UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                  Form 10-KSB/A
                                 Amendment No. 1


[ X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934
          For the fiscal year ended:    December 31, 1999
                                    ---------------------

[ ]       TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934
          For the transition period from ______________ to _____________

                       Commission file number: 000-27669


                              ePHONE Telecom, Inc.
                              (formerly IFB Corp.)
                 ----------------------------------------------
                 (Name of Small Business Issuer in its charter)

          Florida                                         98-0204749
-------------------------------                ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

  Suite 1000, 355 Burrard Street Vancouver,           B.C., Canada  V6C 2G8
--------------------------------------------         ----------------------
(Address of principal executive offices)                    (Zip Code)

Issuer's telephone number: (604) 482-6166
                           --------------

Securities to be registered pursuant to Section 12(b) of the Act:

     Title of each class:             Name of each exchange on which registered:
------------------------------        ------------------------------------------
Common shares $0.001 par value                           None

Securities to be registered under Section 12 (g) of the Act:

(Title of Class)                Name of each exchange on which registered
----------------               -------------------------------------------
      None                                        None


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. [X ] Yes [ ] No

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

The issuer did not have revenues for its most recent fiscal year.

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates  was approximately  $10,560,000 as of December 31, 1999 (based on
the average bid and asked price of such common equity).

The issuer has not been involved in a bankruptcy proceeding during the past five
years.

As of December 31, 1999 there were 12,000,000 shares of the registrant's  common
stock, par value .001 per share outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Not applicable.

Transitional Small Business Disclosure Format (Check one): Yes ____; No _X_




<PAGE>


                                Table of Contents

PART I.........................................................................3
   Item 1.   DESCRIPTION OF BUSINESS...........................................3
   Item 2.   DESCRIPTION OF PROPERTY..........................................16
   Item 3.   LEGAL PROCEEDINGS................................................16
   Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............16

PART II.......................................................................16
   Item 5.   MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.........16
   Item 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........18
   Item 7.   FINANCIAL STATEMENTS.............................................20
   Item 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
             ACCOUNTING AND FINANCIAL DISCLOSURE..............................21

PART III......................................................................21
   Item 9.   DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS..21
   Item 10.  EXECUTIVE COMPENSATION...........................................23
   Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...24
   Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................25
   Item 13.  EXHIBITS AND REPORTS ON FORM 8K..................................27

SIGNATURES....................................................................28

Supplemental  information to be furnished With Reports Filed
Pursuant to Section 15(d) of the Exchange Act by Non-reporting Issuers........29

EPhone Telecom Inc. - Financial Statements as of December 31, 1999............30



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<PAGE>


Outlook and Uncertainties

Certain information in this Report contains "forward-looking  statements" within
the meaning of Section 21E of the  Securities  Exchange Act of 1934, as amended.
All statements  other than  statements of historical  fact are  "forward-looking
statements"  for purposes of these  provisions,  including  any  projections  of
earnings,  revenues or other  financial  items,  any statements of the plans and
objectives  of  management  for future  operations,  any  statements  concerning
proposed new products or services,  any  statements  regarding  future  economic
conditions or  performance,  and any statement of assumptions  underlying any of
the foregoing.  In some cases,  forward-looking  statements can be identified by
the use of terminology such as "may", "will", "expects", "plans", "anticipates",
"estimates",  "potential",  or  "continue",  or the  negative  thereof  or other
comparable  terminology.   Although  ePhone  Telecom,  Inc.  believes  that  the
expectations reflected in its forward-looking  statements are reasonable, it can
give  no  assurance  that  such  expectations  or  any  of  its  forward-looking
statements will prove to be correct,  and actual results could differ materially
from those projected or assumed in these forward-looking statements.

                                     PART I

Item 1.  DESCRIPTION OF BUSINESS

A.       Business Development

ePHONE Telecom,  Inc. (the "Company") has not been in business for 3 years.  The
development  of the business of the Company as described  below was  essentially
commenced as of November,  1998.  From the date of the  Company's  incorporation
until November,  1998 the Company did no business and made no attempt to develop
any business.  From November,  1998 until December 31, 1999, the Company has not
been in  business  and  has  focused  its  efforts  on the  review  of  business
opportunities and, ultimately, the development of the business described below.

The  Company  does not  have a  predecessor  nor has  there  been  any  material
reclassification  of its  business  or any  purchase  of any  assets  not in the
ordinary course of business.

The  Company  was  incorporated  pursuant  to the laws of the State of  Florida,
U.S.A.,  effective May 3, 1996, as IRA Fund Brokers Corp.,  and changed its name
to IFB Corp. on April 6, 1998. On March 22, 1999, IFB Corp.  changed its name to
ePHONE Telecom Inc.

B.       Business of the Company

The Company's vision is to become a global telecommunications  carrier providing
a full  complement  of  telecommunications  services,  including  phone-to-phone
one-step dialing, using Voice over Internet Protocol ("VoIP") technology.

Using  a call  origination  approach  that  involves  its own  Customer  Premise
Equipment  ("CPE"),  and a combination  of its own dedicated  Internet  Protocol
("IP") network,  the public Internet and the public switched  telephone  network
("PSTN"),  the Company  plans to develop the  capacity to provide  voice and fax
transmission and other telephony features at high quality and low cost.

                                       3
<PAGE>

The  Company  believes  that the  combination  of its CPE device,  gateways  and
guaranteed   bandwidth   network  could  represent  a  significant   competitive
advantage.  The Company's  service does not require  two-step dialing or require
that the other party have a CPE device.  The Company's  UUNET IP network  should
guarantee the necessary bandwidth to provide the contemplated telecommunications
services and enhance the quality of these services.  Customer testing  conducted
with potential distributors indicates that the CPE device, working together with
the gateways and IP network, represents a very attractive solution. Furthermore,
the CPE device is priced very  competitively and the cost will go down as volume
increases.  The Company  intends to make the CPE devices  available  free to all
qualified customers, further enhancing the Company's competitive advantage.

On October 22, 1999 the Company  signed an Agreement  in  Principle  with Saigon
Post &  Telecommunications  Corporation  ("SPT"),  of Ho Chi Minh City (formerly
Saigon), Vietnam. The Agreement in Principle provides for the Company and SPT to
jointly  develop  and  operate a series of WLL  networks in the region of Ho Chi
Minh City.  The  Company  and SPT agreed to conduct a  technical  and  financial
feasibility  study for the Project.  Further,  if the outcome of the feasibility
study is positive a Business Cooperation Contract is to be negotiated and signed
between the parties - to effectively create a joint venture between them for the
management  and  operation of the Project.  While the  Agreement in Principle is
still in effect the Company is not actively working on the feasibility  study at
this point - and would not expect to do so in any event until further funding is
received  from  which the costs of the study  could be paid.  Management  of the
Company  is unsure at this date as to whether  or not it will  proceed  with the
Agreement in Principle.

