incentive Options and Non-Qualified Options of up to 400,000 shares of common stock (subject to adjustment in the event of
stock dividends, stock splits and other similar events). To the extent that an Incentive Option or Non-Qualified Option is not exercised within the period of exercisability specified
therein, it will expire as to the then-unexercised
portion. If any Incentive Option or Non-Qualified Option terminates prior to exercise thereof and during the duration of the 1995 Employee Plan, the shares of common stock as to which such
option or right was not exercised will become available under the 1995 Employee Plan for the grant of additional options or rights to any eligible employee. The shares of common stock subject to the
1995 Employee Plan may be made available from either authorized but unissued shares, treasury shares, or both. We have 400,000 shares of common stock reserved for issuance under the 1995 Employee
Plan. As of December 31, 2001, options to purchase 302,000 shares of common stock have been granted under the plan and 145,250 were outstanding with an exercise price of $3.90 per share. As of
December 31, 2001, 119,250 options have been exercised under the 1995 Employee Plan.

1997 Recruitment Stock Option Plan

In October 1997, our stockholders approved adoption of the 1997 Recruitment Stock Option and Appreciation Rights Plan, which plan provides for the issuance
of incentive options, non-qualified options and SAR's (1997 Plan).

The
1997 Plan provides for automatic and discretionary grants of Incentive Options and Non-Qualified Options under the Code. In addition SARs may be granted in conjunction
with the grant of Incentive Options and Non-Qualified Options. No SARs have been granted to date.

The
1997 Plan, as amended in 2000, provides for the grant of Incentive Options and Non-Qualified Options to purchase up to 7,400,000 shares of common stock (subject to
adjustment in the event of stock dividends, stock splits and other similar events). The price at which shares of common stock covered by the option can be purchased is determined by our Board of
Directors; however, in all instances the exercise price is never less than the fair market value of our common stock on the date the option is granted. To the extent that an Incentive Option or
Non-Qualified Option is not exercised within the period of exercisability specified therein, it will expire as to the then unexercised portion. If any Incentive Option or
Non-Qualified Option terminates prior to exercise thereof and during the duration of the 1997 Plan, the shares of common stock as to which such option or right was not exercised will
become available under the 1997 Plan for the grant of additional options or rights. The shares of common stock subject to the 1997 Plan may be made available from either authorized but unissued
shares, treasury shares, or both. As of December 31, 2001, options to purchase 5,843,563 shares of common stock have been granted under the plan and 2,882,382 were outstanding with exercise
prices of $0.27 to $13.88 per share. As of December 31, 2001, 411,420 options have been exercised under the 1997 Plan.

2000 Employee Stock Purchase Plan

In October 2000, the stockholders of I-Link approved adoption of I-Link's 2000 Employee Stock Purchase Plan which plan provides for
purchase and issuance of common stock. (the Stock Purchase Plan).

The
purpose of the Stock Purchase Plan is to induce all eligible employees of I-Link (or any of its subsidiaries) who have been employees for at least three months to
encourage stock ownership of I-Link by acquiring or increasing their proprietary interest in I-Link. The Stock Purchase Plan is designed to encourage employees to remain in the
employ of I-Link. It is the intention of I-Link to have the Stock Purchase Plan qualify as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.

35

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The
Stock Purchase Plan provides for the purchase of common stock in the aggregate, up to 2,500,000 shares of common stock (which number is subject to adjustment in the event of stock
dividends, stock splits and other similar events). As of December 31, 2001, 58,012 shares of common stock had been purchased under the Stock Purchase Plan.

2001 Stock Option and Appreciation Rights Plan

In September 2001, the shareholders of the Company approved the 2001 Stock Option and Appreciation Rights Plan which provides for the issuance of incentive
stock options, non-qualified stock options and stock appreciation rights (SARs) up to an aggregate of 14,000,000 shares of common stock (subject to adjustment in the event of stock
dividends, stock splits, and other similar events). The price at which shares of common stock covered by the option can be purchased is determined by the Company's Board of Directors or its committee;
however, in the case of incentive stock options the exercise price shall not be less than the fair market value of the Company's common stock on the date the option is granted. There were no options
granted under this plan in 2001.

Changes in Control

On March 1, 2001, Counsel Communications LLC (subsequently reorganized and renamed Counsel Springwell Communications LLC) entered into a Securities
Purchase Agreement with Winter Harbor. Pursuant to the terms of the Securities Purchase Agreement, Counsel Springwell Communications LLC (Counsel LLC) purchased from Winter Harbor all of the debt and
equity securities of I-Link held by Winter Harbor, including all shares of Series M and Series N preferred stock held by Winter Harbor. Additionally, Counsel obtained the
right to immediately name two Counsel designees to I-Link's Board of Directors, and seek to obtain I-Link shareholder approval to appoint an additional three Counsel director
nominees, resulting in a nine member board, five members of which will be directors nominated or designated by Counsel LLC. As a result of the above mentioned transactions pursuant to the terms of the
Securities Purchase Agreement, a change in control may be deemed to have occurred. To date, there are five Counsel designees or nominees serving on the board consisting of seven persons.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The following table shows, as of March 18, 2001, all directors, executive officers, and, to the best of our knowledge, all other parties we know to be
beneficial owners of more than 5% of the common

36

---

stock. As of March 18, 2001, there were issued and outstanding the following: 116,549,547 shares of common stock and 769 shares of Series N preferred stock.

|Name and Address of Beneficial
Owner(1)                                                            |  | Title of Class |  | Number of Shares
Beneficially Owned |        | % of Common Stock
Beneficially Owned(2) |  
|-------------------------------------------------------------------------------------------------- |  | -------------- |  | ----------------------------------- | ------ | --------------------------------------- | -
|Allan C. Silber                                                                                    |  | Common Stock   |  | 0                                   | (3)    | 0                                       | %
|Helen Seltzer                                                                                      |  | Common Stock   |  | 0                                   |        | 0                                       | %
|Frank Williams                                                                                     |  | Common Stock   |  | 30,000                              | (4)    | *                                       |  
|John Rufener                                                                                       |  | Common Stock   |  | 33,333                              | (4)    | *                                       |  
|Gary J. Wasserson                                                                                  |  | Common Stock   |  | 0                                   | (5)    | 0                                       | %
|Samuel L. Shimer                                                                                   |  | Common Stock   |  | 0                                   |        | 0                                       | %
|Norman Chirite                                                                                     |  | Common Stock   |  | 0                                   | (3)    | 0                                       | %
|Albert Reichmann                                                                                   |  | Common Stock   |  | 25,589                              | (4)    | *                                       |  
|Hal B. Heaton                                                                                      |  | Common Stock   |  | 88,958                              | (4)    | *                                       |  
|Alex Radulovic                                                                                     |  | Common Stock   |  | 1,372,103                           | (6)    | *                                       |  
|Henry Y.L. Toh                                                                                     |  | Common Stock   |  | 312,802                             | (7)    | *                                       |  
|Counsel Corporation
130 King Street West
Suite 1300, P.O. Box 435
Toronto, Ontario, Canada M5X IE3 |  | Common Stock   |  | 117,253,052                         | (8)(9) | 75.9                                    | %
|All Executive Officers and Directors
as a Group (11 people)                                        |  | Common Stock   |  | 1,862,785                           | (10)   | 1.6                                     | %

---

37

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Item 13. Certain Relationships and Related Transactions.

Transactions with Management and Others

See Item 11 hereof for descriptions of the terms of employment and consulting agreements between us and certain officers, directors and other related parties.

Transactions with Counsel Corporation

On March 1, 2001, we entered into a Senior Convertible Loan and Security Agreement, (the Loan Agreement) with Counsel Corporation and Counsel LLC,
(collectively, Counsel). Pursuant to the terms and provisions of the Loan Agreement, Counsel LLC was to make periodic loans to us in the aggregate principal amount not to exceed $10,000,000. This
agreement was amended in May 2001 to increase the aggregate principal amount to $12,000,000. During 2001 the full $12,000,000 was loaned to us pursuant to these agreements.

The
$12,000,000 capital investment is structured as a 3-year note convertible with interest at a rate of 9% per annum, compounded quarterly. Counsel LLC can convert the loan
into shares of our common stock at a conversion price of $0.56 per common share. At any time after September 1, 2002, on the first date that is the twentieth consecutive trading day that the
common stock has closed at a price per share that is equal to or greater than $1.00 per share, the outstanding debt including accrued interest shall automatically convert into common stock using the
then conversion rate. The conversion price is subject to adjustment in accordance with the terms and provisions of the Loan Agreement. The Loan Agreement provides for traditional
anti-dilution protection and is subject to certain events of default. Proceeds to I-Link were $12,000,000 less debt issuance costs of approximately $700,000.

By
executing the above Loan Agreement, we granted Counsel LLC a first priority security interest in all of our assets owned at the time of the execution of the Loan Agreement or
subsequently acquired, including but not limited to our accounts receivable, general intangibles, inventory, equipment, books and records, and negotiable instruments held by I-Link. The
Loan Agreement also included demand registration rights for common stock issuable upon conversion of the Loan Agreement.

In
addition to the foregoing agreements, Counsel LLC and I-Link executed a Securities Support Agreement, dated March 1, 2001 (the Support Agreement) for the purpose of
providing certain representations and commitments by us to Counsel LLC as an inducement to Counsel to enter into a separate agreement with Winter Harbor and First Media, L.P, (the Securities Purchase
Agreement). We
were not a party to the Securities Purchase Agreement. In accordance with the terms and provisions of the Securities Purchase Agreement, Counsel agreed to purchase from Winter Harbor all of our debt

38

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and equity securities owned by Winter Harbor, including shares of our Series M and Series N preferred stock, beneficially owned by Winter Harbor for an aggregate consideration of
$5,000,000.

Our
commitments to Counsel LLC set forth in the Support Agreement included our agreement to appoint two designees of Counsel, reasonably acceptable to us, to our Board of Directors. We
also agreed that immediately following the initial funding (which was received in March 2001) of the Loan Note, we would solicit the proxies of our shareholders to elect three additional
nominees designated by Counsel, thus, increasing the size of our Board of Directors to nine members.

Under
the Support Agreement, we also agreed to engage appropriate advisors and proceed to take all steps necessary to merge WebToTel (a subsidiary of Counsel LLC) and its subsidiary
Nexbell Communications Inc. into I-Link. The merger took place in April 2001 when we exchanged 17,454,333 shares of common stock for WebToTel and its subsidiaries.

On
March 7, 2001, as part of the agreements discussed above, Counsel converted all of the Series M and N convertible preferred stock it obtained from Winter Harbor into
61,966,057 shares of our common stock. The Series N shares were converted at equivalent of $1.25 per common share and Series M at $.56 per common share.

To
fund the acquisition of the assets purchased and liabilities assumed by WorldxChange, Counsel provided a loan on June 4, 2001 to WorldxChange in the aggregate amount of
$15,000,000. The loan is collateralized against all assets of WorldxChange. The loan is also guaranteed by I-Link and collateralized by the assets of I-Link. Outstanding
balances (including any accrued and unpaid interest) under the loan bear interest of 10% per annum and are payable quarterly in arrears and in cash on the last business day of each quarter. Counsel
may waive the payment of cash interest by WorldxChange. The loan will mature in December 2004. The loan may be prepaid at any time prior to the maturity, without penalty.

In
connection with the $15,000,000 loan, I-Link issued to Counsel a warrant to purchase 15,000,000 shares of common stock of I-Link at an exercise price of $0.60
per share. The warrants were exercisable in three tranches as follows; 5,000,000 on the date of the agreement, September 4, 2001 and December 4, 2001, respectively, in the event the loan
is still outstanding on those dates. The warrants expire on June 4, 2003. The Company has recorded $2,170,059 as a discount against the $15,000,000 loan from Counsel representing the relative
fair value attributed to the warrants.

On
June 6, 2001, I-Link and Counsel entered into a Loan and Security Agreement (Loan Agreement). Any monies advanced to I-Link between June 6, 2001
and April 15, 2002, (in the amount not to exceed
$10,000,000) will be governed by the Loan Agreement. In connection with the Loan Agreement, I-Link executed a note payable to Counsel, due June 6, 2002. The loan is secured by all
of the assets of I-Link. Outstanding balances (including any accrued and unpaid interest) under the loan bear interest at 10% per annum which interest is payable quarterly in arrears
following the last business day of each quarter. However, Counsel may (and has to December 31, 2001) at its sole election allow interest to accrue and become payable at the end of the term. The
full amount of the agreement ($10,000,000) was advanced to I-Link during 2001.

During
2001 and as of December 31, 2001, Counsel had also advanced $7,070,320 to I-Link for which the conditions and terms of repayment are anticipated (as there are
no written agreements) to be similar to the $10,000,000 agreement dated June 6, 2001 (discussed above). Subsequent to year end, Counsel has advanced an additional $3,816,602 in under similar
anticipated conditions and terms.

39

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PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.





|Number  |  | Title of Exhibit                                                                                                                                                                        |  | 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|3.1(6)  |  | Amended and Restated Articles of Incorporation, as further amended.                                                                                                                     |  | 
|4.1(4)  |  | Form of Hardy Group Warrant to purchase 175,000 shares of Common Stock.                                                                                                                 |  | 
|4.2(3)  |  | Securities Purchase Agreement by and between I-Link and Winter Harbor, dated as of September 30, 1997.                                                                                  |  | 
|4.3(7)  |  | Amended and Restated Registration Rights Agreement dated as of January 15, 1999 by and between I-Link and Winter Harbor, amending Registration Rights Agreement dated October 10, 1997. |  | 
|4.4(3)  |  | Form of Shareholders Agreement by and among I-Link and Winter Harbor and certain holders of I-Link's securities, which constitutes Exhibit D to the Purchase Agreement.                 |  | 
|4.5(3)  |  | Form of Warrant Agreement by and between Medcross, Inc. and Winter Harbor, which constitutes Exhibit F to the Purchase Agreement.                                                       |  | 
|4.6(10) |  | Senior Convertible Loan and Security Agreement dated March 1, 2001, by and between Counsel Communications, LLC and I-Link Incorporated.                                                 |  | 
|4.7(10) |  | Loan Note, dated as of March 1, 2001, by and between Counsel Communications LLC and I-Link Incorporated.                                                                                |  | 
|4.8(10) |  | Security Agreement, dated as of March 1, 2001, by and between I-Link Communications, MiBridge Inc and Counsel Communications, LLC.                                                      |  | 

40

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|10.1(1)   |  | 1997 Recruitment Stock Option Plan.                                                                                                                                                                 |  | 
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|10.2(2)   |  | 2001 Stock Option and Appreciation Rights Plan                                                                                                                                                      |  | 
|10.3(5)   |  | Agreement dated April 14, 1998, by and between I-Link and Winter Harbor.                                                                                                                            |  | 
|10.4(5)   |  | Pledge Agreement dated April 14, 1998, by and between I-Link and Winter Harbor.                                                                                                                     |  | 
|10.5(5)   |  | Security Agreement dated April 14, 1998, by and among certain of I-Link's subsidiaries and Winter Harbor.                                                                                           |  | 
|10.6(5)   |  | Form of Promissory Notes issued to Winter Harbor.                                                                                                                                                   |  | 
|10.7(5)   |  | Warrant to purchase 250,000 shares of Common Stock of I-Link, dated June 30, 1998, issued to JNC.                                                                                                   |  | 
|10.8(5)   |  | Warrant to purchase 100,000 shares of Common Stock of I-Link, dated July 28, 1998, issued to JNC.                                                                                                   |  | 
|10.9(7)   |  | Loan Agreement dated as of January 15, 1999 by and between I-Link and Winter Harbor.                                                                                                                |  | 
|10.10(7)  |  | First Amendment to Loan Agreement dated March 4, 1999 by and between I-Link and Winter Harbor.                                                                                                      |  | 
|10.11(7)  |  | Promissory Note dated November 10, 1998, in principal amount of $8,000,000 executed by I-Link in favor of Winter Harbor.                                                                            |  | 
|10.12(7)  |  | Series K Warrant Agreement dated as of January 15, 1999 by and between I-Link and Winter Harbor and form of Series K Warrant.                                                                       |  | 
|10.13(7)  |  | Agreement dated as of January 15, 1999 by and between I-Link and Winter Harbor.                                                                                                                     |  | 
|10.14(7)  |  | First Amendment to Security Agreement dated as of January 15, 1999, by and among I-Link, five of its wholly-owned subsidiaries and Winter Harbor, amending Security Agreement dated April 14, 1997. |  | 
|10.15(7)  |  | First Amendment to Pledge Agreement dated as of January 15, 1999, by and among I-Link and Winter Harbor, amending Pledge Agreement dated April 14, 1997.                                            |  | 
|10.16(7)  |  | Series D, E, F, G, H, I and J Warrant Agreement dated as of January 15, 1999 by and between I-Link and Winter Harbor, and related forms of warrant certificates.                                    |  | 
|10.17(8)  |  | Employment agreement with Alex Radulovic dated January 3, 2000                                                                                                                                      |  | 
|10.18(8)  |  | Form of Wholesale Service Provider and Distribution Agreement between I-Link and Big Planet, Inc. dated February 1, 2000                                                                            |  | 
|10.19(9)  |  | Form of Cooperation and Framework Agreement between I-Link Incorporated and CyberOffice International AG dated May 8, 2000                                                                          |  | 
|10.20(9)  |  | Form of Revenue Sharing Agreement between I-Link Incorporated and Red Cube International AG (formerly known as CyberOffice International AG.) dated June 30, 2000.                                  |  | 
|10.21(9)  |  | Form of Letter dated June 30, 2000, clarifying a Cooperation and Framework Agreement issue.                                                                                                         |  | 
|10.22(11) |  | Loan and Security Agreement, dated December 10, 2001, by and among WorldxChange Corp. and Foothill Capital Corporation.                                                                             |  | 
|23.1(11)  |  | Consent of Independent Accountants.                                                                                                                                                                 |  | 

41

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|99.1(10) |  | Warrant Exchange Agreement, dated as of March 1, 2001, by and between Winter Harbor, LLC and I-Link Incorporated.            |  | 
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | 
|99.2(10) |  | Securities Support Agreement, dated as of March 1, 2001, by and between Counsel Communications, LLC and I-Link Incorporated. |  | 

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42

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INDEX OF FINANCIAL STATEMENTS & SUPPLEMENTAL SCHEDULES

|Title of Document                                                                                                        |  | Page
|------------------------------------------------------------------------------------------------------------------------ |  | ----
|Report of Independent Accountants                                                                                        |  | F-1 
|Consolidated Balance Sheets as of December 31, 2001 and 2000                                                             |  | F-2 
|Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999                               |  | F-3 
|Consolidated Statement of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2001, 2000 and 1999 |  | F-5 
|Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999                               |  | F-8 
|Notes to Consolidated Financial Statements                                                                               |  | F-10
|Schedule of Valuation and Qualifying Accounts                                                                            |  | S-1 

---

REPORT OF INDEPENDENT ACCOUNTANTS

To
the Board of Directors and Stockholders of
I-Link Incorporated and Subsidiaries:

In
our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of I-Link Incorporated
and its subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

PricewaterhouseCoopers
LLP
Salt Lake City, Utah
April 3, 2002

F-1

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I-LINK INCORPORATED AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS  as of December 31, 2001 and 2000

|                                                 |                                                                                                                                                                                                             | 2001                        |            | 2000         |            
|------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | ---------- | ------------ | -----------
|ASSETS                                           |                                                                                                                                                                                                             |                             |            |              |            
|Current assets:                                  |                                                                                                                                                                                                             |                             |            |              |            
|                                                 | Cash and cash equivalents                                                                                                                                                                                   |                             | $          | 4,662,532    |            
|                                                 | Accounts receivable, less allowance for doubtful accounts of $1,862,988 and $100,665 as of December 31, 2001 and 2000, respectively                                                                         |                             |            | 16,009,386   |            
|                                                 | Other current assets                                                                                                                                                                                        |                             |            | 2,632,629    |            
|                                                 |                                                                                                                                                                                                             |                             |            |              |            
|                                                 |                                                                                                                                                                                                             | Total current assets        |            |              | 23,304,547 
|Furniture, fixtures, equipment and software, net |                                                                                                                                                                                                             |                             | 21,023,696 |              |            
|Other assets:                                    |                                                                                                                                                                                                             |                             |            |              |            
|                                                 | Intangible assets, net                                                                                                                                                                                      |                             |            | 1,330,839    |            
|                                                 | Other assets                                                                                                                                                                                                |                             |            | 1,121,067    |            
|                                                 |                                                                                                                                                                                                             |                             |            |              |            
|                                                 |                                                                                                                                                                                                             | $                           | 46,780,149 |              | $          
|                                                 |                                                                                                                                                                                                             |                             |            |              |            
|LIABILITIES AND STOCKHOLDERS' DEFICIT            |                                                                                                                                                                                                             |                             |            |              |            
|Current liabilities:                             |                                                                                                                                                                                                             |                             |            |              |            
|                                                 | Accounts payable                                                                                                                                                                                            |                             | $          | 7,719,595    |            
|                                                 | Accrued liabilities                                                                                                                                                                                         |                             |            | 12,270,231   |            
|                                                 | Unearned revenue                                                                                                                                                                                            |                             |            | 1,986,675    |            
|                                                 | Revolving credit facility and other current debt                                                                                                                                                            |                             |            | 10,004,862   |            
|                                                 | Notes payable to a related party                                                                                                                                                                            |                             |            | 17,540,140   |            
|                                                 | Accrued interest on notes payable to a related party                                                                                                                                                        |                             |            |             |            
|                                                 | Current portion of obligations under capital leases                                                                                                                                                         |                             |            | 3,034,293    |            
|                                                 |                                                                                                                                                                                                             |                             |            |              |            
|                                                 |                                                                                                                                                                                                             | Total current liabilities   |            |              | 52,555,796 
|Notes payable                                    |                                                                                                                                                                                                             |                             | 1,147,364  |              |            
|Notes payable to a related party                 |                                                                                                                                                                                                             |                             | 23,088,535 |              |            
|Obligations under capital leases                 |                                                                                                                                                                                                             |                             | 6,986,308  |              |            
|Unearned revenue                                 |                                                                                                                                                                                                             |                             |           |              |            
|                                                 |                                                                                                                                                                                                             |                             |            |              |            
|                                                 |                                                                                                                                                                                                             | Total liabilities           |            |              | 83,778,003 
|                                                 |                                                                                                                                                                                                             |                             |            |              |            
|Commitments and contingencies (notes 9 and 13)   |                                                                                                                                                                                                             |                             |            |              |            
|Redeemable preferred stockSeries M              |                                                                                                                                                                                                             |                             |           |              |            
|                                                 |                                                                                                                                                                                                             |                             |            |              |            
|Stockholders' deficit:                           |                                                                                                                                                                                                             |                             |            |              |            
|                                                 | Preferred stock, $10 par value, authorized 10,000,000 shares, issued and outstanding 769 and 24,435 as of December 31, 2001 and 2000, respectively; liquidation preference of $761,310 at December 31, 2001 |                             |            | 7,690        |            
|                                                 | Common stock, $.007 par value, authorized 300,000,000 shares, issued and outstanding 116,549,547 and 28,136,506 at December 31, 2001 and 2000, respectively                                                 |                             |            | 815,849      |            
|                                                 | Additional paid-in capital                                                                                                                                                                                  |                             |            | 128,942,389  |            
|                                                 | Accumulated deficit                                                                                                                                                                                         |                             |            | (166,763,782 | )          
|                                                 |                                                                                                                                                                                                             |                             |            |              |            
|                                                 |                                                                                                                                                                                                             | Total stockholders' deficit |            |              | (36,997,854
|                                                 |                                                                                                                                                                                                             |                             |            |              |            
|                                                 |                                                                                                                                                                                                             | $                           | 46,780,149 |              | $          
|                                                 |                                                                                                                                                                                                             |                             |            |              |            

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

F-2

---



I-LINK INCORPORATED AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS  for the years ended December 31, 2001, 2000 and 1999

|                                                             |                                                         | 2001                               |             | 2000       |             | 1999        |           
|------------------------------------------------------------ | ------------------------------------------------------- | ---------------------------------- | ----------- | ---------- | ----------- | ----------- | ----------
|Revenues:                                                    |                                                         |                                    |             |            |             |             |           
|                                                             | Telecommunication services                              |                                    | $           | 74,887,557 |             | $           | 18,300,548
|                                                             | Marketing services                                      |                                    |             |           |             |             | 463,740   
|                                                             | Technology licensing and development                    |                                    |             | 5,696,893  |             |             | 8,972,828 
|                                                             | Other                                                   |                                    |             | 2,025,585  |             |             | 2,667,039 
|                                                             |                                                         |                                    |             |            |             |             |           
|                                                             |                                                         | Total revenues                     |             |            | 82,610,035  |             |           
|                                                             |                                                         |                                    |             |            |             |             |           
|Operating costs and expenses:                                |                                                         |                                    |             |            |             |             |           
|                                                             | Telecommunication network expense                       |                                    |             | 62,652,227 |             |             | 24,958,320
|                                                             | Marketing services                                      |                                    |             |           |             |             | 456,354   
|                                                             | Selling, general and administrative                     |                                    |             | 36,836,446 |             |             | 18,353,731
|                                                             | Provision for doubtful accounts                         |                                    |             | 4,066,690  |             |             | 113,168   
|                                                             | Depreciation and amortization                           |                                    |             | 10,166,790 |             |             | 6,399,318 
|                                                             | Write-down of capitalized software costs                |                                    |             |           |             |             |          
|                                                             | Research and development                                |                                    |             | 2,332,593  |             |             | 4,220,333 
|                                                             | Impairment of goodwill                                  |                                    |             | 8,040,054  |             |             |          
|                                                             |                                                         |                                    |             |            |             |             |           
|                                                             |                                                         | Total operating costs and expenses |             |            | 124,094,800 |             |           
|                                                             |                                                         |                                    |             |            |             |             |           
|Operating loss                                               |                                                         |                                    | (41,484,765 | )          |             | (24,097,069 | )         
|                                                             |                                                         |                                    |             |            |             |             |           
|Other income (expense):                                      |                                                         |                                    |             |            |             |             |           
|                                                             | Interest expense                                        |                                    |             | (4,774,636 | )           |             | (1,502,676
|                                                             | Interest and other income                               |                                    |             | 81,015     |             |             | 487,132   
|                                                             | Gain on sale of subsidiary                              |                                    |             | 588,943    |             |             |          
|                                                             | Settlement expense                                      |                                    |             |           |             |             | (639,565  
|                                                             |                                                         | Total other expense                |             |            | (4,104,678  | )           |           
|                                                             |                                                         |                                    |             |            |             |             |           
|Loss from continuing operations                              |                                                         |                                    | (45,589,443 | )          |             | (25,752,178 | )         
|                                                             |                                                         |                                    |             |            |             |             |           
|Discontinued operations:                                     |                                                         |                                    |             |            |             |             |           
|                                                             | Loss during phase-out period of discontinued operations |                                    |             |           |             |             |          
|                                                             |                                                         |                                    |             |            |             |             |           
|Loss before extraordinary gain                               |                                                         |                                    | (45,589,443 | )          |             | (25,752,178 | )         
|Extraordinary gain on extinguishment of debt (net of $0 tax) |                                                         |                                    | 1,092,818   |            |             |            |           
|                                                             |                                                         |                                    |             |            |             |             |           
|                                                             |                                                         | Net loss                           |             | $          | (44,496,625 | )           | $         
|                                                             |                                                         |                                    |             |            |             |             |           

F-3

---



|                                                                                                                                        |                                                            | 2001                      |             | 2000        |       | 1999        |            
|--------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------- | ----------- | ----------- | ----- | ----------- | -----------
|Calculation of net loss per common share:                                                                                               |                                                            |                           |             |             |       |             |            
|Loss from continuing operations                                                                                                         |                                                            | $                         | (45,589,443 | )           | $     | (25,752,178 | )          
|Cumulative preferred stock dividends not paid in current year                                                                           |                                                            |                           | (27,610     | )           |       | (1,646,818  | )          
|Dividends accrued and paid on Class M redeemable preferred stock                                                                        |                                                            |                           | (269,027    | )           |       |            |            
|Net effect on retained earnings of redemption and reissuance of Class M and N preferred stock, including beneficial conversion features |                                                            |                           | 15,512,473  |             |       |            |            
|Deemed (non-cash) preferred stock dividend on Series N convertible preferred stock                                                      |                                                            |                           |            |             |       |            |            
|                                                                                                                                        |                                                            |                           |             |             |       |             |            
|                                                                                                                                        | Loss from continuing operations applicable to common stock |                           | $           | (30,373,607 | )     | $           | (27,398,996
|                                                                                                                                        |                                                            |                           |             |             |       |             |            
|Basic and diluted weighted average shares outstanding                                                                                   |                                                            |                           | 99,184,427  |             |       | 26,669,058  |            
|                                                                                                                                        |                                                            |                           |             |             |       |             |            
|Net loss per common share  basic and diluted:                                                                                          |                                                            |                           |             |             |       |             |            
|                                                                                                                                        | Loss from continuing operations                            |                           | $           | (0.31       | )     | $           | (1.03      
|                                                                                                                                        | Loss from discontinued operations                          |                           |             |            |       |             |           
|                                                                                                                                        | Extraordinary gain from extinguishment of debt             |                           |             | 0.01        |       |             |           
|                                                                                                                                        |                                                            |                           |             |             |       |             |            
|                                                                                                                                        |                                                            | Net loss per common share |             | $           | (0.30 | )           | $          
|                                                                                                                                        |                                                            |                           |             |             |       |             |            