C.       Approach - Network, Services and Access

The   development  of  IP  telephony  as  a  viable   technology  for  providing
telecommunications  services is significant not only because of the reduction in
costs  that it  allows,  but  also  because  of the  enhanced  services  that it
facilitates.  Unlike legacy telecommunication  systems, which are currently used
by most providers of telecommunications services, IP telephony systems are open,
allowing the integration of numerous services on a single platform.

The Company  plans to offer a wide range of  telecommunications  services to end
users  throughout  the world.  The  fundamental  service  that the Company  will
provide is the ability to reduce  telecommunications costs through the use of IP
telephony  technology.  In order to  provide  such  services  economically,  the
Company is required to deploy a worldwide IP network that will be used to handle
calls.  The Company  network will handle long distance  traffic,  both for calls
between  customers  using  the  Company's  network,  and for calls  between  the
Company's  customers and the larger population  connected to the public switched
telephone network (PSTN).

Companies such as ITXC, iBasis, and Net2Phone have demonstrated the viability of
selling long distance  telephone service carried using IP telephony  technology.
However, the Company's plans to offer significantly  differentiated products and
services.  There are two broad  categories in which the Company will innovate to
deliver services that are more compelling than the straightforward long distance
calling  services  being  offered  currently  by IP  telephony  carriers.  These
categories are:

1.       Enhanced services.  Through  integration of IP Telephony products based
         on open standards,  as well as through integration of the Company-owned
         technology and expertise with such products, the Company will provide a
         significantly  greater  depth of services  beyond  simple long distance
         calling.  Furthermore,  enhanced  services  such as toll  free,  remote
         exchange number,  online billing and  verification,  and others will be
         provided by the Company  from the  flexible  switches  that make up the
         Company's network.

                                       4
<PAGE>

2.       Access technology.  At present, the only means provided by IP telephony
         carriers to access  their  networks,  is an access  number that must be
         manually  dialed.  While  companies  using IP telephony  products enjoy
         one-stage  dialing,  they are  required to deploy their own networks in
         order to do so, and as a result,  can typically only call between areas
         where they have physical offices.  The Company, in conjunction with its
         partners,  has  arranged  for  several  access  devices  to be  used in
         addition to the normal PSTN-based access methods.  These devices should
         allow the Company to deliver services targeted  specifically at certain
         sizes of business, in a manner that is effective and efficient both for
         the Company and for the Company's customers.

The Company's approach has three components:

o        Build a flexible and reliable IP telephony based network;
o        Deliver a range of innovative services using that network; and
o        Provide  a wide  range of access  devices  for  interaction  with those
         services,  scaling  from  home  users with a single  telephone  line to
         corporations with sophisticated PBXs.

Each one of these three major  components  of the  Company's  plan is elaborated
upon in the sections that follow.  Each section  explains the key aspects of the
component,  the specific  capabilities that the component will provide,  and the
technology that the Company expects will be involved in creating that component.

C.1     The Company's Network

Central to the Company's  ability to provide  products and services to end-users
will be the  network  that will enable  service to be  provided.  The  Company's
network  will be deployed  worldwide,  and will  consist of the  following  main
elements:

         1.       A high  quality IP backbone  used to carry  telecommunications
                  traffic, and to link nodes in the Company's network.

         2.       Nodes in the Company's  network that  interface with end-users
                  and provide the actual  services to be offered by the Company.
                  These nodes will be referred to as the Company's switches.

         3.       The  Company's  network  operations  center  (NOC).  From this
                  centralized  point of command,  the Company's  technical staff
                  will use their best efforts to ensure uninterrupted  operation
                  of the Company's network and services.  The Company's NOC will
                  also serve as a collection point for billing  information used
                  in invoicing for services rendered.

         4.       Access  devices used by the Company's  users to interface with
                  the Company's network.

Since  access  devices are a key  element of the  Company's  plan,  they will be
discussed in a separate section below.  The remainder of this section  describes
each of the other components of the Company's network.

                                       5
<PAGE>

C.1.1    The Company's IP Backbone

In order to deliver high quality voice  services with quality that is comparable
to traditional public telephone services, the Company requires a high quality IP
backbone to carry traffic between the Company switches.

Because of the necessary level of capital involved,  it is not practical for the
Company to deploy its own high  quality IP backbone.  At the same time,  quality
requirements  dictate  that the  public  Internet  cannot be used  directly.  To
address  this,  the  Company  has  entered  into  a   relationship   with  UUNET
Technologies Inc. (UUNET) as the backbone provider for its worldwide IP network.
UUNET  will  provide  guarantees  on the level of  performance  required  by the
Company  in  delivering  its  services  successfully.  Since  this  relationship
leverages  UUNET's high quality  worldwide IP network used in providing  UUNET's
Internet service,  but without using public unmanaged  Internet routers to carry
traffic,  the  result  is  expected  to be a  dependable  level  of  quality  at
reasonable cost.

Because of the  structure  of the  Company's  switches,  it is possible  for the
Company to add a dedicated  point-to-point  connection between two major hubs if
the  volume of  traffic  demands  greater  bandwidth  than  UUNET is  capable of
providing.  This  strategy  also should  allow the  Company to deploy  points of
presence  (POPs) into areas in which UUNET is not able to provide the  requisite
level of service.

C.1.2    The Company's Switches

In each region where the Company's establishes a presence, a Company switch will
be deployed.  Each switch will  interface to the IP Backbone in order to provide
the numerous  services that the Company intends to offer.  The key components of
each the Company's switches will be the following:

         1.       Network  routers  used to connect the switch as a whole to the
                  IP backbone.  These routers will allow access to the Company's
                  IP  backbone  by any  device  that is  part  of the  Company's
                  switch. Such devices include gateways,  uninterruptible  power
                  supplies ("UPSs"),  and other  sub-components of the Company's
                  switch.

         2.       PSTN/IP gateway that serves as the interface between the local
                  PSTN (or other  traditional  telecommunications  provider) and
                  the  Company's  IP  backbone.  This VOIP gateway is the bridge
                  between  the  Company's   network  and  the  existing   public
                  telephone network.

         3.       Application servers used to deliver actual services to the end
                  user. Much like a web server, application servers will be used
                  to host the applications  that end-users  interact with. Since
                  VOIP   gateways   may  be  embedded   devices   with   limited
                  capabilities in terms of providing  sophisticated services, it
                  is  necessary  to deliver the  applications  through  PC-based
                  application servers.

         4.       Uninterruptible Power Supplies (UPSs). It is intended that the
                  Company's switches will have sufficient UPS capacity to ensure
                  that brownouts and other short-term  power  disruptions do not
                  affect the operation of the Company's network. In the event of
                  a  long-term  failure,  the UPS will  allow the  failure to be
                  notified  to the  Company's  NOC  (described  below),  so that
                  traffic can be routed around the affected area if necessary.

The Company proposes to deploy 300 POPs throughout the world over the next three
years. These switches will be strategically  located,  and deployed initially to
key telecommunications  hubs. It is expected that with a relatively small number
of the  Company's  switches  in these key  areas,  the  Company  will be able to
provide  competitive rates worldwide by terminating each call partially over the
Company's network, with the final portion of a call occurring on the PSTN.