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

F-4

---

I-LINK INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
for the years ended December 31, 2001, 2000 and 1999

|                                                                                                         |  | Preferred Stock |   | Common Stock |          |   |            |  |   |         | 
|-------------------------------------------------------------------------------------------------------- |  | --------------- | - | ------------ | -------- | - | ---------- |  | - | ------- | 
|
|
|Balance at December 31, 1998                                                                             |  | 44,051          |   | $            | 440,510  |   | 18,762,596 |  | $ | 131,338 | 
|Conversion of Series C, F and N preferred stock into common stock                                        |  | (14,809         | ) |              | (148,090 | ) | 5,180,396  |  |   | 36,263  | 
|Reclassification of Series F redeemable preferred stock from mezzanine due to conversion to common stock |  | 750             |   |              | 7,500    |   |           |  |   |        | 
|Common stock dividend paid to holders of Series F redeemable preferred stock                             |  |                |   |              |         |   | 165,220    |  |   | 1,157   | 
|Issuance of Series N convertible preferred stock, net of issuance costs of $486,679                      |  | 20,000          |   |              | 200,000  |   |           |  |   |        | 
|Exercise of stock options and warrants                                                                   |  |                |   |              |         |   | 42,617     |  |   | 298     | 
|Warrants issued in connection with certain notes payable                                                 |  |                |   |              |         |   |           |  |   |        | 
|Warrants issued in connection with a standby letter of credit                                            |  |                |   |              |         |   |           |  |   |        | 
|Stock options issued for services                                                                        |  |                 |   |              |          |   |            |  |   |         | 
|Amortization of deferred compensation on stock options issued for services                               |  |                |   |              |         |   |           |  |   |        | 
|Net loss                                                                                                 |  |                |   |              |         |   |           |  |   |        | 
|                                                                                                         |  |                 |   |              |          |   |            |  |   |         | 
|Balance at December 31, 1999                                                                             |  | 49,992          |   | $            | 499,920  |   | 24,150,829 |  | $ | 169,056 | 
|                                                                                                         |  |                 |   |              |          |   |            |  |   |         | 

F-5

---



|                                                                                                         |  | Preferred Stock |   | Common Stock |          |   |            |  |   |         | 
|-------------------------------------------------------------------------------------------------------- |  | --------------- | - | ------------ | -------- | - | ---------- |  | - | ------- | 
|
|
|Balance at December 31, 1999                                                                             |  | 49,992          |   | $            | 499,920  |   | 24,150,829 |  | $ | 169,056 | 
|Conversion of preferred stock into common stock                                                          |  | (25,805         | ) |              | (258,050 | ) | 2,158,413  |  |   | 15,109  | 
|Reclassification of Series F redeemable preferred stock from mezzanine due to conversion to common stock |  | 248             |   |              | 2,480    |   |           |  |   |        | 
|Common stock dividend paid to holders of Series F redeemable preferred stock                             |  |                |   |              |         |   | 87,477     |  |   | 612     | 
|Exercise of stock options, warrants and issuances under stock purchase plan                              |  |                |   |              |         |   | 1,589,810  |  |   | 11,129  | 
|Stock options issued for services                                                                        |  |                |   |              |         |   |           |  |   |        | 
|Common stock issued as payment of settlement and interest expense                                        |  |                |   |              |         |   | 149,977    |  |   | 1,051   | 
|Amortization of deferred compensation on stock options issued for services                               |  |                |   |              |         |   |           |  |   |        | 
|Net loss                                                                                                 |  |                |   |              |         |   |           |  |   |        | 
|                                                                                                         |  |                 |   |              |          |   |            |  |   |         | 
|Balance at December 31, 2000                                                                             |  | 24,435          |   | $            | 244,350  |   | 28,136,506 |  | $ | 196,957 | 
|                                                                                                         |  |                 |   |              |          |   |            |  |   |         | 

F-6

---



|                                                                                                                         |  | Preferred Stock |   | Common Stock |          |   |             |  |  
|------------------------------------------------------------------------------------------------------------------------ |  | --------------- | - | ------------ | -------- | - | ----------- |  | -
|
|
|Balance at December 31, 2000                                                                                             |  | 24,435          |   | $            | 244,350  |   | 28,136,506  |  | $
|Conversion of convertible debt and accrued interest into Class M mezzanine preferred stock and common warrants           |  |                |   |              |         |   |            |  |  
|Common stock issued and accumulated deficit acquired as a result of WebToTel acquisition and conversion of notes payable |  |                |   |              |         |   | 17,454,333  |  |  
|Stock issuedemployee stock purchase plan                                                                                |  |                |   |              |         |   | 34,518      |  |  
|Repurchase of Class M mezzanine preferred stock                                                                          |  |                |   |              |         |   |            |  |  
|Repurchase of Class N preferred stock                                                                                    |  | (14,404         | ) |              | (144,040 | ) |            |  |  
|Net contribution from repurchase/settlement with stockholders of Class M and N preferred stock                           |  |                |   |              |         |   |            |  |  
|Contingent beneficial conversion feature on Class N preferred stock                                                      |  |                |   |              |         |   |            |  |  
|Issuance of common shares to related party to repurchase warrants outstanding                                            |  |                |   |              |         |   | 5,000,000   |  |  
|Reissuance and conversion of Class M redeemable preferred stock into common stock                                        |  |                |   |              |         |   | 50,442,857  |  |  
|Reissuance and conversion of Class N preferred stock into common stock                                                   |  |                |   |              |         |   | 11,523,159  |  |  
|Beneficial conversion feature on the reissuance of Class M and N preferred stock                                         |  |                |   |              |         |   |            |  |  
|Other conversions of Class N preferred stock into common stock                                                           |  | (13             | ) |              | (130     | ) | 9,143       |  |  
|Warrants issued in connection with notes payable to related party                                                        |  |                |   |              |         |   |            |  |  
|Beneficial conversion feature on certain convertible note payable to related party                                       |  |                |   |              |         |   |            |  |  
|Conversion of Class C preferred stock into common stock                                                                  |  | (9,249          | ) |              | (92,490  | ) | 3,415,015   |  |  
|Dividend on Class C preferred stock paid in the form of common stock                                                     |  |                |   |              |         |   | 534,016     |  |  
|Net loss                                                                                                                 |  |                |   |              |         |   |            |  |  
|                                                                                                                         |  |                 |   |              |          |   |             |  |  
|Balance at December 31, 2001                                                                                             |  | 769             |   | $            | 7,690    |   | 116,549,547 |  | $
|                                                                                                                         |  |                 |   |              |          |   |             |  |  

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

F-7

---



I-LINK INCORPORATED AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS  for the years ended December 31, 2001, 2000 and 1999

|                                                                                                      |                                                                                           | 2001                                                                                 |                                                     | 2000        |             | 1999        |            
|----------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | --------------------------------------------------- | ----------- | ----------- | ----------- | -----------
|Cash flows from operating activities:                                                                 |                                                                                           |                                                                                      |                                                     |             |             |             |            
|                                                                                                      | Net loss                                                                                  |                                                                                      | $                                                   | (44,496,625 | )           | $           | (25,752,178
|                                                                                                      | Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                                                                      |                                                     |             |             |             |            
|                                                                                                      |                                                                                           | Depreciation and amortization                                                        |                                                     |             | 10,166,790  |             |            
|                                                                                                      |                                                                                           | Impairment of goodwill                                                               |                                                     |             | 8,040,054   |             |            
|                                                                                                      |                                                                                           | Provision for doubtful accounts                                                      |                                                     |             | 4,066,690   |             |            
|                                                                                                      |                                                                                           | Amortization of discount and debt issuance costs on notes payable and capital leases |                                                     |             | 1,518,443   |             |            
|                                                                                                      |                                                                                           | Amortization of deferred compensation on stock options issued for services           |                                                     |             |            |             |            
|                                                                                                      |                                                                                           | Common stock issued as payment of settlement and interest expense                    |                                                     |             |            |             |            
|                                                                                                      |                                                                                           | Write-down of capitalized software costs                                             |                                                     |             |            |             |            
|                                                                                                      |                                                                                           | Loss on disposal of assets                                                           |                                                     |             |            |             |            
|                                                                                                      |                                                                                           | Extraordinary gain on extinguishment of debt                                         |                                                     |             | (1,092,818  | )           |            
|                                                                                                      |                                                                                           | Gain on sale of subsidiary                                                           |                                                     |             | (588,943    | )           |            
|Increase (decrease) from changes in operating assets and liabilities, net of effects of acquisitions: |                                                                                           |                                                                                      |                                                     |             |             |             |            
|                                                                                                      |                                                                                           | Accounts receivable                                                                  |                                                     |             | (4,527,719  | )           |            
|                                                                                                      |                                                                                           | Other assets                                                                         |                                                     |             | (1,126,625  | )           |            
|                                                                                                      |                                                                                           | Accounts payable, accrued liabilities and interest                                   |                                                     |             | 13,323,546  |             |            
|                                                                                                      |                                                                                           | Unearned revenue                                                                     |                                                     |             | (14,565,584 | )           |            
|                                                                                                      |                                                                                           | Discontinued operationsnoncash charges and working capital changes                  |                                                     |             |            |             |            
|                                                                                                      |                                                                                           |                                                                                      |                                                     |             |             |             |            
|                                                                                                      |                                                                                           |                                                                                      | Net cash provided by (used in) operating activities |             |             | (29,282,791 | )          
|                                                                                                      |                                                                                           |                                                                                      |                                                     |             |             |             |            
|Cash flows from investing activities:                                                                 |                                                                                           |                                                                                      |                                                     |             |             |             |            
|                                                                                                      | Purchases of furniture, fixtures, equipment and software                                  |                                                                                      |                                                     | (1,963,115  | )           |             | (6,911,003 
|                                                                                                      | Acquisition of WorldxChange assets                                                        |                                                                                      |                                                     | (13,681,000 | )           |             |           
|                                                                                                      | Cash received from purchase of WebToTel                                                   |                                                                                      |                                                     | 233,787     |             |             |           
|                                                                                                      | Proceeds from maturity of certificates of depositrestricted                              |                                                                                      |                                                     |            |             |             |           
|                                                                                                      | Investing activities of discontinued operations                                           |                                                                                      |                                                     |            |             |             | 29,537     
|                                                                                                      |                                                                                           |                                                                                      |                                                     |             |             |             |            
|                                                                                                      |                                                                                           |                                                                                      | Net cash used in investing activities               |             |             | (15,410,328 | )          
|                                                                                                      |                                                                                           |                                                                                      |                                                     |             |             |             |            

F-8

---



|                                                                      |                                                                                                                      | 2001 |                                                | 2000       |   | 1999       |           
|--------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ---- | ---------------------------------------------- | ---------- | - | ---------- | ----------
|Cash flows from financing activities:                                 |                                                                                                                      |      |                                                |            |   |            |           
|                                                                      | Proceeds from issuance of notes payable to a related party                                                           |      | $                                              | 43,920,320 |   | $          | 2,600,000 
|                                                                      | Payment of notes payable to related party                                                                            |      |                                                | (2,500,000 | ) |            | (2,600,000
|                                                                      | Proceeds from revolving credit facility                                                                              |      |                                                | 12,745,632 |   |            |          
|                                                                      | Payment of revolving credit facility                                                                                 |      |                                                | (5,749,028 | ) |            |          
|                                                                      | Proceeds from advance under strategic marketing agreement                                                            |      |                                                |           |   |            | 1,751,183 
|                                                                      | Payment of advance under strategic marketing agreement                                                               |      |                                                |           |   |            | (1,751,183
|                                                                      | Payment of capital lease obligations                                                                                 |      |                                                | (1,052,387 | ) |            | (141,728  
|                                                                      | Proceeds from issuance of preferred stock, net of offering costs                                                     |      |                                                |           |   |            |          
|                                                                      | Payment of long-term debt                                                                                            |      |                                                | (180,093   | ) |            | (3,992    
|                                                                      | Proceeds from exercise of stock options and warrants and issuances under stock purchase plan                         |      |                                                | 15,579     |   |            | 4,341,659 
|                                                                      | Financing activities of discontinued operations                                                                      |      |                                                |           |   |            | (24,204   
|                                                                      |                                                                                                                      |      |                                                |            |   |            |           
|                                                                      |                                                                                                                      |      | Net cash provided by financing activities      |            |   | 47,200,023 |           
|                                                                      |                                                                                                                      |      |                                                |            |   |            |           
|Increase (decrease) in cash and cash equivalents                      |                                                                                                                      |      | 2,506,904                                      |            |   | (840,376   | )         
|Cash and cash equivalents at beginning of year                        |                                                                                                                      |      | 2,155,628                                      |            |   | 2,996,004  |           
|                                                                      |                                                                                                                      |      |                                                |            |   |            |           
|Cash and cash equivalents at end of year:                             |                                                                                                                      |      |                                                |            |   |            |           
|                                                                      | Continuing operations                                                                                                |      |                                                | 4,662,532  |   |            | 2,155,628 
|                                                                      | Discontinued operations                                                                                              |      |                                                |           |   |            |          
|                                                                      |                                                                                                                      |      |                                                |            |   |            |           
|                                                                      |                                                                                                                      |      | Total cash and cash equivalents at end of year |            | $ | 4,662,532  |           
|                                                                      |                                                                                                                      |      |                                                |            |   |            |           
|Supplemental schedule of non-cash investing and financing activities: |                                                                                                                      |      |                                                |            |   |            |           
|                                                                      | Reclassification of Series F redeemable preferred stock from mezzanine                                               |      |                                                |           |   | $          | 2,338,785 
|                                                                      | Warrants issued in connection with notes payable to related party                                                    |      | $                                              | 2,170,059  |   |            |          
|                                                                      | Conversion of notes payable to a related party and associated accrued interest to Class M redeemable preferred stock |      |                                                | 10,305,072 |   |            |          
|                                                                      | Reclassification of Class M redeemable preferred stock from mezzanine                                                |      |                                                | 22,039,892 |   |            |          
|                                                                      | Conversion of notes payable to a related party and associated accrued interest to common stock                       |      |                                                | 10,326,938 |   |            |          
|                                                                      | Warrants issued in connection with a standby letter of credit                                                        |      |                                                |           |   |            |          
|                                                                      | Building mortgage incurred                                                                                           |      |                                                |           |   |            | 840,000   
|                                                                      | Stock options issued for services                                                                                    |      |                                                |           |   |            | 42,605    
|                                                                      | Accrued interest and debt exchanged for Series N preferred stock                                                     |      |                                                |           |   |            |          
|                                                                      | Accrued debt issuance costs                                                                                          |      |                                                |           |   |            |          
|                                                                      | Equipment acquired under capital lease obligations and note payable                                                  |      |                                                | 9,887,835  |   |            |          
|Supplemental cash flow information:                                   |                                                                                                                      |      |                                                |            |   |            |           
|                                                                      | Interest paidcontinuing operations                                                                                  |      | $                                              | 1,269,605  |   | $          | 244,854   
|                                                                      | Interest paiddiscontinued operations                                                                                |      |                                                |           |   |            | 43,087    

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

F-9

---



I-LINK INCORPORATED AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1Description of Business, Principles of Consolidation and Liquidity

The
consolidated financial statements include the accounts of I-Link Incorporated and its subsidiaries (I-Link or the Company). The Company's principal operations
are two fold. First, for the past five years the Company has developed and marketed enhanced communications products and services utilizing its own private intranet and both owned and leased network
switching and transmission facilities. The communications solutions are delivered through the Company's proprietary technologies. Enhanced communications products and services are marketed through
master agent and wholesale distributor arrangements with I-Link Communications Inc., a wholly owned subsidiary of the Company that is an FCC licensed long-distance
carrier. The Company develops and licenses communications applications products and software that support multimedia communications (voice, fax and audio) over the public switched network, local area
networks and the Internet. The second principal operation began on June 4, 2001, when I-Link Incorporated, through its wholly owned subsidiary WorldxChange Corp. (WorldxChange),
purchased certain assets and assumed certain liabilities of WorldxChange Communications, Inc. from a bankruptcy proceeding. WorldxChange is a facilities-based telecommunications carrier that
provides international and domestic long-distance service to retail customers. Telecommunication services provided by WorldxChange consist primarily of a dial-around product
that allows a customer to make a call from any phone by dialing a 10-10-XXX prefix. The phone call is then billed directly to the customer. Billings to these customers are
primarily done through the customers' local exchange carrier (LEC). Marketing of the dial around product is primarily done through independent marketing agents that receive a commission.
WorldxChange's retail base is comprised of residential and commercial customers located throughout the United States.