                                       6
<PAGE>

C.1.3     The Company's Network Operations Center (NOC)

The NOC  will  be the  centralized  command  center  from  which  the  Company's
technical staff will manage the various components of the Company's network,  as
well as the services being  provided.  The NOC will be staffed 24 hours a day, 7
days a week.  The NOC,  which will be connected to the  Company's  network via a
high-speed dedicated IP connection, will provide the following services:

         1.       Real-time  collection of call detail record (CDR)  information
                  from all the Company's switches.

         2.       Consolidation  of all  billing  information  collected  by the
                  Company's switches located throughout the network.

         3.       Back  office  functions  such as  account  setup,  management,
                  termination, billing.

         4.       IP network monitoring, to ensure, to the extent possible, that
                  the IP backbone delivers consistently high quality performance
                  and results.

         5.       Monitoring of each switch in the  Company's  network to ensure
                  availability.   Such   monitoring   will  not  be  limited  to
                  monitoring on the IP network; additional steps may be taken to
                  ensure PSTN availability of a given the Company's switch.

         6.       Deployment of new services to the Company's switches.

         7.       Bandwidth  monitoring and planning activities to determine the
                  appropriate  timing  and  structure  of  improvements  to  the
                  Company's network infrastructure.

         8.       Co-ordination of the deployment of new Company  switches,  and
                  extensions  of  the  Company's  IP  backbone  to  include  new
                  regions.

It is likely that several  other  services will be required of the Company's NOC
with regards to specific services being offered by the Company.  For example,  a
toll free  service  might  require the NOC to interface  with PSTN  providers to
ensure the correct toll free setup.  The proposed  location of the NOC is in the
State of Virginia.

C.2       Services Planned to be Offered by the Company

C.2.1     One-Stage Calling


The  fundamental service that ePHONE will offer through the Company network is a
one-stage calling service. This service will allow businesses and individuals to
direct their  long-distance  traffic via the Company's network.  Initially,  the
Company will provide one-stage calling through access devices such as dialers.


The one-stage  calling service offered by the Company will differ  significantly
from offerings from other providers.  First, by providing a wide range of access
devices (described below), the Company will be able to offer its services to the
following markets.

         o        Large  businesses with  pre-existing  PBXs, which require many
                  lines  of  long  distance   connectivity  and  have  dedicated
                  Internet access;

                                       7
<PAGE>

         o        Small and medium  business that may or may not have a PBX, and
                  may require one to four lines of long distance connectivity;

         o        Small businesses and home offices that require only one or two
                  lines of connectivity,  and which may not have Internet access
                  of any sort.

Secondly,  the Company will offer innovative pricing plans for this product. The
one-stage calling service will support multiple pricing models so that different
pricing models can be used in different areas, and so that future pricing models
can be added later without disrupting  existing pricing models.  This allows for
one-time promotional offers, better pricing plans for early users of the system,
and so forth.

Pricing for the one-stage  calling plan will be  characterized  by an ability to
offer differentiated  pricing for on-net calls (which originate and terminate on
the Company's  network) and off-net calls (which are originated by the Company's
customers but are made to non- Company's  customers).  The ability to offer such
differentiated  pricing  plans is an  important  part of the  one-stage  calling
service.

C.2.2      Toll Free

Toll Free services  provided by traditional  carriers  allows an organization to
have calls to its toll free number directed to the service center closest to the
person  making  the call.  With such toll free  services,  the  organization  is
responsible  for paying  both the fee for having the toll free  number,  and the
long distance portion of every call placed to that long distance number.

With the Company's  network nodes located at strategic  communication  hubs, the
Company will be able to lower the cost of toll free services to the end user. By
directing  toll free  traffic to a  customer's  toll free  number to the nearest
Company  switch,  and  carrying the long  distance  portion of the call over the
Company's  network,  the long  distance  portion  of toll free  charges  will be
reduced  significantly.  By taking advantage of intelligent routing capabilities
on the Company's  switches,  such toll free services can be provided without any
additional  hardware or infrastructure  investments.  Calls to a customer's toll
free  numbers  would be  recognized  by the  Company's  switches  and  forwarded
directly to the customer office. This routing of calls can additionally be based
on time of day,  allowing  calls at different  times to be directed to different
service centers.

C.2.3     Prepaid Calling Cards

Prepaid  calling  card  services  represent a  significant  opportunity  for the
Company's network. By leveraging the intelligence in each switch, it is possible
for the Company to offer a full-prepaid calling card service, with prepaid calls
terminated by the  Company's  network.  Since each Company  switch is capable of
providing interactive voice response ("IVR"),  balance announcements,  real-time
billing with automatic cutoff and other key features, no additional  investments
are required in order to use the Company's  network to provide  prepaid  calling
card services.

C.2.4    Customized Online Billing

Because the Company's network is built on Internet Protocol (IP) technology,  it
is able to deliver transactional and e-commerce  applications identical to those
used by Web-based  retailers.  Since all the Company's  switches collect billing
information in real-time,  with immediate transmission of billing information to
the NOC, the Company will be able to provide online services allowing a customer
to review their bills,  sign up for new plans and  services,  or make changes to
existing  services.  The ability to offer up to date information at all times is
an enhanced  service,  that the Company  believes  is not  presently  offered by
existing  telecommunications  service providers.  This service will also provide
immediate  feedback to end users of the benefits and savings they enjoy  through
the use of the Company's network.

                                       8
<PAGE>

C.2.5     Foreign Exchange Numbers

  The Company  will have  switches in a number of key calling  areas.  This will
permit the  Company to obtain,  at low cost,  local  telephone  numbers in those
areas, and to have those telephone  numbers directed at the Company's  switches.
Because of the intelligent routing capability of the Company's  switches,  it is
then possible to forward calls to these numbers to alternate final destinations.
This allows the Company to offer its customers  local  telephone  numbers in any
region covered by the Company's network.  For example, the Company could provide
a customer  located in Paris with a local telephone  number in New York. As with
toll free and prepaid calling card services,  this can be  accomplished  without
any  additional  investment in equipment and  infrastructure.  Furthermore,  the
Company  can  combine   this  service  with  the  toll  free  service  to  offer
international customers a North America wide toll free number that directs calls
to their international offices.

C.3       Access Methods

The Company  believes that another key to the success of the  Company's  network
will be the  ability  to  provide  access to the  network  in a  convenient  and
efficient  way.  Many IP  telephony  operators  today  restrict  access to their
services to two-stage PSTN access,  effectively  creating a situation where only
certain home consumers will be willing to use their services. In order to target
a broader  market,  the Company  will  support a range of access  methods to the
network. The initial access methods are listed below. Access methods that may be
added a later time (such as 1010XXX, 1+ access) are not described.

C.3.1     PSTN Access

Traditional  PSTN access  methods,  which  involve  calling an access number and
entering  information such as a personal  identification  number and a number to
call will be supported by the Company's  switches.  This access method is widely
used,  particularly  for prepaid  calling  cards,  and requires no investment in
order to provide a particular  customer  with  service.  Since all the Company's
switches will support this  capability  inherently,  there is no cost associated
with supporting PSTN access.

 C.3.2    CPE Gateway - Embedded

The  embedded  customer  premises  equipment  (CPE)  Gateway  model  focuses  on
delivering direct IP-based access to the Company's network, allowing lower costs
(since only one Company switch is required, instead of two for PSTN access) that
can be passed on to the user.  The model being used  successfully  by  Net2Phone
involves  this type of  access;  however,  in the case of  Net2Phone,  a PC with
speakers  and a  microphone  must be used to  make a call.  By  comparison,  the
Company's  embedded CPE gateways will allow one-stage dialing from a traditional
analog telephone, or from a PBX, by acting as a trunk line for the outbound PBX.

Where a  customer  does  not  have a PBX,  or does  not  wish to make use of the
services of the Company's  network from behind a PBX, the customer  connects the
embedded  CPE  gateway  to the  Internet  on one side,  and to a regular  analog
telephone on the other. Two versions of Internet  connectivity  are planned,  an
Ethernet  version,  in  which  the  customer  makes  use of their  existing  LAN
connection  to the  Internet,  and a dialup  version,  in which the embedded CPE
gateway manages a direct connection to the Internet.  In the dialup version, the
embedded CPE gateway can establish and terminate the  connection to the Internet
as is  required.  Furthermore,  the  embedded  CPE  gateway  allows  calls to be
received over the Internet from the  Company's  network,  and for those calls to
ring the attached phones. This capability allows calls to be received from other
the  Company's  customers  or from remote  exchange  numbers / toll free numbers
being provided by the Company's network.

                                       9
<PAGE>

Where a customer does have a PBX, the Company's  embedded CPE gateways integrate
on the line side of the PBX, emulating one or more analog trunks.  Through least
cost routing (LCR)  functions and line  grouping  functions  found in all modern
PBXs, it is possible for the customer to direct their long  distance  traffic to
the Company's network.  In order to do this, the PBX is programmed to route some
or all calls to the group of lines  attached to the embedded  CPE gateway.  This
configuration also facilitates inbound calls, as the PBX will handle them in the
same way as calls received directly over the PSTN.

 C.3.3    CPE Gateway - Complete

While significant  functionality can be provided by embedded CPE gateways, there
are some  restrictions  to the  applications  and scale that can be  effectively
handled with an embedded solution.  Typically,  embedded gateways do not provide
the ability to deploy  applications,  and as such, all traffic must be routed to
alternate  locations  for  services  such as IVR and  routing.  The embedded CPE
gateways  selected by the Company  have these  restrictions,  and are  justified
given  that the  Company's  goal with the  embedded  CPE  gateways  is to have a
simple,   small,   inexpensive   solution  that  does  not  require  significant
investment.

However,  some  customers  are  expected  to  require  larger  systems,  digital
connectivity, integrated applications, and other such capabilities. For example,
a large  corporation with multiple offices may want to use their existing WAN to
carry traffic  between nodes,  but to have all long distance  traffic handled by
the  Company  network.  It might  additionally  want to provide a service to its
employees to be able to dial in remotely and  originate  calls using the Company
network at  reduced  prices.  Such  applications  demand a  complete  IP gateway
solution.  Although  complete  IP gateway  solutions  may be  available  through
embedded  devices,  providing such services normally is challenging for a purely
embedded  device.  To meet the needs of  sophisticated  customers,  the  Company
intends to use a combination of embedded technology and PC servers,  deployed at
the customer site.

These  complete  gateways  will  provide  to the  customer  all of the  benefits
described  for the embedded CPE gateway.  In  addition,  such  gateways  will be
capable of managing  restrictions  on individual  users of the system,  flexible
routing,  and will support other applications that the Company may wish to offer
to the customer in the future.  Complete Company CPE gateways will be capable of
handling up to 120 ports of connectivity to the Company's network, ensuring that
the requirements of even the largest customers can be handled successfully.

C.3.4     Automated Dialers

In many cases, the target companies for the Company's  network may not even have
an IP network  connection,  nor may they be inclined  to obtain one.  While such
customers  can use PSTN access  numbers to access the  services  provided by the
Company's network,  the Company's will provide automated dialers,  also referred
to as  autodialers,  to provide  one-stage  access to the Company's  network and
services.

The  autodialer  will provide the user with a dial tone,  and is  pre-programmed
with access numbers, user IDs, and other information that is necessary to access
the Company's services.  During the dialing process, the autodialer will connect
to the nearest  Company  switch,  and supply the necessary  information  for the
Company's  switch to deliver the desired service to the end user. The autodialer
may  even  be  capable  of  routing  around  the  Company's  switches  that  are
experiencing  problems,  guaranteeing a prospective  Company's  customer that no
service disruption will be possible.

                                       10
<PAGE>

Since autodialers are relatively  inexpensive,  this approach allows the Company
to provide  the  benefits of  one-stage  access to smaller  organizations  whose
traffic does not justify the cost  involved in  deploying  either an embedded or
complete CPE gateway.

D.        Suppliers

A significant  amount of  technology  will be required to create the network and
deliver  services  to  end-users.  Although  the  Company  will have to have the
technical expertise to create some systems, the Company's strategy is to partner
with other  companies  that  provide the  required  technology  and can meet the
Company's  requirements.  A list of the partners and suppliers  that the Company
intends to use are listed as follows.

D.1     Array Telecom Corp. of Herndon, Virginia, U.S.A.

Array  Telecom  Corp  (Array) has been  selected as the  provider of both the IP
gateway and application technology used to operate the Company switches, as well
as the provider of complete  CPE-based  gateways.  Array will supply the initial
equipment  required  to build the  Company  network.  To date,  the  Company has
ordered the billing software and server, and the first 3 gateways, to be located
respectively in Rotterdam,  The Netherlands,  Herndon,  Virginia, and Hong Kong,
during the first quarter of 2000.  The Company has also ordered two  low-density
gateways for testing purposes.

Array products are built on standard off-the-shelf PC hardware technology.  This
is significant since alternate PC hardware can be selected in the case where the
default  hardware  platform  provided  by  Array is not  certified  for use in a
particular environment.

D.2     Infozech


Infozech,  based in  India,  provides  a billing  system  for IP  gateways.  The
Infozech  system  was  found  to  provide  sufficient  capabilities  to meet the
Company's  requirements.  Additionally,  it has been determined that Infozech is
willing to customize  its products in order to meet specific  requirements.  The
main reason for the  selection of Infozech as a provider of billing  software is
that Infozech has  integrated  their billing  software with Array's  Series 3000
products.  The Company does not have an agreement with Infozech and  proposes to
purchase software programs as it needs them at prices to be negotiated from time
to time.