On
March 1, 2001, I-Link became a majority owned subsidiary of Counsel Communications LLC (subsequently reorganized and renamed Counsel Springwell Communications LLC),
which was a
majority-owned subsidiary of Counsel Corporation, (collectively, Counsel). On April 17, 2001, I-Link merged with WebToTel, Inc. (WebToTel), a subsidiary of Counsel, and its
subsidiary Nexbell Communications Inc. (Nexbell) as more fully described in Note 6. As the entities were under common control as of March 1, 2001, the financial statements for the
year ended December 31, 2001 include the financial results of WebToTel and Nexbell as if I-Link's merger with these two entities had occurred on March 1, 2001. The
acquisition has been accounted for similar to a pooling-of-interests using Counsel's book values of the WebToTel assets and liabilities. Nexbell was sold by the Company in
December 2001 (see Note 6).

All
significant intercompany accounts and transactions have been eliminated in consolidation.

The
Company incurred a net loss from continuing operations of $45,589,443 for the year ended December 31, 2001, and as of December 31, 2001 had an accumulated deficit of
$166,763,782 and negative working capital of $29,251,249. The Company anticipates that revenues generated from its continuing operations will not be sufficient during 2002 to fund ongoing operations,
the continued expansion of its private telecommunications network facilities, product development and anticipated growth in subscriber base.

In
late 2001, the Company determined it was not cost justifiable to maintain a significant part of I-Link's fixed network, specifically, the leased lines for call origination
and termination from the backbone network. Instead of using these leased lines for origination and termination, it was determined that, given current revenue levels, it would be more economical to
originate and terminate traffic on WorldxChange's network, which I-Link began to do in late 2001. The Company anticipates

F-10

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the transition will be completed in April 2002, and that this transition will result in monthly net savings. In addition to the anticipated cost savings, Counsel Corporation and its subsidiary
Counsel Springwell Communications LLC have committed to fund, through long-term inter-company advances or equity contribution, all capital investment, working capital or other operational
cash requirements of I-Link through April 15, 2003.

Note 2Summary of Significant Accounting Policies

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains its cash and
cash equivalents primarily with financial
institutions in Utah, California, and Arizona. These accounts may from time to time exceed federally insured limits. The Company has not experienced any losses on such accounts.

Allowance for Doubtful Accounts

The Company evaluates the collectability of its receivables at least quarterly, based upon various factors including the financial condition and payment history
of major customers, an overall review of collections experience on other accounts and economic factors or events expected to affect the Company's future collections experience.

Furniture, fixtures, equipment and software

Furniture, fixtures, equipment and software are stated at cost. Depreciation is calculated using the straight-line method over the following estimated
useful lives:

Interest in network cables

17 yearsTelecommunications network equipment

2-6 yearsFurniture, fixtures and office equipment

3-6 yearsSoftware

1-3 years


Betterments
and renewals that extend the life of the assets are capitalized. Other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation
applicable to assets retired are removed from the accounts and the gain or loss on disposition is recognized in operations. The Company regularly evaluates whether events or circumstances have
occurred that indicate the carrying value of its furniture, fixtures, equipment and software may not be recoverable. When factors indicate the asset may not be recoverable, the Company compares the
related undiscounted future net cash flows to the carrying value of the asset to determine if an impairment exists. If the expected future net cash flows are less than the carrying value, impairment
is recognized based on the fair value of the asset. During 1999, the Company wrote off $1,847,288 in unrecoverable capitalized software costs. There were no such write-offs in 2001 or
2000.

Intangible assets

The Company regularly evaluates whether events or circumstances have occurred that indicate the carrying value of its intangible assets may not be recoverable.
When factors indicate the asset may not be recoverable, the Company compares the related undiscounted future net cash flows to the carrying value of the asset to determine if impairment exists. If the
expected future net cash flows are less than

F-11

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carrying value, impairment is recognized based on the fair value of the asset. Amortization of intangible assets is calculated using the straight-line method over the following periods:

Excess acquisition cost over fair value of net assets acquired

5-10 yearsAcquired technology

5 yearsOther intangible assets

3-15 years


As
discussed in Note 7, the Company recorded an $8,040,054 impairment charge, representing the remaining balance of the goodwill associated with the WebToTel acquisition.

Revenue recognition

Long-distance and enhanced service revenue is recognized as service is provided to subscribers.

Marketing
services revenues from the network marketing channel primarily included revenues recognized from Independent Representatives (IRs) for promotional and presentation materials
and national conference registration fees. Revenue from the sale of promotional and presentation materials (included in Marketing services revenue) was recognized at the time the materials were
shipped. The portion of the sign-up fee, including a normal profit margin, relating to on-going administrative support was deferred and recognized over twelve months (the
initial term of the IR agreement). Marketing services revenues are presented net of estimated refunds on returns of network marketing materials.

During
the second quarter of 2000, the Company entered into an agreement with Red Cube International AG (Red Cube). The agreement with Red Cube consisted of a $7,500,000 licensing fee
and $2,500,000 for consulting services. This $10,000,000 aggregate amount is nonrefundable and is being recorded as revenue ratably over a two-year period. Accordingly, $5,000,000 and
$3,333,333 were recorded as technology licensing revenue in 2001 and 2000, respectively. The balance of $1,666,667 has been recorded as unearned revenue as of December 31, 2001. In
July 2000, the Company received an additional nonrefundable payment of $10,000,000. This payment was a service prepayment that was to be credited against services performed for and/or provided
to Red Cube by June 30, 2001. As of June 30, 2001, there remained $9,543,000 which had not been used by Red Cube and as the Company had no further obligation under the prepayment
arrangement, the $9,543,000 was recognized as revenue as of June 30, 2001.

Revenue
from the sale of software licenses is recognized when the product is shipped, a non-cancelable agreement is in force, the license fee is fixed or determinable,
acceptance has occurred and collectability is reasonably assured. Maintenance and support revenues are recognized ratably over the term of the related agreements. When a license of I-Link
technology requires continued support or involvement of I-Link, contract revenues are spread over the period of the required support or involvement. In the event that collectability is in
question, revenue (deferred or recognized) is recorded only to the extent of cash receipts. Revenues on long-term development projects are recognized under the percentage of completion
method of accounting and are based upon costs incurred on the project, compared to estimated total costs related to the contract.

Advertising costs

Advertising production costs are expensed the first time the advertisement is run. Media (TV and print) placement costs are expensed in the month the advertising
appears. Total advertising and

F-12

---

promotion expenses in 2001 were $7,266,000, which related to promotional expenses of WorldxChange for the seven-month period that WorldxChange was a subsidiary of I-Link. Included in
prepaid expenses and other assets was $516,000 as of December 31, 2001, relating to prepaid advertising and promotion expenses.

Computer software costs

The Company capitalizes qualified costs associated with developing computer software for internal use. Such costs are amortized over the expected useful life,
usually three years.

Concentrations of Credit Risk

The Company's retail telecommunications subscribers are primarily residential subscribers and are not concentrated in any specific geographic region of the United
States. The Company's wholesale customers are primarily based in Utah. The only customer that accounted for over 10% of the revenues for the year 2001 was Red Cube, which accounted for approximately
18% of revenues.

Income taxes

The Company records deferred taxes in accordance with Statement of Financial Accounting Standards (SFAS) 109, "Accounting for Income Taxes." The statement
requires recognition of deferred tax assets and liabilities for temporary differences between the tax bases of assets and liabilities and the amounts at which they are carried in the financial
statements, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets
to the amount expected to be realized.

Segment reporting

The Company reports its segment information based upon the internal organization that is used by management for making operating decisions and assessing
performance.

Use of estimates

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities; disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain balances in the December 31, 2000 financial statements have been reclassified to conform to current year presentation. These changes had no effect
on previously reported net loss, total assets, liabilities or stockholders' equity.

F-13

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Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests
method. The Company believes that the adoption of SFAS 141 will not have a significant impact on its financial statements.

In
July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets", which is effective for fiscal years beginning after December 15, 2001.
SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions upon adoption for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the testing for
impairment of existing goodwill and other intangibles. The Company believes that the adoption of SFAS 142 will not have a significant impact on its financial statements.

In
August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement Obligations", effective for years beginning after June 15, 2002. SFAS 143 addresses
financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations
associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for
certain obligations of lessees. The Company believes that the adoption of SFAS 143 will not have a significant impact on its financial statements.

In
August 2001, the FASB issued the SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144 addresses financial accounting
and reporting for the disposal of long-lived assets. SFAS 144 is effective for fiscal years beginning after December 15, 2001. The Company believes that the adoption of
SFAS 144 will not have a significant impact on its financial statements.

Note 3Net Loss per Share

Basic earnings per share is computed based on the weighted average number of common shares outstanding during the period. Options, warrants, convertible preferred
stock and convertible debt are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. As the Company had a net loss from continuing
operations for 2001, 2000 and 1999, basic and diluted loss per share are the same.

The
basic and diluted net loss per common share for the year ending December 31, 2001 includes a net increase to retained earnings of $30,292,319 attributable to the redemption on
March 1, 2001 of the Class M redeemable preferred stock and all Class N preferred stock owned by Winter Harbor, including redemption of the beneficial conversion feature related
to such preferred stock. In addition, there was a charge to retained earnings in 2001 of $9,779,846 representing a contingent beneficial conversion feature on the Class N preferred stock
resulting from the reset of the conversion price. The basic and diluted net loss per common share in 2001 also reflects a $5,000,000 charge to retained earnings for the beneficial conversion feature
related to the reissuance on March 1, 2001 of the Class M and Class N preferred stock to Counsel. The net effect of these transactions was a benefit included in the net loss per
common share of $15,512,473 for the year ended December 31, 2001.

F-14

---

On
September 6, 2001, all outstanding shares of the Company's Class C preferred stock automatically converted into shares of common stock according to the terms of the
designation of the Class C preferred stock. Accordingly, 9,249 shares of Class C preferred stock were converted into 3,415,015 shares of common stock. In addition to the conversion of
the preferred stock, the Company was obligated to pay dividends declared but unpaid and other dividends not paid on the preferred stock through the conversion date. Accordingly, dividends in the
amount of $630,313 were paid through the issuance of 534,016 shares of common stock.

During
2000 and 1999, holders of the Series F redeemable preferred stock converted 248 and 750 of those preferred shares, respectively. Accordingly, they were paid stock dividends
of 87,477 and 165,220 shares, respectively, of common stock on the converted shares.

As
the conversion price of the Series N preferred stock at issuance was less than the market price of the Company's common stock, the Company recognized a deemed preferred stock
dividend of $6,978,417 at issuance in 1999 which increased the loss attributable to common shareholders in the calculation of basic and diluted net loss per common share. The deemed preferred stock
dividend was calculated as the difference between the conversion price per common share per the Series N agreement and the market price of the common stock on the date the proceeds from the
offering were received and/or the debt was exchanged. The deemed dividends are implied only and do not represent future obligations to pay a dividend.

Potential
common shares that were not included in the computation of diluted EPS because they would have been anti-dilutive are as follows as of December 31:

2001

2000

1999Assumed conversion of Series C preferred stock



374,959

808,248Assumed conversion of Series F redeemable preferred stock





1,105,169Assumed conversion of Series M convertible preferred stock



8,175,676

5,951,795Assumed conversion of Series N preferred stock

615,200

10,260,810

7,270,463Assumed conversion of convertible debt

22,852,506

7,539,830

4,931,226Assumed exercise of warrants issued on conversionof convertible debt



5,000,000

5,000,000Assumed exercise of options and warrants to purchase shares of common stock

28,033,464

45,354,992

41,945,09151,501,170

76,706,267

67,011,992


Note 4Discontinued Operations

On March 23, 1998, the Company's Board of Directors approved a plan to dispose of the Company's medical services businesses in order to focus its efforts
on the sale of telecommunication services and technology licensing. The Company has sold essentially all of the fixed assets, with the

F-15

---

proceeds being used to satisfy outstanding obligations of the medical services subsidiaries. In January 1999, the Company sold additional assets for $15,000 and a note receivable of $35,000.
In March 2000, the Company sold the remaining assets and settled the outstanding liabilities of the China operations and received net proceeds of $150,000.

The
results of the medical services operations have been classified as discontinued operations for all periods presented in the Consolidated Statements of Operations. Discontinued
operations have also been segregated for all periods presented in the Consolidated Statements of Cash Flows.

Revenues
of the discontinued operations were $0 in 2001 and 2000 and $337,268 in 1999.

Note 5Furniture, Fixtures, Equipment and Software

Furniture, fixtures, equipment and software consisted of the following at December 31:

2001

2000Telecommunications network equipment

$
27,040,503

$
13,209,784Furniture, fixtures and office equipment


5,680,912


3,896,733Building


1,200,000


1,200,000Software and information systems


1,848,201


1,259,34335,769,616


19,565,860Less accumulated depreciation and amortization


(14,745,920
)

(8,582,587
)$
21,023,696

$
10,983,273


Included
in telecommunications network equipment are $10,137,861 and $3,899,474 in assets acquired under capital leases at December 31, 2001 and 2000, respectively. Accumulated
amortization on these leased assets was $1,674,967 and $2,931,420 at December 31, 2001 and 2000, respectively.

Note 6Acquisition of Subsidiaries

Acquisition of WebToTel

On April 17, 2001, I-Link completed its merger with WebToTel and its subsidiary Nexbell, for 17,454,333 shares of I-Link common
stock issued to Counsel, the owner of WebToTel. WebToTel was an entity established to acquire telecommunication companies. Nexbell is a wholesale network telecommunications provider which operates a
private, managed IP telephony network that delivers packet voice services to over 400 key metropolitan areas in the United States. Nexbell's first product offering, Multi-Exchange Transport Service
(METS), provides customers with VoIP based local access origination and termination services through 32 (subsequently consolidated to 13) domestic points of presence. The merger of
I-Link and WebToTel has been accounted for similar to a pooling-of-interests using Counsel's book values of the WebToTel assets and liabilities, effective
March 1, 2001, the earliest dated that all three entities were under common control of Counsel.

In
December 2001 and subsequent to the time the Company recorded the impairment of goodwill charge (see note 7) related to Nexbell, the Company sold Nexbell to an unrelated
party. The sale was a sale of Nexbell's common stock and accordingly the assets and liabilities of Nexbell were assumed by the purchaser with no further financial obligation to I-Link. At
the time of the sale, the liabilities

F-16

---

exceeded the assets of Nexbell and accordingly a gain on sale of subsidiary in the amount of $588,943 (the amount by which the liabilities of Nexbell exceeded the assets) was recorded.

Purchase of Certain WorldxChange Communications, Inc. Assets and Liabilities

On June 4, 2001, I-Link Incorporated, through its wholly-owned subsidiary WorldxChange, purchased certain assets and assumed certain
liabilities of WorldxChange Communications, Inc. (Debtor) from a bankruptcy proceeding. The purchased assets included all of the assets employed in the Debtor's operations in the United States
and consisted of the Debtor's equipment, inventory, retail long distance business, accounts receivable, licenses, permits, authorizations, software programs and related technology. On June 4,
2001, the Debtor transferred the purchased assets to WorldxChange in exchange for $13,000,000.

To
fund the acquisition of the assets and provide working capital, Counsel agreed to provide a collateralized loan to I-Link in the aggregate amount of $15,000,000 (of which
$13,000,000 was used for the purchase) as more fully described in Note 8.

The
fair values of assets acquired and liabilities assumed as of June 4, 2001 are as follows:

Accounts receivable and other current assets

$
12,386,687Furniture, fixtures, and equipment


4,580,285Accounts payable and accrued liabilities


(2,061,753
)Obligations under capital leases


(1,224,219
)Net cash paid

$
13,681,000


Also,
in connection with the acquisition, WorldxChange agreed to pay $727,000 to a supplier for services rendered prior to the acquisition to continue services with that vendor. The
Company also incurred $681,000 of transaction costs related to the purchase.

Unaudited
pro forma results of operations for the years ended December 31, 2001 and 2000 as if the acquisitions had been completed as of the beginning of each period presented are
shown below. The pro forma results include the historical result of operations of I-Link, WebToTel and Nexbell for the twelve months ended December 31, 2001 and 2000. The pro forma
results include the historical result of
operations of WorldxChange for the twelve months ended September 30, 2001 and 2000. The pro forma results include estimates and assumptions which management believes are reasonable. However,
pro forma results do not include any anticipated cost savings or other effects of the planned integration of the operations, and are not necessarily indicative of the results which would have

F-17

---

occurred if the business combinations had occurred on the dates indicated, or which may result in the future.

For the Year EndedDecember 31,
2001

December 31,
2000Revenues

$
117,059,000

$
136,492,000Net Loss before extraordinary gain

$
(88,665,000
)
$
(110,466,000
)Net Loss

$
(87,572,000
)
$
(110,466,000
)Loss Per Share

$
(.71
)
$
(2.60
)


Note 7Intangible Assets

Amortization of Intangibles from WebToTel Acquisition

I-Link's wholly owned subsidiary WebToTel acquired Nexbell on February 22, 2001 and accounted for that acquisition using the purchase method of
accounting. As part of that acquisition, WebToTel recorded $9,136,427 of goodwill. This goodwill was being amortized over a five-year period.

The
Company continuously reviews the products it offers and their contribution to the Company and its overall strategy. These reviews resulted in a determination that it was not
economically justified to continue to maintain a portion of the Company's network related to leased lines for local access origination and Nexbell's METS product. In the fourth quarter of 2001, the
Company approved a plan to discontinue offering the METS product. With this determination, the Company performed an impairment analysis of the goodwill recorded in connection with the acquisition of
WebToTel and its subsidiary Nexbell. The analysis was performed in response to projected losses on the METS product acquired in the WebToTel acquisition. As a result of this review, an $8,040,054
impairment charge, representing the remaining balance of the goodwill, was recorded in September 2001.

F-18

---

Other Intangible Assets

Intangible assets consisted of the following at December 31:

2001

2000Acquired technology

$
8,875,000

$
10,325,000Excess acquisition cost over fair value of net assets acquired


1,405,410


2,197,138Other intangible assets


540,000


1,228,20010,820,410


13,750,338Less accumulated amortization


(9,489,571
)

(9,811,112
)$
1,330,839

$
3,939,226


Note 8Debt

Debt, the carrying value of which approximates market, consists of the following at December 31:

|                                                                                                                                                                      |  | 2001 |             | 2000 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | -
|Note payable to a service provider, interest at 7.0%, due on demand                                                                                                   |  | $    | 746,625     |      | $
|Note payable to Winter Harbor, payable April 15, 2001, interest at prime plus four percent (13.50% at December 31, 2000) (converted to common stock in March 2001)    |  |      |            |      |  
|Building mortgage payable to a bank, interest at 9.84%, payable in monthly installments of $10,028                                                                    |  |      | 797,329     |      |  
|Note payable to a network service provider, interest at 10% payable in monthly installments of $22,500                                                                |  |      | 612,454     |      |  
|Revolving Credit Facility, interest at prime plus 1.75% (6.5% at December 31, 2001) balance is paid daily based on collections on accounts receivable of WorldxChange |  |      | 6,996,603   |      |  
|Note payable, Winter Harbor                                                                                                                                           |  |      | 1,999,215   |      |  
|Note payable, Counsel Corporation, interest at 9%, due March 1, 2004                                                                                                  |  |      | 11,527,512  |      |  
|Note payable, Counsel Corporation, interest at 10%, due June 6, 2002                                                                                                  |  |      | 17,540,140  |      |  
|Note payable, Counsel Corporation, interest at 10%, due December 2004                                                                                                 |  |      | 11,561,023  |      |  
|                                                                                                                                                                      |  |      |             |      |  
|                                                                                                                                                                      |  |      | 51,780,901  |      |  
|Less current portion                                                                                                                                                  |  |      | (27,545,002 | )    |  
|                                                                                                                                                                      |  |      |             |      |  
|Long-term debt, less current portion                                                                                                                                  |  | $    | 24,235,899  |      | $
|                                                                                                                                                                      |  |      |             |      |  

Maturities
of long-term obligations during each of the years 2003 through 2006 are $290,000, $25,353,000, $59,000 and $65,000 respectively.

In
December 2001, WorldxChange entered into a three-year loan and security agreement with a financial institution, which consists of an accounts receivable based
revolving credit facility. The facility allows WorldxChange to borrow up to a maximum of $20 million subject to certain restrictions and borrowing base limitations. The maximum available
borrowing base is determined as a specific percentage of eligible accounts receivable. The balance outstanding is reduced by the application of payments received on collection of accounts receivable.
The facility had an outstanding balance of $6,996,603 at December 31, 2001. Outstanding balances under the loan bear interest at the prime rate plus 1.75% (6.5% at December 31, 2001) and
are collateralized by substantially all the assets of the WorldxChange.
At December 31, 2001, $4,043,000 remains available under the revolving credit facility based on borrowing base limitations. Additionally, the loan contains certain financial covenants related

F-19

---

to WorldxChange for fiscal 2002 and 2003. In conjunction with executing the credit facility, an Intercreditor Agreement was entered into between WorldxChange and Counsel where the promissory note
between WorldxChange and Counsel was made subordinate to the credit facility. Further, the cumulative principal repayments of the promissory note are not to exceed $11,500,000 during the term of the
facility.

As
of September 30, 2001, I-Link was in default on an equipment lease. This lease was secured by a letter of credit issued by an affiliate of Winter Harbor LLC, a
former majority shareholder of I-Link. On October 11, 2001, the leasing company drew against the letter of credit in the amount of $1,999,215. As of December 31, 2001,
I-Link carries the liability related to this draw on the letter of credit in its consolidated financial statements. On October 26, 2001, I-Link received a demand for
payment from Winter Harbor LLC for the amount of the draw on the letter of credit and interest (at prime plus 9%) since October 11, 2001. The Company is evaluating Winter Harbor's demand in
light of the various agreements entered into between the Company, Counsel Communications LLC and Winter Harbor. While the Company believes that it will not be required to pay cash to Winter Harbor of
the amount claimed, there can be no assurance as to the ultimate outcome of this matter.

The
Company borrowed $12,000,000 under a loan agreement with Counsel Communications during 2001. Interest on the note (9% per annum) is automatically added to principal at the end of
each calendar quarter. The note is due March 1, 2004. The note is convertible into I-Link's common stock at a conversion rate of $.56 per share. At any time the Company made a draw
on the loan agreement and the market price of the Company's common stock was higher than the conversion rate, a debt discount was recorded equal to this beneficial conversion feature. A debt discount
of $1,092,143 was recorded on the borrowings of $12,000,000. This discount is being accreted to interest expense over the term (three years) of the loan agreement.

On
June 6, 2001, I-Link and Counsel entered into a Loan and Security Agreement (Loan Agreement). Any monies advanced to I-Link between June 6, 2001
and April 15, 2002, (in the amount not to exceed $10,000,000) will be governed by the Loan Agreement. In connection with the Loan Agreement, I-Link executed a note payable to
Counsel, due June 6, 2002. The loan is secured by all of the assets of I-Link. Outstanding balances (including any accrued and unpaid interest) under the loan bear interest at 10%
per annum which interest is payable quarterly in arrears following the last business day of each quarter. However, Counsel may (and has elected to do so through December 31, 2001) at its sole
election allow interest to accrue and become payable at the end of the term. The full amount of the agreement ($10,000,000) was advanced to I-Link during 2001. During 2001 and as of
December 31, 2001, Counsel had also advanced $7,070,320 to I-Link for which the conditions and terms of repayment are anticipated (as there are no written agreements) to be similar
to the $10,000,000 agreement dated June 6, 2001.

On
June 4, 2001, WorldxChange entered into a $15,000,000 loan and security agreement and promissory note with Counsel (as the lender) and I-Link Incorporated (as the
guarantor). The loan is collateralized by all assets of WorldxChange. The loan is also guaranteed by I-Link and collateralized by the assets of
I-Link. Outstanding balances under the loan bear interest at 10% per annum. The loan will mature in December 2004. The proceeds of the loan were used to purchase and operate certain
of the business assets purchased under the court-supervised sale in the bankruptcy proceeding of World Access, Inc. The proceeds were also utilized to pay fees and expenses related to such
asset acquisition and operation and pay certain assumed liabilities related to the transaction. In December 2001, the WorldxChange repaid $2,500,000 of the principal amount outstanding under
the promissory note and as of December 31, 2001, the outstanding balance was $12,465,000, of which $9,000,000 is permitted to be repaid under certain conditions, during the
three-year term of the credit facility.

In
connection with the $15,000,000 loan, I-Link issued to Counsel a warrant to purchase 15,000,000 shares of common stock of I-Link at an exercise price of $0.60
per share. The warrants were

F-20

---

exercisable in three tranches as follows: 5,000,000 on the date of the agreement, 5,000,000 on September 4, 2001 and 5,000,000 on December 4, 2001. The warrants expire on June 4,
2003. The Company has recorded $2,170,059 as a discount against the $15,000,000 loan from Counsel representing the relative fair value attributed to the warrant. The value of the warrants was
calculated using the Black Scholes Model and is being amortized over the original one-year term of the loan. As of December 31, 2001, the unamortized debt discount was $904,000.

During
1998, the Company obtained an aggregate of $7,768,000 in interim debt financing from Winter Harbor, L.L.C. As consideration for Winter Harbor's commitment to make the loan, the
Company agreed to issue 6,740,000 warrants to purchase common stock of the Company at exercise prices ranging from $5.50 to $7.22 (subsequently reset to $1.25 in January 2001) based upon 110%
of the closing price of the common stock on the day loan funds were advanced. The warrants had exercise periods of 7.5 years from the date of issuance. The Company also agreed to extend the
exercise period on all warrants previously issued to Winter Harbor (10,800,000) to 7.5 years. Pursuant to the terms of the loan agreement with Winter Harbor, the initial borrowings of
$5,768,000 were payable upon demand by Winter Harbor no earlier than May 15, 1998, and were collateralized by essentially all of the assets of the Company's subsidiaries. As the loan was not
repaid by May 15, 1998, the total loan, including additional borrowings of $2,000,000 obtained in the second quarter, continued on a demand basis with interest accruing at prime plus 4%. On
April 15, 1999, Winter Harbor agreed that it would not demand payment under the notes prior to April 15, 2000 and in April 2000 agreed to extend the due date of the principal and
accrued interest to April 15, 2001. On March 1, 2001, Winter Harbor converted the note ($7,768,000) and accrued interest ($2,537,072 at February 28, 2001) into 4,122 shares of
Series M convertible preferred stock. Accrued and unpaid interest of $2,376,498 on the $7,768,000 Winter Harbor debt was included in short-term liabilities as of December 31,
2000.

Note 9Commitments under Long-term Leases

Agreements classified as operating leases have terms ranging from one to six years. The Company's rental expense for operating leases was approximately
$13,547,000, $6,946,000, and $3,270,000 for 2001, 2000 and 1999, respectively.

Future
minimum rental payments required under non-cancelable capital and operating leases with initial or remaining terms in excess of one year consist of the following at
December 31, 2001:

|                                            |  | Capital
Leases |            | Operating
Leases
|------------------------------------------- |  | -------------- | ---------- | ----------------
|Year ending December 31:                    |  |                |            |                 
|2002                                        |  | $              | 3,869,000  |                 
|2003                                        |  |                | 3,036,000  |                 
|2004                                        |  |                | 2,984,000  |                 
|2005                                        |  |                | 1,470,000  |                 
|2006                                        |  |                |           |                 
|                                            |  |                |            |                 
|Total minimum payments                      |  |                | 11,359,000 |                 
|                                            |  |                |            |                 
|Less amount representing interest           |  |                | (1,339,000 | )               
|                                            |  |                |            |                 
|Present value of net minimum lease payments |  |                | 10,020,000 |                 
|Less current portion                        |  |                | (3,034,000 | )               
|                                            |  |                |            |                 
|Long-term obligations under capital leases  |  | $              | 6,986,000  |                 
|                                            |  |                |            |                 

F-21

---

I-Link's
subsidiaries have various agreements with national carriers to lease local access spans and to purchase carrier services. The agreements include minimum usage
commitments with termination penalties up to 100% of the remaining commitment. Minimum usage commitments are as follows:

Year ending December 312002

$
4,800,0002003


3,100,0002004


800,000


Note 10Extraordinary Gain on Extinguishment of Debt

During the third quarter of 2001, Nexbell was in default on two leases and at the time of settlement, Nexbell was liable for $1,272,818. The debt was settled
during the fourth quarter of 2001 for a one-time payment of $180,000 and accordingly the Company recorded an extraordinary gain in the amount of $1,092,818.

Note 11Income Taxes

The Company recognized no income tax benefit from its losses in 2001, 2000 and 1999.

The
reported benefit from income taxes varies from the amount that would be provided by applying the statutory U.S. Federal income tax rate to the loss from continuing operations before
taxes for the following reasons:

2001

2000

1999Expected federal statutory tax benefit

$
(15,128,853
)
$
(8,755,741
)
$
(8,384,158
)Increase (reduction) in taxes resulting from:State income taxes


(1,094,465
)

(774,427
)

(553,452
)Foreign loss not subject to domestic tax


233,999


1,584,313


353,083Non-deductible interest on certain notes


516,271





2,473,160Exercise of stock options issued for services





(1,277,402
)

(60,428
)Non-deductible goodwill


3,096,030





Change in valuation allowance


14,107,017


10,090,027


5,719,844Other


(1,729,999
)

(866,770
)

451,951$


$


$



At
December 31, 2001, the Company had net operating loss carryforwards for both federal and state income tax purposes of approximately $117,000,000. The Company's utilization of
approximately $90,000,000 of the net operating loss carryforward against future taxable income will be subject to an annual limitation of approximately $1,300,000 per year because of the change in
ownership in 2001, as required by Internal Revenue Code Section 382.