D.3     TEK DigiTel

TEK  DigiTel  has been  selected as the  manufacturer  of  embedded  CPE gateway
devices.  TEK DigiTel  manufactures  a product  named the V-Server  iGate.  This
product is a two-port embedded  gateway,  with support for H.323 and proprietary
network protocols.  On the telephony side, the TEK DigiTel product supports both
analog  trunk and analog  station  interfaces,  and  provides two ports (both of
which can either be a station port or a trunk port,  simply by connecting to the
appropriate  port).  TEK  DigiTel  indicates  that  larger  capacity  boxes  are
currently being developed and tested.

For the  connection  to the IP network,  TEK DigiTel  provides two  options:  an
Ethernet  + ISDN BRI  interface  which  allows the TEK  DigiTel  box to act as a
router of traffic between the Internet and local LAN, as well as a Dual Ethernet
version.  The V-Server iGate is priced  reasonably and provides the capabilities
not found in many of the competing products.

                                       11
<PAGE>

The Company has  contracted  Array to perform  interoperability  and  functional
testing on the TEK DigiTel V-Server iGate products.  The testing revolves around
interoperability of the 2 port CPE devices with the Array gateways,  Array large
CPE devices, and with the Infozech billing software.  The results of these tests
indicate that the above technologies are interoperable with one another, as well
as with the Company's  billing  software.  Further testing is underway to verify
the ISDN wakeup features described above.

D.4     UUNET Technologies Inc.

A high quality IP data network is critical for the Company.  UUNET  Technologies
has been selected as the provider of this IP data network.  The Company  intends
to install its switches at UUNET  facilities  around the world.  This allows the
Company to rapidly  deploy  nodes in its network  without  having to arrange for
physical  facilities  to house the  equipment.  A  30-port  Company  switch  was
installed in UUNET's site in Rotterdam, The Netherlands in February 2000.

 D.5    Lampus Inc.

Lampus, a Korean company,  is a manufacturer of automated dialers,  and has been
selected  by the  Company to supply  the  dialers  used to access the  Company's
network services. The reason for the selection is that interoperability  between
Lampus  dialers and the Series 3000 software has  previously  been  established.
Other Array  customers are currently using the Lampus dialers  successfully.  An
adapter-powered model and its configuration are shown below.

 D.6    Other Suppliers

The above  sections  described  the  suppliers of key pieces of equipment in the
Company's  network,  and did not deal with  commodity  items  such as  monitors,
keyboards,  etc.  However,  the Company expects to use the following  additional
suppliers.  No specific  agreements have been negotiated with these suppliers as
of yet.

Cisco  Systems - Routers  interconnecting  the  Company's  switches and UUNET IP
network. This may only be necessary in nodes where co-location is not possible.

American Power Conversion Corp - Uninterrupted power supply manufacturer.


E        Main Competitors

We expect  to face  competition  from  larger  international  telecommunications
carriers  such as AT&T Corp.  and Internet  service  providers  (ISPs) and other
Internet  companies such as America Online,  Inc. and Yahoo,  Inc. Many of these
potential  competitors have substantially  greater financial and other resources
than we do. In addition,  consolidation of telecommunications  companies and the
formation of strategic  alliances  within the  telecommunications  industry will
give rise to significant new competitors.

For the present, the following are the main competitors known to the Company:

                                       12
<PAGE>

 E.1     The Internet Telephone eXchange Carrier (ITXC)

ITXC will be a major competitor.  ITXC is a clearinghouse for Internet telephony
service providers and operates ITXC.net. Since April of 1998, ITXC has been used
to provide traditional carriers  international call completion with quality good
enough for these carriers to serve their phone-to-phone  customers. ITXC has, as
of January 2000, reportedly installed 167 POPs in 45 countries,  and 101 cities.
The company adds between 5-9 POPs a month.

 E.2     iBasis

iBasis,  Inc. was founded in 1996 to provide  Internet  Protocol (IP)  telephony
service to  telecommunication  carriers  around the globe.  The company has POPs
across Asia, Europe,  the Middle East, and the Americas.  iBasis is in wholesale
Internet telephony service.

E.3     Glocalnet.

Glocalnet  is  a  next-generation   telecommunications  group  headquartered  in
Stockholm, Sweden.

E.4     Net2Phone

Net2Phone began as a subsidiary of IDT  Corporation,  and is a provider of voice
over public Internet communications services. Net2Phone enables its customers to
place telephone calls from their computers,  telephones,  or fax machines to any
telephone or fax machine in the world. By routing calls via the public Internet,
Net2Phone  enables  users  to save  money on their  international  phone  rates.
Net2Phone  develops its own Gateway  technology for IP voice services offered by
the company.

Recognized  as the  company  who first  bridged  the  Internet  with the  public
switched  telephone  network,  Net2Phone routes millions of minutes monthly over
the public Internet.  According to a recent study by Frost & Sullivan, Net2Phone
leads the Internet telephony services industry with 30% market share.

Net2Phone's product offerings include PC-to-phone  service, IP telephony service
for phone or fax and Real-time PC-to-fax solution. Its network currently reaches
30 countries and expects to be operational in 25 additional countries by the end
of 2000.

 E.5     DeltaThree.com

Founded in 1996,  DeltaThree.com manages a network dedicated to the transmission
of voice over IP. Its services include  PC-to-phone,  unified messaging,  global
access   calling  cards,   voice   greetings   accessible   from  the  company's
communications  portal.  Deltathree.com  currently  operates  a  network  of  37
international POPs.  DeltaThree.com is a subsidiary of RSL Communications  Ltd.,
an international facilities-based carrier.

Deltathree.com  operates a managed  network.  According to Frost and  Sullivan's
recent  study,  Deltathree.com  routes  17% of all  Internet  telephony  traffic
worldwide.

F        Partnership Program

A key element in the Company's overall strategy is its Partnership  Program. The
Company's Partnership Program is designed to facilitate the rapid deployment and
sales of the Company's services with a minimum of capital investment on the part
of the Company. There are three elements to the Company's Partnership Program:

                                       13
<PAGE>

o        Strategic Partner Program
o        Sales Partner Program
o        Technical Partner Program

Each one of these  three  programs  is  described  in the  sections  below.  The
consolidation  of these  programs  makes up the  overall  Company's  Partnership
Program.

F.1     Strategic Partner Program


The  distribution  partner  program  focuses  on  the  rapid  deployment  of the
Company's  network.  The  program is  designed  to allow  interested  parties to
participate in the deployment of the Company's network by providing capital used
to locate an the  Company's  switch in a given area (each "AP Area").  Once that
switch is deployed,  the Company's  Strategic Partner then performs marketing of
the Company's  services in the AP Area,  taking a share of any profits generated
by that the Company's switch.


The responsibilities of a Strategic Partner are as follows:


o          Provide initial capital required in the creation of a Company POP for
           the AP Area.  Prior to  approval,  the  Company  will  determine  the
           viability of the proposed location,  and reserves the right to reject
           any locations that are deemed unsuitable.  It is currently  estimated
           that the required capital will be approximately US$50,000 per POP.

o          Select one or more  services  offered by the Company,  and sell those
           services  within  the AP Area.  The  Company  may  establish  certain
           requirements on levels of performance,  etc, in order for a Strategic
           Partner to qualify to sell that service.