F-22

---

The
components of the deferred tax asset and liability as of December 31, 2001 and 2000 are as follows:

2001

2000Deferred tax assets:Tax net operating loss carryforwards

$
43,469,476

$
27,319,350Acquired in-process research and development and intangible assets


3,503,450


2,943,381Amortization of deferred compensation on stock options


1,933,060


Reserve for loss on disposal of discontinued operations


304,173


Reserve for accounts receivable and inventory valuation


694,895


164,703Accrued officers wages


101,545


Accrued vacation


145,511


126,820Unearned revenue


741,030


6,183,318Other


20,229


136,993Valuation allowance


(50,905,160
)

(36,798,144
)Total deferred tax asset


8,209


76,421Deferred tax liability:Excess tax depreciation and amortization


(8,209
)

(76,421
)Total deferred tax liability


(8,209
)

(76,421
)Net deferred tax asset

$


$



The
valuation allowance at December 31, 2001 and 2000 has been provided to reduce the total deferred tax assets to the amount which is considered more likely than not to be
realized, primarily because the Company has not generated taxable income from its business communications services. The change in the valuation allowance is due primarily to the increase in net
operating loss carryforwards. It is at least reasonably possible that a change in the valuation allowance may occur in the near term.

Note 12Transactions with Significant Owners

Transactions with Winter Harbor:

On March 1, 2001, Winter Harbor elected to convert a note payable from I-Link for $7,768,000 plus accrued interest of $2,537,072 into 4,122
shares of Class M convertible redeemable preferred stock of I-Link and 5,000,000 common stock warrants under the original terms of the loan agreement. Upon conversion of the note
and accrued interest, current liabilities in the amount of $10,305,072 were satisfied without use of cash.

On
March 1, 2001 the Company entered into a Warrant Exchange Agreement with Winter Harbor. Pursuant to the terms and provisions of this Agreement, Winter Harbor agreed to assign,
transfer, convey and deliver to I-Link, warrants to acquire 33,540,000 (including the 5,000,000 warrants issued upon conversion of the convertible debt discussed above) shares of common
stock of I-Link beneficially owned by Winter Harbor in exchange for the issuance of 5,000,000 shares of I-Link's common stock to Winter Harbor. The repurchase of the common
warrants was accounted for similar to the repurchase of treasury stock.

F-23

---

Transactions with Counsel:

On March 1, 2001, I-Link entered into a Senior Convertible Loan and Security Agreement, (the Loan Agreement) with Counsel Communications, LLC,
and a wholly owned subsidiary of Counsel Corporation, (collectively, Counsel). Pursuant to the terms and provisions of the Loan Agreement, Counsel agreed to make periodic loans to I-Link
in the aggregate principal amount not to exceed $10,000,000. Draw downs against the $10,000,000 Loan Agreement are structured as a 3-year convertible
note with interest at 9% per annum, compounded quarterly. On May 8, 2001 the aggregate principal amount under the facility was increased to $12,000,000. Counsel can convert the loan into shares
of common stock of I-Link at a conversion price of $0.56 per common share. At any time after September 1, 2002, the outstanding debt including accrued interest shall automatically
convert into common stock using the then current conversion rate, on the first date that is the twentieth consecutive trading day that the common stock has closed at a price per share that is equal to
or greater than $1.00 per share. The conversion price is subject to adjustment in accordance with the terms and provisions of the Loan Agreement. The Loan Agreement provides for traditional
anti-dilution protection and is subject to certain events of default. Total proceeds available to the Company were $12,000,000, less debt issuance costs of $600,000, which are being
amortized over three years.

By
executing the above Loan Agreement, I-Link granted Counsel a first priority security interest in all of I-Link's assets owned at the time of the execution of
the Loan Agreement or subsequently acquired, including but not limited to I-Link's accounts receivable, general intangibles, inventory, equipment, books and records, and negotiable
instruments held by the Company (collectively, the Collateral). The Loan Agreement also included demand registration rights for common stock issuable upon conversion of the Loan Agreement.

In
addition to the foregoing agreements, I-Link and Counsel executed a Securities Support Agreement, dated March 1, 2001 (the Support Agreement) for the purpose of
providing certain representations and commitments by I-Link to Counsel. In accordance with the terms and provisions of a separate agreement (the Securities Purchase Agreement) with Winter
Harbor and First Media L.P., a limited partnership and the parent company of Winter Harbor (collectively the Winter Harbor Parties), Counsel agreed to purchase from the Winter Harbor Parties all of
their equity securities in I-Link, including shares of Class M and Class N preferred stock of I-Link, beneficially owned by the Winter Harbor Parties for an
aggregate consideration of $5,000,000 cash.

I-Link's
commitments to Counsel set forth in the Support Agreement included I-Link's agreement to appoint two designees of Counsel (which was done in
May 2001) to the Company's Board of Directors. The Company also agreed that immediately following the initial funding of the Loan agreement, I-Link would solicit the proxies of
I-Link's shareholders to elect three additional nominees designated by Counsel, thus, increasing the size of the Company's Board of Directors to nine members.

Under
the Support Agreement, I-Link also agreed to engage appropriate advisors and proceed to take all steps necessary to merge Nexbell Communications Inc. (a
subsidiary of Counsel) into I-Link. The merger was completed on April 17, 2001 (See note 6).

On
March 7, 2001, as part of the agreements discussed above, Counsel converted all of the Class M and N convertible preferred stock it obtained from Winter Harbor for
$5,000,000 into 61,966,016 shares of I-Link's common stock. The Class N shares were converted at $1.25 per common share and Class M at $.56 per common share, in accordance
with their respective conversion rights.

On
June 6, 2001, I-Link and Counsel entered into a Loan and Security Agreement (Loan Agreement). Any monies advanced to I-Link between June 6, 2001
and April 15, 2002, (in the amount not to exceed $10,000,000) will be governed by the Loan Agreement. In connection with the Loan Agreement, I-Link executed a note payable to
Counsel, due June 6, 2002. The loan is secured by all of

F-24

---

the assets of I-Link. As of December 31, 2001, advances under this loan agreement totaled $10,000,000. (See Note 8)

During
2001 and as of December 31, 2001, Counsel had also advanced $7,070,320 to I-Link for which the conditions and terms of repayment are anticipated (as there are
no written agreements) to be similar to the $10,000,000 agreement dated June 6, 2001 (discussed above).

To
fund the acquisition of the assets purchased and liabilities assumed by WorldxChange, Counsel provided a loan to WorldxChange in the aggregate amount of $15,000,000. The loan is
subordinated to the revolving credit facility described above and is collateralized against all assets of WorldxChange. (See Note 8)

As
a result of Counsel's purchase of Winter Harbor's security holdings in I-Link, Counsel became the single largest shareholder of the Company. In addition to the above
transactions, Counsel Corporation and its subsidiary Counsel LLC committed to fund, through long-term intercompany advances or equity contribution, all capital investment, working capital
or other operational cash requirements of the Company through April 15, 2003.

Accounting treatment of Counsel and Winter Harbor transactions:

The repurchase of Winter Harbor's 33,540,000 warrants for 5,000,000 common shares was recorded at market value of the common stock issued in the exchange
amounting to $3,750,000. The repurchase was accounted for similar to the repurchase of treasury stock. Accordingly, common stock and additional paid in capital was increased by $3,750,000 which was
offset by a charge to additional paid in capital of $3,715,000 to reflect the warrant repurchase. The net effect of this transaction was the recording of additional par value of $35,000 for the
5,000,000 shares issued.

As
the conversion price for Class M preferred stock had dropped to $1.25 per share (from its original conversion price of $2.78), an amount reflecting the increase in the
beneficial conversion feature was recorded as an increase in additional paid in capital and a charge to accumulated deficit for $9,779,846. The purchase and sale of the Class M and
Class N preferred stock between Winter Harbor and Counsel, as described above, have been imputed in I-Link's financial statements as if the transactions had been effected through
I-Link as a repurchase of the preferred stock from Winter Harbor and a reissuance to Counsel. Accordingly, the transaction was considered a repurchase of Winter Harbor's Class M and
N preferred stock in exchange for $5,000,000. The difference between the carrying value of the Class M
and N preferred stock and the $5,000,000 paid was recorded as an adjustment to retained earnings reflected in the form of a $30,292,319 contribution from settlement of these transactions between
shareholders and has been reflected as such in the statement of changes in stockholders' deficit. In addition, the transaction considered that I-Link resold the Class M and N
preferred stock to Counsel for $5,000,000 (Counsel's payment to Winter Harbor). However, since the conversion price on the Class M shares was below the market price on the day the transaction
closed, a beneficial conversion feature was recorded as the difference between the market price of the common shares and the conversion price per share multiplied by the number of common shares into
which the Class M and Class N could convert. This amount was limited to the proceeds.

The
Company has also recorded a beneficial conversion feature (debt discount) in the amount of $1,017,857 on the convertible debt funded by Counsel that was received through
March 31, 2001. The amount of the discount, if applicable, is calculated as the difference between the conversion price ($.56) and the market price of the common stock (if higher than the
conversion price on the date funds are drawn on the loan), multiplied by the number of shares of common stock into which the note can be converted. The beneficial conversion feature is being amortized
over the life of the note payable (three years).

F-25

---

Note 13Legal Proceedings

On January 18, 2001, I-Link filed action against Red Cube, International AG and Red Cube, Inc. (Red Cube) in federal court in Utah
seeking damages against Red Cube, for an alleged default on an agreement to provide approximately $60,000,000 in equity funding to I-Link, and instituting a scheme to drive
I-Link out of business and obtain control of I-Link's proprietary technology, telecommunications network, key employees and customers. I-Link obtained a temporary
restraining order against Red Cube preventing Red Cube from interfering with I-Link's employees, vendors and customers. Red Cube subsequently filed a motion to dismiss the action and
compel arbitration based upon a mandatory arbitration provision in the May 2000 Cooperation and Framework Agreement by and between Red Cube and I-Link. The court found that
I-Link's claims were "related to" the Cooperation and Framework Agreement and granted Red Cube's motion to dismiss for lack of subject matter jurisdiction. The dismissal resulted in this
issue being submitted for AAA arbitration pursuant to the Cooperation and Framework Agreement.

On
January 24, 2001, Red Cube delivered a written demand for arbitration and commenced an arbitration proceeding in New York alleging that I-Link breached the
Cooperation and Framework Agreement by (i) threatening a shut-down of I-Link's IP telecommunications network, (ii) the resignation of certain employees, and
(iii) I-Link's alleged failure to update the escrowed copy of its source code to the current version of the source code employed to maintain the IP telecommunications network.
I-Link denied these allegations. I-Link filed a counterclaim against Red Cube and filed a third-party claim against Red Cube, seeking (compensatory and/or punitive) damages for
Red Cube's default under a subsequent agreement to provide approximately $60,000,000 in equity funding to I-Link, and engaging in a scheme to drive I-Link out of business and
obtain control of I-Link's proprietary technology, telecommunications network, key employees and customers. An evidentiary arbitration hearing is currently scheduled to begin in
July 2002.

On
March 10, 2000, the Company and JNC Opportunity Fund, Ltd. (JNC) entered into a settlement and release agreement relating to certain litigation concerning shares of
Series F Preferred stock held by JNC. The shares of Series F Preferred stock held by JNC were convertible into 1,104,972 shares of common stock under the original agreement with JNC. On
March 10, 2000, the Company issued 531,968 shares of common stock to JNC pursuant to the settlement agreement in cancellation of the Series F shares held by JNC. The balance of the
shares required to be issued pursuant to the settlement agreement required approval at a special meeting of the shareholders held on May 23, 2000, at which time approval of the shareholders was
received. Due to the delay in issuance of the shares required to be issued pursuant to the settlement agreement until shareholder approval was received and the related common shares were registered,
the Company issued 20,458 "Additional Shares" of common stock in accordance with the agreement.

The
issuance of 87,477 shares representing dividends associated with the Series F stock has been recorded in the Company's financial statements as dividends paid, and 129,519
shares have been recorded as settlement expense. The Company has recorded interest expense of $111,021 representing the market value of the common stock issued as Additional Shares, Late Shares and
Additional Late Shares (20,458) on May 24, 2000. The amount of settlement and interest expense was determined by reference to the market value of the Company's common stock on the date of
issuance (May 24, 2000) multiplied by the common shares issued. Accordingly, the total settlement and interest expense was $639,565 and $111,021, respectively.

The
Company is involved in litigation relating to other claims arising out of its operations in the normal course of business. The litigation and arbitration referred to above is not
expected, individually or in the aggregate, to have a material adverse affect on the Company.

F-26

---

Note 14Stockholders' Equity

Series N preferred stock

On July 23, 1999, the Company completed its offering of 20,000 shares of Series N preferred stock. The offering was fully subscribed through cash
subscriptions and the Company exercised its rights to exchange notes payable to Winter Harbor of $8,000,000 and $4,000,000, plus accrued interest. In total the Company received $7,281,086 in cash
(before expenses of $486,679) and exchanged $12,718,914 in debt and accrued interest. The Series N conversion price was initially set at $2.78. The conversion rate was adjusted to $1.48 as of
December 31, 2000 and $1.25 in January 2001 based on 110% of the average trading price for any 20 day period following the date that Series N preferred stock is first
issued subject to a floor of $1.25.

The
Series N preferred stock votes with the common stock on an as converted basis and is senior to all other preferred stock of the Company. Dividends, if any, will be paid on an
as converted basis equal to common stock dividends.

During
2001, 2000 and 1999, holders of the Series N preferred stock converted 14,417 (including the shares issued to Winter Harborsee Note 11), 1,129 and 3,685
of those shares into 11,532,343, 467,169
and 1,413,369 shares of common stock, respectively, at conversion prices ranging between $2.78 and $1.25. As of December 31, 2001 there were 769 shares of Series N preferred stock
outstanding.

At
December 31, 2001, of the 10,000,000 shares of preferred stock authorized, 9,486,500 remain undesignated and unissued.

Series C preferred stock

The Company's Articles of Incorporation provide for up to 240,000 shares of preferred stock as Series C Convertible Cumulative preferred stock (the
Series C preferred stock). The Series C preferred stock has a par value of $10 per share and holders are entitled to receive cumulative preferential dividends equal to 8% per annum of
the liquidation preference per share of $60. Unless previously redeemed, the Series C preferred stock was initially convertible into 24 shares of the Company's common stock (Conversion Shares)
at the option of the holder (subject to certain anti-dilution adjustments). The Series C stock exchange price did allow for downward resets based upon certain conditions subject to
a floor of $1.25. On September 6, 2001, all outstanding shares of the Company's Class C preferred stock automatically converted into shares of common stock according to the terms of the
designation of the Class C preferred stock. Accordingly, 9,249 shares of Class C preferred stock were converted into 3,415,015 shares of common stock. In addition to the conversion of
the preferred stock, the Company was obligated to pay dividends declared but unpaid and other dividends not paid on the preferred stock through the conversion date. Accordingly, dividends in the
amount of $630,313 were paid through the issuance of 534,016 shares of common stock.

During
the years ending December 31, 2000 and 1999, 24,428, and 10,374 shares, respectively, of Series C preferred stock were converted into common shares. At
December 31, 2001, there were no Series C preferred shares outstanding.

Series M preferred stock

On October 10, 1997, the Company closed an agreement with Winter Harbor pursuant to which Winter Harbor invested $12,100,000 in a new series of the
Company's convertible preferred stock (the Series M convertible preferred stock). Winter Harbor purchased approximately 2,545 shares of Series M convertible preferred stock, originally
convertible into approximately 2,545,000 shares of common stock, for an aggregate cash consideration of approximately $7,000,000 (equivalent to $2.75 per share of common stock). The agreement with
Winter Harbor also provided for the purchase of approximately 1,855 additional shares of Series M convertible preferred stock, originally convertible

F-27

---

into approximately 1,855,000 shares of common stock. Such additional shares of Series M convertible preferred stock were paid for by Winter Harbor exchanging $5,000,000 in outstanding notes
payable and accrued interest of approximately $100,000.

The
Series M convertible preferred stock was entitled to receive cumulative dividends in the amount of 10% per annum before any other Series of preferred (other than
Series F) or common stock receives any dividends. Thereafter, the Series M convertible preferred stock was to participate with the common stock in the issuance of any dividends on a per
share basis. The Series M convertible preferred stock had the right to veto the payment of dividends on any other class of stock.

The
basis for conversion shall be adjusted upon the occurrence of certain events, including without limitation, issuance of stock dividends, recapitalization of the Company or the
issuance of stock by the Company at less than the fair market value thereof. Because certain redemption provisions were not entirely within the control of the Company, the Series M convertible
preferred stock was presented as a separate line item above stockholders' deficit as of December 31, 2000.

On
March 1, 2001, Winter Harbor elected to convert a note payable from I-Link for $7,768,000 plus accrued interest of $2,537,072 into 4,122 shares of Class M
convertible redeemable preferred stock of I-Link and 5,000,000 common stock warrants under the original terms of the loan agreement. Upon conversion of the note and accrued interest,
current liabilities in the amount of $10,305,072 were satisfied without use of cash.

During
2001, all 8,522 shares of Series M preferred stock outstanding were converted into 41,849,107 shares of common stock (at a equivalent common share price of $0.56 in
accordance with its conversion features). In addition, the Company was obligated to pay a dividend in the amount of $4,812,214 on the Series M preferred stock being converted, which dividend
was paid by issuance of 8,593,239 shares of common stock. At December 31, 2001, there were no Series M preferred shares outstanding.

Series F preferred stock

On July 9, 1998 the Company obtained a $10,000,000 equity investment, net of $530,000 in closing costs, from JNC Opportunity Fund Ltd. (JNC). Under
the original terms of the equity investment, JNC purchased 1,000 shares of the Company's newly created 5% Series E convertible preferred stock, which were convertible into the Company's common
stock. In addition, JNC obtained a warrant to purchase 250,000 shares of the Company's common stock at an exercise price of $5.873 (equal to 120% of the market price of the Company's publicly traded
common shares as of the date of closing).

On
July 28, 1998, the terms of the JNC equity investment were amended to provide a floor to the conversion price, and to effect the amendment the Company created a 5%
Series F convertible preferred stock for which the Series E preferred shares originally issued to JNC were exchanged one for one. Pursuant to the amendment, the Series F preferred
shares were originally convertible into common shares at a conversion price of the lesser of $4.00 per common share or 87% of the moving average market price of the Company's common shares at the time
of conversion, subject to a $1.25 floor. JNC also received an additional warrant to purchase 100,000 shares of the Company's common stock at an
exercise price of $4.00 per common share. In addition, the Company issued warrants to purchase 75,000 shares of the Company's common stock at a price of $4.89 per share to two individuals as a
brokerage fee in connection with the JNC equity investment.

During
2000 and 1999 JNC converted 248 and 750 shares of Series F redeemable preferred stock into 1,104,972 and 3,518,051 shares of common stock, respectively. In addition, during
2000 and 1999, JNC was paid a stock dividend of 87,477 and 165,220 shares of common stock, respectively, on the converted shares. As of December 31, 2001 and 2000, all of the Series F
redeemable preferred stock had been converted.

F-28

---

Common Stock

In September 2001, at the annual meeting of shareholders, the shareholders approved an amendment to the Articles of Incorporation increasing the authorized
common stock from 150,000,000 shares to 300,000,000 shares.

Note 15Stock-based Compensation Plans

At December 31, 2001, the Company has several stock-based compensation plans, which are described below. The Company applies APB Opinion No. 25 and
related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its fixed option plans.

Had
compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under the plans and based on the incremental
fair value associated with the repricing of options consistent with the method outlined by SFAS 123, "Accounting for Stock-Based Compensation", the Company's net loss and loss per share would
have been increased to the pro forma amounts indicated as follows:

|                                             |  | 2001 |             | 2000 |   | 1999        |  
|-------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | -
|Net loss as reported                         |  | $    | (44,496,625 | )    | $ | (25,752,178 | )
|                                             |  |      |             |      |   |             |  
|Net loss pro-forma                           |  | $    | (47,429,694 | )    | $ | (33,262,209 | )
|                                             |  |      |             |      |   |             |  
|Basic and diluted loss per share as reported |  | $    | (0.29       | )    | $ | (1.03       | )
|                                             |  |      |             |      |   |             |  
|Basic and diluted loss per share pro-forma   |  | $    | (0.32       | )    | $ | (1.25       | )
|                                             |  |      |             |      |   |             |  

The
fair value of each option grant is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions: expected
volatility of 120%, 102% and 97% in 2001, 2000 and 1999, respectively, risk free rates ranging from 3.17% to 6.62%, 4.67% to 6.83% and 4.35% to 6.08% in 2001, 2000 and 1999, respectively, expected
lives of 3 years for each year, and dividend yield of zero for each year.

|                                                                            |  | 2001        |   | 2000 |      | 1999
|--------------------------------------------------------------------------- |  | ----------- | - | ---- | ---- | ----
|
|Outstanding at beginning of year                                            |  | 45,354,992  |   | $    | 2.57 |     
|Granted                                                                     |  | 20,509,559  |   |      | 0.76 |     
|Exercised                                                                   |  |            |   |      |     |     
|Expired                                                                     |  | (1,643,177  | ) |      | 3.43 |     
|Forfeited                                                                   |  | (36,187,910 | ) |      | 1.42 |     
|                                                                            |  |             |   |      |      |     
|Outstanding at end of year                                                  |  | 28,033,464  |   | $    | 2.27 |     
|                                                                            |  |             |   |      |      |     
|Options and warrants exercisable at year end                                |  | 27,090,203  |   |      |      |     
|                                                                            |  |             |   |      |      |     
|Weighted-average fair value of options and warrants granted during the year |  |             |   | $    | 0.57 |     
|                                                                            |  |             |   |      |      |     

F-29

---

The
following table summarizes information about fixed stock options and warrants outstanding at December 31, 2001.

|Exercise price  |  | Options and
Warrants
Outstanding |  | Weighted
Average
Remaining Life
(years) |  | Weighted
Average
Exercise
Price |      | Number
Exercisable
at 12/31/01 |            | Weighted
Average
Exercise Price
|--------------- |  | -------------------------------- |  | --------------------------------------- |  | ------------------------------- | ---- | ------------------------------ | ---------- | -------------------------------
|$0.27 to $1.00  |  | 15,381,724                       |  | 1.61                                    |  | $                               | 0.60 |                                | 15,177,224 |                                
|$1.13 to $3.00  |  | 3,010,195                        |  | 8.82                                    |  |                                 | 2.60 |                                | 2,810,528  |                                
|$3.06 to $4.94  |  | 6,374,308                        |  | 5.37                                    |  |                                 | 3.84 |                                | 6,226,910  |                                
|$5.06 to $13.88 |  | 3,267,237                        |  | 5.39                                    |  |                                 | 6.75 |                                | 2,875,541  |                                
|                |  |                                  |  |                                         |  |                                 |      |                                |            |                                
|                |  | 28,033,464                       |  | 2.13                                    |  | $                               | 2.27 |                                | 27,090,203 |                                
|                |  |                                  |  |                                         |  |                                 |      |                                |            |                                

2001 Stock option and appreciation rights plan

In September 2001, the shareholders of the Company approved the 2001 Stock Option and Appreciation Rights Plan which provides for the issuance of incentive
stock options, non-qualified stock options and stock appreciation rights (SARs) up to an aggregate of 14,000,000 shares of common stock (subject to adjustment in the event of stock
dividends, stock splits, and other similar events). The price at which shares of common stock covered by the option can be purchased is determined by the Company's Board of Directors or its committee;
however, in the case of incentive stock options the exercise price shall not be less than the fair market value of the Company's common stock on the date the option is granted. There were no options
granted under this plan in 2001.

1997 Recruitment stock option plan

In October 2000, the shareholders of the Company approved an amendment of the 1997 Recruitment Stock Option Plan which provides for the issuance of
incentive stock options, non-qualified stock options and stock appreciation rights (SARs) up to an aggregate of 7,400,000 shares of common stock (subject to adjustment in the event of
stock dividends, stock splits, and other similar events). The price at which shares of common stock covered by the option can be purchased is determined by the Company's Board of Directors; however,
in all instances the exercise price is never less than the fair market value of the Company's common stock on the date the option is granted.

As
of December 31, 2001, there were incentive stock options to purchase 1,746,039 shares of the Company's common stock and non-qualified stock options to purchase
1,136,343 shares of the Company's common stock outstanding. The outstanding options vest over three years at exercise prices of $0.27 to $13.88 per share. Options issued under the plan must be
exercised within ten years of grant and can only be exercised while the option holder is an employee of the Company. The Company has not awarded any SARs under the plan. During 2001, 2000 and
1999, options to purchase 2,600,430, and 439,542 and 126,042 shares of common stock, respectively, were forfeited or expired. There were no exercises during 2001.

Director stock option plan

The Company's Director Stock Option Plan authorizes the grant of stock options to directors of the Company. Options granted under the Plan are
non-qualified stock options exercisable at a price equal to the fair market value per share of common stock on the date of any such grant. Options granted under the Plan are exercisable
not less than six months or more than ten years after the date of grant.

As
of December 31, 2001, options for the purchase of 7,002 shares of common stock at prices ranging from $0.875 to $3.875 per share were outstanding, all of which are exercisable.
In connection

F-30

---

with the adoption of the 1995 Director Plan, the Board of Directors authorized the termination of future grants of options under the plan; however, outstanding options granted under the plan will
continue to be governed by the terms thereof until exercise or expiration of such options. In 2001, no options were exercised.

1995 Director stock option and appreciation rights plan

The 1995 Director Stock Option and Appreciation Rights Plan (the 1995 Director Plan) provides for the issuance of incentive options, non-qualified
options and SARs to directors of the Company up to 250,000 shares of common stock (subject to adjustment in the event of stock dividends, stock splits, and other similar events).

The
1995 Director Plan also provides for the grant of non-qualified options on a discretionary basis to each member of the Board of Directors then serving to purchase 10,000
shares of common stock at an exercise price equal to the fair market value per share of the common stock on that date. Each option is immediately exercisable for a period of ten years from the
date of grant. The Company has 190,000 shares of common stock reserved for issuance under the 1995 Director Plan. As of December 31, 2001, options to purchase 170,000 shares of common stock at
prices ranging from $1.00 to $1.25 per share are outstanding and exercisable. No options were granted or exercised under this plan in 2001, 2000 or 1999.

1995 Employee stock option and appreciation rights plan

The 1995 Employee Stock Option and Appreciation Rights Plan (the 1995 Employee Plan) provides for the issuance of incentive options, non-qualified
options, and SARs.

Directors
of the Company are not eligible to participate in the 1995 Employee Plan. The 1995 Employee Plan provides for the grant of stock options which qualify as incentive stock
options under Section 422 of the Internal Revenue Code, to be issued to officers who are employees and other employees, as well as non-qualified options to be issued to officers,
employees and consultants. In addition, SARs may be granted in conjunction with the grant of incentive options and non-qualified options.

The
1995 Employee Plan provides for the grant of incentive options, non-qualified options and SARs of up to 400,000 shares of common stock (subject to adjustment in the event
of stock dividends, stock splits, and other similar events). To the extent that an incentive option or non-qualified option is not exercised within the period of exercisability specified
therein, it will expire as to the then unexercisable portion. If any incentive option, non-qualified option or SAR terminates prior to exercise thereof and during the duration of the 1995
Employee Plan, the shares of common stock as to which such option or right was not exercised will become available under the 1995 Employee Plan for the grant of additional options or rights to any
eligible employee. The shares of common stock subject to the 1995 Employee Plan may be made available from either authorized but unissued shares, treasury shares or both. The Company has 400,000
shares of common stock reserved for issuance under the 1995 Employee Plan. As of December 31, 2001, options to purchase 145,250 shares of common stock with an exercise price of $3.90 are
outstanding under the 1995 Employee Plan. During 2001, 2000 and 1999, options to purchase 37,500, 3,333 and 45,834, respectively, of common stock were forfeited or expired. No options were exercised
in 2001.

Other warrants and options

In 1996, the Company approved the issuance of 1,750,000 options to executives of the Company, as part of their employment agreements, and 64,000 options to a
consultant. The options expire in 2006 and have an option price of $3.90. In 2000, 250,000 options were exercised. As of December 31, 2001, there remained 1,564,000 options outstanding.

F-31

---

On
July 1, 1996, the Company approved the issuance of options to purchase 1,500,000 and 500,000 shares of common stock to two officers as part of their employment agreements. Each
option has an exercise price of $7.00 per share, vesting in 25% increments in the event that the average closing bid price of a share of the Company's common stock for five consecutive
trading days exceeds $10, $15, $20 and $25, respectively. Each option becomes exercisable (to the extent vested) on June 30, 1997, vested in its entirety on June 30, 2001 and
lapses on June 30, 2002. As of December 31, 2001 there remained 2,000,000 options outstanding.

During
1997, the Company issued options to purchase 1,210,000 shares of common stock (210,000 of which were issued under the 1997 recruitment stock option plan) to consultants at
exercise prices ranging from $4.875 to $8.438 (repriced to $3.90 on December 13, 1998), which was based on the closing price of the stock at the grant date. The fair value of the options issued
was recorded as deferred compensation of $4,757,134 to be amortized over the expected period the services were to be provided. As a result of the repricing, the Company recorded additional deferred
compensation expense totaling $262,200 (of which $21,103 and $44,364 was expensed in 2000 and 1999, respectively), representing the incremental fair value of the repriced options over the original
options. During 2000 and 1999, $279,150, and $852,714, respectively, of the deferred compensation was amortized to expense. All deferred compensation expense related to these options was recorded as
of December 31, 2000. During 2001, 2000 and 1999, options to purchase 0, 91,000 and 16,669, respectively, shares of common
stock expired. During 2000, 169,000 options were exercised. The remaining options must be exercised within ten years of the grant date. As of December 31, 2001 there remained 890,000
options outstanding.