The benefits to Strategic Partners are the following:


o          Deployment  and  maintenance  of equipment is handled by the Company,
           allowing   a   Strategic  Partner   to  sell  service  without  being
           responsible   for  the   deployment  and  maintenance  of the  actual
           equipment used to provide services.

o          Receive a percentage of the net  operating  profit from services sold
           in the AP Area and from the operation of the switch  installed in the
           AP Area.  Because  individual  Strategic  Partners may elect  various
           services  to sell,  the  portion  of the net  operating  profit  each
           Strategic Partner will receive will be separately  negotiated.  It is
           anticipated that the percentage may be as much as 50% for a Strategic
           Partner  which  elects  to sell all of the  services  offered  by the
           Company  and  reaches  the  maximum  performance  levels  that may be
           negotiated with that Strategic Partner.


The typical profiles of a Strategic Partner are expected to be:

o        Resellers of carriers and existing phone companies

o        ISPs that have either sales forces or advertising programs

o        Sales organizations and network marketing organizations


F.2     Sales Partner Program

Under this program,  the Company will recruit resellers who will make no capital
investment but will  specialize in selling service within an existing area where
the Company has deployed a switch.  Sales Partners will be required to commit to
targets for each of the Company services that they sell. However, Sales Partners
will be paid a commission based on sales.

                                       14
<PAGE>

F.3      Technical Partners

The CPE model requires a significant number of actual installations (of embedded
gateways,  complete gateways, or automated dialers) by the Company.  Rather than
building  a large  organization  of  installers  that  travel  around  the world
installing  such devices,  the Company plans to enlist the services of Technical
Partners around the world to deploy the Company's CPE access devices.  Technical
Partners will be paid a fee based on completing  installations  of the Company's
access devices. Technical Partners may have differing experience (such as having
experience  with LAN  environments,  PBXs, or the combination of the two) and as
such, compensation arrangements will vary from one technical partner to another.

G.        Government Approvals and Regulations

The  Company  will not  attempt  to enter into any  market,  which is subject to
regulation,  without  first  determining  that  it can  satisfy  the  regulatory
requirements.

In order to conduct  telephony  business in the United States,  the Company will
have to prepare and file  applications and associated  tariffs for international
and   interexchange   telecommunications   certification   before  the   Federal
Communications Commission and State Commissions,  respectively.  The Company has
requested and received a proposal from a US consulting  company,  to prepare and
file the  applications,  but has not yet given approval to proceed.  The Company
understands  that the  process  will  require  several  months to  complete.  No
specific time frames for securing approvals in any particular  jurisdiction have
been established.

The Company's need for licenses in Europe and Asia will be a function of whether
the Company  operates  as a foreign  company in those  locations,  or whether it
works with licensed  local  partners and no specific  decisions or  arrangements
have yet been made in this regard.

H.        Patents, Trademarks and Royalty Agreements

The  Company  does not have any  patents,  trademarks,  licenses  or  protective
agreements. The Company has trademarked its logo in Canada.

 I.      Research & Development Activities

The Company  considers  that it has, to the date  hereof,  spent on research and
development  activities related to its  above-described  business  approximately
$200,000. There is no specific allocation of any of those costs to the Company's
future customers - although it will be the Company's objective to charge for its
products and services in sufficient amounts to enable it to recover its research
and development costs.

J.        Employees

At the date hereof,  the Company has one  employee,  Charlie  Yang.  The Company
functions  through  the  efforts  of  its  officers,  directors  and  contracted
consultants. As the Company's business and development efforts expand additional
personnel  will be engaged - who may become  employees  or who may supply  their
services under contract.

                                       15
<PAGE>

Item 2.  DESCRIPTION OF PROPERTY

 As of December 31, 1999, the Company did not own or have any rights to purchase
any plants or other property.

Item 3.  LEGAL PROCEEDINGS


Mr.  Charles  Yang  joined  the  Company in July 1999,  as  President  and Chief
Operating  Officer.  Part of the  motivation  for  recruiting  Mr. Yang were his
strong  representations  that he could bring to the Company  extensive  business
connections,  and that those  connections  could be converted into sales for the
Company.  The  Board  subsequently  concluded  that  Mr.  Yang  did not have the
potential that they originally believed he had - which is part of the reason for
the  breakdown  of  the  relationship  with  Mr.  Yang. For  further information
regarding the  Company's  relationship  with Mr. Yang,  see Section B of Item 12
below.

Mr. Yang ceased  providing  services to the Company as of January 31, 2000.  Mr.
Yang's  positions as President  and Chief  Operating  Office of the Company were
formally  terminated  March  9,  2000.  His  employment   agreement  is  now  in
arbitration  and the  Company  does not  believe  itself to be bound by it.  The
Company  believes  it will  prevail in the  arbitration.  The  Company  does not
consider that  repudiating  the  agreement  with Mr. Yang will have any material
effect on its business.


Other than disclosed above, the Company is not involved in, nor has no knowledge
of, any threatened or pending legal proceedings against it.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of 1999, no matters were submitted to security holders
for their approval.

                                     PART II

Item 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

A.       Market Information

Until  December  15,  1999,  the common  stock of the  Company was traded on the
Over-The-Counter  Electronic  Bulletin  Board  under the  symbol  "EPHO".  After
December 15,  1999,  trades have been made on the  National  Quotation  Bureau's
electronic  "Pink Sheets" under the symbol "EPHO".  The Company's  shares do not
trade on any stock exchange or any other market.

The Company's shares were not publicly traded or quoted in 1997 or the first two
quarters of 1998.  The  following  table sets forth the closing high and low bid
prices of the Common  Stock for the  periods  indicated  as reported by NASDAQ's
Trading and Market Services Division. The quotations reflect inter-dealer prices
and do not include  retail  mark-ups,  mark-downs  or  commissions,  and may not
represent actual transactions.

                                       16
<PAGE>

                                1998 Bid                  1999 Bid
                       ----------------------------------------------------
                            High           Low        High         Low

      March 31               N/A           N/A          $ 0.63      $ 0.50
      June 30                N/A           N/A          $ 2.13      $ 1.25
      September 30             $  0.50      $ 0.50      $ 3.13      $ 0.75
      December 31              $  0.50      $ 0.50      $ 1.65      $ 0.59
      ---------------------------------------------------------------------



B.       Shares

The Company has an authorized  capital of 50,000,000  voting common shares,  par
value  $.001.  As of the December  31,  1999,  12,000,000  shares are issued and
outstanding.  The  issued  and  outstanding  shares  are  held by 25  registered
shareholders.  All of the common  shares rank equally with each other,  and none
have attached to them any dividend, pre-emptive or other rights or restrictions.
Each share has attached to it one (1)  non-cumulative  vote.  Of the  12,000,000
shares issued, 9,300,000 shares are free trading, while 2,700,000 are subject to
control block restrictions.