During
1997, the Company issued non-qualified options to purchase 2,295,000 shares of common stock to certain executive employees. The options must be exercised within
ten years of the grant date and have an exercise price of $3.90. There were no options forfeited in 2001 or 2000 and 66,670 were forfeited in 1999. There were 78,000 options exercised in 2000.
No options expired of exercised during 2001. As of December 31, 2001 there remained 2,118,219 options outstanding.

In
1997, the Company issued warrants to an investment group in relation to settlement of certain litigation. As of December 31, 2001 there were outstanding, 87,500 of these
warrants with an exercise price of $2.50 and expire in April 2002.

During
1998, the Company issued non-qualified options to purchase 935,000 shares of common stock to certain executive employees at exercise prices ranging from $2.563 to
$3.125, which price was based on the closing price of the stock at the grant date. The options must be exercised within ten years of the grant date. During 2001, 2000 and 1999, options to
purchase 0, 43,332 and 58,333 shares of common stock, respectively, were forfeited. No options were exercised during 2001. As of December 31, 2001 there remained 809,446 options outstanding.

In
1998 the Company issued warrants in connection with a financing arrangement. As of December 31, 2001, there were 408,000 warrants outstanding with exercise prices from $4.89 to
$5.87. The warrants expire in June 2003.

During
1999, the Company issued non-qualified options to purchase 655,000 shares of common stock to certain executive employees at exercise prices ranging from $2.50 to
$3.563, which price was based on the closing price of the stock at the grant date. The options must be exercised within ten years of the grant date. No options were exercised during 2001.
During 2001, 50,000 of these options were forfeited. During 2000, options to purchase 230,000 shares of common stock were exercised. As of December 31, 2001 there remained 375,000 options
outstanding.

During
1999, the Company issued non-qualified options to purchase 200,000 shares of common stock to a consultant at an exercise price of $3.00, which was based on the closing
price of the stock at the grant date. The fair value of the options issued was recorded as deferred compensation of $300,000

F-32

---

to be amortized over the expected period the services were to be provided. During 2000 and 1999 deferred compensation of $137,500 and $162,500, respectively, was amortized to expense. As of
December 31, 2001 there remained 200,000 options outstanding.

During
2000, the Company issued non-qualified options to purchase 2,585,000 shares of common stock to certain executive employees at exercise prices ranging from $2.75 to
$6.375, which price was based on the closing price of the stock at the grant date. The options must be exercised within ten years of the grant date. During 2001, 1,208,335 of these options were
forfeited. As of December 31, 2001 there remained 1,376,665 options outstanding.

In
June 2001, the Company issued to Counsel Communications (the Company's largest shareholder) 15,000,000 warrants to purchase common stock at $0.60 per share. The grant of the
warrants was associated with the acquisition of WorldxChange (see Notes 6 and 8).

During
2000 the Company obtained approval from its shareholders to establish the 2000 Employee Stock Purchase Plan. This plan allows all eligible employees of the Company to have payroll
withholding of 1 to 15 percent of their wages. The amounts withheld during a calendar quarter are then used to purchase common stock at a 15 percent discount off the lower of the closing
sale price of the Company's stock on the first or last day of each quarter. This plan was approved by the Board of Directors, subject to shareholder approval, and was effective beginning the third
quarter of this year. The Company issued 34,518 and 23,494 shares to employees based upon payroll withholdings during 2001 and 2000, respectively.

Note 16Segment of Business Reporting

The Company's reportable segments are as follows:



F-33

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There
are no material inter-segment revenues. The Company's business is conducted principally in the U.S.; foreign operations are not material. The table below presents information about
net loss and segment assets used by the Company as of and for the year ended December 31:

|                                      |                                 | For the Year Ending December 31, 2001 |            
|------------------------------------- | ------------------------------- | ------------------------------------- | -----------
|
|Revenues from external customers      |                                 | $                                     | 26,624,000 
|Interest revenue                      |                                 |                                       |           
|Interest expense                      |                                 |                                       | 82,000     
|Depreciation and amortization expense |                                 |                                       | 3,758,000  
|Segment income (loss)                 |                                 |                                       | (19,615,000
|Other significant non-cash items:     |                                 |                                       |            
|                                      | Provision for doubtful accounts |                                       |            
|Expenditures for segment assets       |                                 |                                       | 1,181,000  
|Segment assets                        |                                 |                                       | 10,605,000 

|                                      |                                 | For the Year Ending December 31, 2000 |            
|------------------------------------- | ------------------------------- | ------------------------------------- | -----------
|
|Revenues from external customers      |                                 | $                                     | 20,567,000 
|Interest revenue                      |                                 |                                       |           
|Interest expense                      |                                 |                                       | 16,000     
|Depreciation and amortization expense |                                 |                                       | 2,409,000  
|Segment loss                          |                                 |                                       | (10,599,000
|Other significant non-cash items:     |                                 |                                       |            
|                                      | Provision for doubtful accounts |                                       |            
|Expenditures for segment assets       |                                 |                                       | 5,528,000  
|Segment assets                        |                                 |                                       | 15,311,000 

|                                      |                                                        | For the Year Ending December 31, 1999 |           
|------------------------------------- | ------------------------------------------------------ | ------------------------------------- | ----------
|
|Revenues from external customers      |                                                        | $                                     | 26,440,000
|Interest revenue                      |                                                        |                                       |          
|Interest expense                      |                                                        |                                       | 51,000    
|Depreciation and amortization expense |                                                        |                                       | 2,128,000 
|Segment loss                          |                                                        |                                       | (1,818,000
|Other significant non-cash items:     |                                                        |                                       |           
|                                      | Amortization of deferred compensation on stock options |                                       |           
|                                      | Provision for doubtful accounts                        |                                       |           
|Expenditures for segment assets       |                                                        |                                       | 3,191,000 
|Segment assets                        |                                                        |                                       | 8,423,000 

F-34

---

The
following table reconciles reportable segment information to the consolidated financial statements of the Company:

|                                                                    |                                                                            | 2001 |             | 2000       |   | 1999        |           
|------------------------------------------------------------------- | -------------------------------------------------------------------------- | ---- | ----------- | ---------- | - | ----------- | ----------
|Total interest revenue for reportable segments                      |                                                                            | $    |            |            | $ |            |           
|Unallocated interest revenue from corporate accounts                |                                                                            |      | 81,000      |            |   | 487,000     |           
|                                                                    |                                                                            |      |             |            |   |             |           
|                                                                    |                                                                            | $    | 81,000      |            | $ | 487,000     |           
|                                                                    |                                                                            |      |             |            |   |             |           
|Total interest expense for reportable segments                      |                                                                            | $    | 2,581,000   |            | $ | 16,000      |           
|Unallocated amortization of discount on notes payable               |                                                                            |      |            |            |   |            |           
|Unallocated interest expense from related party debt                |                                                                            |      | 1,556,000   |            |   | 1,054,000   |           
|Other unallocated interest expense from corporate debt              |                                                                            |      | 637,000     |            |   | 433,000     |           
|                                                                    |                                                                            |      |             |            |   |             |           
|                                                                    |                                                                            | $    | 4,774,000   |            | $ | 1,503,000   |           
|                                                                    |                                                                            |      |             |            |   |             |           
|Total depreciation and amortization for reportable segments         |                                                                            | $    | 6,170,000   |            | $ | 2,523,000   |           
|Unallocated amortization expense from intangible assets             |                                                                            |      | 2,608,000   |            |   | 2,612,000   |           
|Other unallocated depreciation from corporate assets                |                                                                            |      | 1,389,000   |            |   | 1,264,000   |           
|                                                                    |                                                                            |      |             |            |   |             |           
|                                                                    |                                                                            | $    | 10,167,000  |            | $ | 6,399,000   |           
|                                                                    |                                                                            |      |             |            |   |             |           
|Total segment loss                                                  |                                                                            | $    | (31,931,000 | )          | $ | (7,585,000  | )         
|Unallocated non-cash amounts in consolidated net loss:              |                                                                            |      |             |            |   |             |           
|                                                                    | Amortization of discount on notes payable                                  |      |             | (253,000   | ) |             |          
|                                                                    | Loss on write-off and disposal of certain assets                           |      |             |           |   |             |          
|                                                                    | Litigation settlement expense                                              |      |             |           |   |             | (640,000  
|                                                                    | Gain on sale of subsidiary                                                 |      |             | 589,000    |   |             |          
|                                                                    | Extraordinary gain on extinguishment of debt                               |      |             | 1,093,000  |   |             |          
|                                                                    | Amortization of deferred compensation on stock options issued for services |      |             |           |   |             | (542,000  
|                                                                    | Amortization of intangible assets                                          |      |             | (2,608,000 | ) |             | (2,612,000
|Other corporate expenses                                            |                                                                            |      | (11,387,000 | )          |   | (14,373,000 | )         
|                                                                    |                                                                            |      |             |            |   |             |           
|                                                                    |                                                                            | $    | (44,497,000 | )          | $ | (25,752,000 | )         
|                                                                    |                                                                            |      |             |            |   |             |           
|Total amortization of deferred compensation for reportable segments |                                                                            |      |            |            |   |            |           
|Unallocated amortization of deferred compensation                   |                                                                            |      |            |            | $ | 542,000     |           
|                                                                    |                                                                            |      |             |            |   |             |           
|                                                                    |                                                                            |      |            |            | $ | 542,000     |           
|                                                                    |                                                                            |      |             |            |   |             |           
|Expenditures for segment long-lived assets                          |                                                                            | $    | 15,986,000  |            | $ | 5,536,000   |           
|Other unallocated expenditures for corporate assets                 |                                                                            |      | 93,000      |            |   | 93,000      |           
|                                                                    |                                                                            |      |             |            |   |             |           
|                                                                    |                                                                            | $    | 16,079,000  |            | $ | 5,629,000   |           
|                                                                    |                                                                            |      |             |            |   |             |           
|Segment assets                                                      |                                                                            | $    | 42,948,000  |            | $ | 15,512,000  |           
|Intangible assets not allocated to segments                         |                                                                            |      | 1,331,000   |            |   | 3,939,000   |           
|Furniture, fixtures and equipment not allocated to segments         |                                                                            |      | 495,000     |            |   | 954,000     |           
|Software and information systems not allocated to segments          |                                                                            |      | 432,000     |            |   | 443,000     |           
|Other assets not allocated to segments                              |                                                                            |      | 1,574,000   |            |   | 809,000     |           
|                                                                    |                                                                            |      |             |            |   |             |           
|                                                                    |                                                                            | $    | 46,780,000  |            | $ | 21,657,000  |           
|                                                                    |                                                                            |      |             |            |   |             |           

F-35

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Note 17Summarized Quarterly Data (unaudited)

Following is a summary of the quarterly results of operations for the years ended December 31, 2001 and 2000:

|(in thousands of dollars, except per share amounts)                         |  |           |  | March 31(1) |               | June 30 |   | September 30  |    | December 31 |               
|--------------------------------------------------------------------------- |  | --------- |  | ----------- | ------------- | ------- | - | ------------- | -- | ----------- | --------------
|Net sales:                                                                  |  | 2001
2000 |  | $           | 6,524
10,959  |         | $ | 21,347
7,338  |    | $           | 27,128
5,543  
|Operating loss:(2)                                                          |  | 2001
2000 |  | $           | (6,433
(2,069 | ))      | $ | (2,196
(6,382 | )) | $           | (18,711
(6,786
|Net loss before extraordinary item:(3)                                      |  | 2001
2000 |  | $           | (6,669
(3,836 | ))      | $ | (2,839
(5,899 | )) | $           | (20,503
(6,875
|Net loss:                                                                   |  | 2001
2000 |  | $           | (6,669
(3,836 | ))      | $ | (2,839
(5,899 | )) | $           | (20,503
(6,875
|Basic and diluted income (loss) before extraordinary item per common share: |  | 2001
2000 |  | $           | 0.16
(0.17    | )       | $ | (0.03
(0.25   | )) | $           | (0.18
(0.26   
|Basic and diluted income (loss) per common share:                           |  | 2001
2000 |  | $           | 0.16
(0.17    | )       | $ | (0.03
(0.25   | )) | $           | (0.18
(0.26   

---

As Originally
Reported

Adjustment

As AdjustedRevenues

$
(6,231,338
)
$
(293,127
)
$
(6,524,465
)Operating loss

$
(5,680,258
)
$
(752,836
)
$
(6,433,094
)Net loss

$
(5,916,658
)
$
(752,836
)
$
(6,669,494
)Basic and diluted weighted shares outstanding


47,079,855


6,012,048


53,091,903Net income per common share-basic and diluted

$
0.20

$
(0.04
)
$
.16


---

F-36

---



I-LINK INCORPORATED AND SUBSIDIARIES  SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

|Description                      |                   | Balance at
Beginning
of Period |           | Charged to
Costs and
Expenses |           | Deductions(a) |           | Balance at
End of
Period
|-------------------------------- | ----------------- | ------------------------------ | --------- | ----------------------------- | --------- | ------------- | --------- | ------------------------
|Allowance for doubtful accounts: |                   |                                |           |                               |           |               |           |                         
|                                 | December 31, 1999 |                                | 1,941,000 |                               | 3,703,077 |               | 3,855,077 |                         
|                                 | December 31, 2000 |                                | 1,789,000 |                               | 113,168   |               | 1,801,503 |                         
|                                 | December 31, 2001 |                                | 100,665   |                               | 4,066,690 |               | 2,304,367 |                         

---

S-1

---



SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on our behalf by the
undersigned, hereunto duly authorized.

|                      |  | I-LINK INCORPORATED
(REGISTRANT)
|--------------------- |  | --------------------------------
|DATED: APRIL 12, 2002 |  | By:                             

In
accordance with Section 13 of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

|Signature                                   |  | Title                                                       |  | Date          
|------------------------------------------- |  | ----------------------------------------------------------- |  | --------------
|                                            |  |                                                             |  |               
|/s/ALLAN C. SILBERAllan C. Silber           |  | Chairman of the Board and Director                          |  | April 12, 2002
|/s/HELEN SELTZERHelen Seltzer               |  | Helen Seltzer President, Chief Executive Officer            |  | April 12, 2002
|/s/JAMES A. GIAUQUE IIIJames A. Giauque III |  | Chief Accounting Officer and acting chief financial officer |  | April 12, 2002
|/s/HENRY Y. L. TOHHenry Y.L. Toh            |  | Director                                                    |  | April 12, 2002
|                                            |  |                                                             |  |               

2

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|/s/HAL B. HEATONHal B. Heaton         |  | Director                                                        |  | April 12, 2002
|------------------------------------- |  | --------------------------------------------------------------- |  | --------------
|/s/GARY J. WASSERSONGary J. Wasserson |  | Director, President and Chief Executive Officer of WorldxChange |  | April 12, 2002
|/s/SAMUEL L. SHIMERSamuel L. Shimer   |  | Director                                                        |  | April 12, 2002
|/s/NORMAN CHIRITENorman Chirite       |  | Director                                                        |  | April 12, 2002
|Albert Reichmann                      |  | Director                                                        |  |               

3

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