Effective June 7, 1999, the Company granted share purchase  incentive options to
12  directors,  executive  officers,   non-executive  officers  and  individuals
providing services to the Company, entitling them to purchase up to an aggregate
total of 3,500,000  shares of the Company,  exercisable at $0.50 per share on or
before June 30, 2002.  Charlie Yang was granted 500,000 options  pursuant to the
agreement  described  in Part  III-Item  12 "Certain  Relationships  and Related
Transactions". The holders of these options have agreed to defer exercise of any
option  until the  Articles  of  Incorporation  of the  Company  are  amended to
increase  the  authorized  capital  stock of the  Company  in  exchange  for the
revocation  of the  necessity  of being  employed  by the Company at the time of
exercising the options.


On  November  3,  1999,  the  Company  agreed  with  certain  private  investors
(including some of the directors and officers) to make a $1,012,500 Regulation S
private placement of shares to them. In all,  1,350,000 shares will be issued at
$0.75 per share,  plus  1,350,000 in warrants at $1.25 each.  The proceeds  from
this private  placement were used to fund operations and equipment  purchases in
1999.


From authorized capital,  the Company has agreed to reserve in escrow 14,000,000
shares, which will be released in four tranches,  conditional upon the Company's
operations  reaching  a series of  performance  targets.  The  holders  of these
escrowed performance shares include directors, executive officers, non-executive
officers and individuals providing service to the Company.  Reservation of these
shares and their release is dependent upon shareholder  approval of an amendment
to the Company's  Articles of Incorporation,  in order to increase the number of
authorized common shares of the Company.


The Company is currently in negotiations with Charlie Yang, former President and
COO with respect to the terms of his  departure  from the company.  Mr. Yang has
requested  to  proceed  towards  arbitration.  The terms of the  settlement  may
involve the issuance of some shares to Mr. Yang.

                                       17
<PAGE>

C.       Holders

As of December  31,1999,  there were 25  shareholders of record of the Company's
outstanding shares. One registered holder with 7,065,700 shares was the brokers'
nominee and clearing  house Cede & Co., of New York City, New York,  U.S.A.  The
Company  has no  knowledge  of who  are  the  beneficial  owners  of the  shares
registered in the name of Cede &Co.

 D.      Dividends

The Company  has not paid any cash  dividends  to date and the company  does not
anticipate that any cash dividends will be declared or paid on the common shares
in the foreseeable  future.  Payment of dividends is solely at the discretion of
the Board of Directors.

On July 2, 1999, the Board of Directors unanimously approved a stock dividend of
2 shares for each 1 issued  share,  having the same  effect as a 3 for 1 forward
split of the Company's common shares.  The record date of the stock dividend was
the close of  business  on July 6, 1999 and the stock  dividend  was paid at the
close of business on July 16, 1999. The Company does not  anticipate  that there
will be any stock dividends paid by the Company in the foreseeable future.

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.


Forward  Looking  Statements.  Some  of  the  statements  in  this  Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations  are
forward-looking  statements.  These statements  involve known and unknown risks,
uncertainties and other factors which may cause our actual results,  performance
or achievements to be materially different from any future results,  performance
or achievements expressed or implied by the forward-looking statements.

Forward-looking statements include but are not limited to:

         -        our  expectations  and estimates as to completion dates of the
                  Network  of  Regional  gateways  we  are  installing  and  the
                  Network.

         -        our ability to implement  successfully our operating  strategy
                  as defined in the business plan of the Company.

         -        future  financial  performance  as estimated in the  Company's
                  financial projections.

The following  factors,  among others,  could cause our actual results to differ
materially from those expressed in any forward-looking statements we make:

         -        inaccuracies in our forecasts of customer or market demand

         -        highly competitive market conditions


         -        changes  in  or  developments  under  laws,   regulations  and
                  licensing  requirements  in regions  the Company is installing
                  gateways


         -        changes in telecommunications technology

These  factors  should not be  construed  as  exhaustive.  We will not update or
revise any forward-looking statements.

                                       18
<PAGE>

A.       Overview

Array Telecom, Inc., a subsidiary of Comdial Corporation will supply the initial
equipment  required to build the Company  network.  As of December 31, 1999, the
Company had ordered the billing  software and server,  and the first 3 gateways,
which were placed in Rotterdam,  The Netherlands,  Herndon,  Virginia,  and Hong
Kong, during the first quarter of 2000.

The Company also agreed with Array Telecom Inc.,  to provide  ongoing  technical
management  services  regarding the  verification and testing of the TEK DigiTel
V-Server iGate product,  other products,  and provide the technical expertise in
the final design and implementation of the Company's network.

Subsequent  discussions  between  the  Company  and Array  revealed  significant
synergy between the two  organizations.  Array owns the product and technologies
that are central to the success of the  Company.  The  Company  represented  the
ideal customer for Array with its innovative marketing and sales strategies that
created applications for Array products that they did not independently have the
ability to provide.

The Company has not received any revenues from  operations,  in each of the last
two fiscal years, as it has not commenced its proposed business  operations on a
commercial basis.

As of December  31,  1999,  the Company  had  approximately  $82,742 in cash and
$374,894 in current liabilities. The Fixed Assets increased to $144,026 with the
purchase of 3 gateways and software that are being installed in The Netherlands,
Herndon, Virginia and Hong Kong.

The Company,  effective  November 3, 1999 privately sold  1,350,000  shares,  to
generate  funding of $1,012,500.  The proceeds from this private  placement have
been used to fund  operations  and  equipment  purchases  to date.  The  Company
anticipates  that  share  purchase  warrants  attached  to the  shares  will  be
exercised, giving the Company further funding.

Previously,  the Company required  approximately $60,000 per month for salaries,
rent, marketing,  general  administration,  and consulting and legal fees. These
working  capital  requirements,  and  equipment  purchases,  will continue to be
funded out of the above-noted private until March 31, 2000.

B.       Plan of Operation

A key strength of the Company's plan of operation for the next 12 months is that
it proposes a variety of  services,  using a number of  different  products,  to
customers  ranging from  individuals to large  corporations.  This plan requires
significant  technical  integration.  Since the  Company is neutral  towards the
selection  of the  hardware  platform,  it is likely  that  changes to the basic
hardware  systems  deployed  will  occur  continuously,  as  industry  products,
capabilities,  and protocols  evolve.  The ongoing  requirement to integrate the
best  products and  technology  available  would require  significant  technical
expertise and  management.  Even deploying the initial  network will require the
integration  of IP gateway  technology,  autodialers,  CPE devices,  PSTN access
ranging  from  single  analog  lines to digital  T-1/E-1  lines,  IP routers and
network interfaces,  billing systems, and much more. Integrating this variety of
technology is expected to be challenging.

The plan  calls for the  Company  to deliver a range of  enhanced  services.  In
addition,  the Company NOC will  require the ability to deploy  these  services,
bill and monitor the services. It is likely that the Company will need to hire a
development  team that will build the  technology  to supply the  services  that
cannot be purchased directly.

                                       19
<PAGE>

Experts in  networking,  IP  telephony,  and network  design will be required in
order to advise on the design and  construction  of the  Company's  network  and
services.  Often,  such design  involved the  technical  evaluation of candidate
products.  The Company  contracted  Array Telecom Corp. to perform a significant
portion of this evaluation, design and testing work.

The Company has begun the  development  of its network in Europe.  The  Company,
with its European partners,  plans to install and test 30 regional gateways,  or
the Company's switches,  in Europe during the year 2000, 80 gateways in the year
2001 and 190 gateways in the year 2002.

At the same time the  Company  recognizes  the need to  generate  revenues  from
operations.  As regional gateways are tested and become  operational,  customers
will be added through the efforts of the Company's partners.

The Company's  anticipated  timetable for the rollout of the European network is
shown below.


   February 20, 2000    o Install Holland Regional Node - achieved by
   February 29, 2000      installation in Rotterdam prior to March 1, 2000
   March 15, 2000 -     o Confirm PSTN Providers - achieved by March 20, 2000
   now projected for    o Install 5 Holland and 4 Belgium locations (in process)
   April 30, 2000       o Technician hiring process engaged (in process)

   April 1, 2000        o 3 Technicians in Europe have been  hired (in
   now projected for    o Credit Card Facility set-up and finalized (in process)
   April 30, 2000


   May 1, 2000          o Sell CPE in Holland & Belgium for Beta Test

   June 1, 2000         o Full CPE Sale in Holland & Belgium
                        o Install 10 Regional Nodes in France

          (Phase 1)
   August 1, 2000       o Sell CPE in France for Beta  September  1, 2000
                        o Full Sell of CPE in France (Phase 1)
                        o Deploy 10 more locations in France

           Phase 2
   December 1, 2000     o Full sale in France

The  Company  expects to hire  full-time  employees  as it rolls out its plan of
operations in the latter half of 2000.

Item 7.  FINANCIAL STATEMENTS

The information  required  hereunder in this report are set forth in the "ePhone
Telecom Inc. - Financial Statements" on page 30.

                                       20
<PAGE>

Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.

Since May 1996,  the Company has engaged Barry L.  Friedman,  P.C., of Las Vegas
Nevada, as its principal independent auditor. Barry L. Friedman,  P.C.'s reports
for the fiscal years ended December 31, 1997 and 1998, six months ended June 30,
1999,  did not contain an adverse  opinion or  disclaimer  of opinion,  and such
reports  were  not  qualified  as to  uncertainty,  audit  scope  or  accounting
principles.

The  reports of Mr.  Friedman  raised  doubt with the  respect to the  Company's
ability to continue as a "going  concern"  since the Company "has no established
source of  revenue".  The  Company has not had any  disagreements  with Barry L.
Friedman, P.C on any of his reports.

Because  of the  significant  nature  of the work  involved  in  performing  the
Company's 1999 audit and an unexpected  illness,  Mr.  Friedman  requested to be
relieved of his  commitment.  On March 14, 2000 the Company  appointed Grant and
Thornton, LLP to perform the fiscal year 1999 audit.

                                    PART III

Item 9.  DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

A.       Directors and Officers

The Directors and  Executive  Officers of the Company,  their ages and positions
held as of December 31, 1999 are listed below.  Each  director  serves until the
next Annual General  Meeting of the  Shareholders or unless they resign earlier.
The Board of  Directors  elects  officers  and their  terms of office are at the
discretion of the Board of Directors.

         Name          Age                 Position Held
         ----          ---                 -------------
   Robert G. Clarke    55    President, Chief Executive Officer, Director
   Charlie Yang        39    Director (President up to March 9, 2000)(see below)
   John G. Fraser      53    Executive Vice President, Director
   Charlie Rodriguez   55    Vice President-Corporate Affairs, Secretary
   Benjamin Leboe      54    Chief Financial Officer
   Hans van Yzeren     52    Director
   Peter Francis       50    Director


The following  describes the business  experience  during the past five years of
the Company's  Directors and Executive  Officers,  including for each  director,
other directorships held in reporting companies.


Robert G. Clarke, age 55, was appointed Director,  President and Chief Executive
Officer on June 3, 1999.  Effective August 9, 1999, he resigned as President and
was  appointed  Chairman  of the Board.  He is also  deemed the  promoter of the
Company. Mr. Clarke was re-appointed  President March 9, 2000. During the last 5
years he has acted an independent business consultant -- principally in the area
of high tech  start-ups --  providing  advice with respect to public and private
financings,  creating business plans,  assembling  management teams and business
opportunity  assessments.  He was a Director,  President and Chief  Executive of
Waverider  Communications,  Inc. (OTC BB Symbol  "WAVC") from  January,  1997 to
December,  1997.  He was a Director  of Global CT & T  Telecommunications,  Inc.
("GLC" - Vancouver  Stock  Exchange) from September 18, 1995 to October 17, 1996
and from  February  11,  1998 to  October  11,  1999.  Mr.  Clarke  was also the
Corporate  Secretary of Pacific Western Capital Corporation (traded on Vancouver
Stock Exchange) from August 15, 1995 to October 17, 1996.


                                       21
<PAGE>

Mr.  Clarke  holds the degrees of  Bachelor  of Commerce  and Master of Business
Administration.


Charles Yang,  age 39, was  appointed  Director,  President and Chief  Operating
Officer of the Company,  on August 9, 1999. He was terminated  from his position
on March 9, 2000. For further  information  regarding the Company's relationship
with Mr. Yang, see Section B of Item 12 below.


John G. Fraser, age 53, was appointed  Director and Executive  Vice-President of
the Company on June 3, 1999. He was with KPMG Canada, Chartered Accountants from
November 1976 until February 1998.  His last position was as  Vice-Chairman  and
had national  responsibility  for KPMG  Consulting.  Mr. Fraser has a Masters in
Business Administration from University of Pittsburgh and a Bachelor of Commerce
and Administration from Victoria University, Wellington, New Zealand.

Charlie Rodriguez, age 55, was appointed Vice-President of Corporate Affairs and
Corporate Secretary on June 3, 1999. He is also President of Management Services
of Arizona, a business consulting company specializing in mergers,  acquisitions
and  financing.  Previously,  he served as Chief  Financial  Officer  for Zephyr
Technologies,  Inc.,  Omaha,  Nebraska,  a  biometrics  and  smartcard  software
integration  company.  He was with  WaveRider  Communications,  Inc., a wireless
communication company, (OTC B. B. symbol "WAVC"),  Vancouver,  Canada,  formerly
named Channel I, Inc.  serving as director from January to November 1997, and as
President  and CEO from May 1995 to  January  1997.  During  1995 and  1996,  he
resided in London,  United Kingdom and was involved in the European business and
capital markets.  During 1998, he was the lead consultant during the restructure
of the Hogan Clinics in Las Vegas, Nevada. From October 1994 to December 1996 he
was an in-house consultant for Advisory Services of Arizona,  Inc.,  Scottsdale,
Arizona,  an investment  banking and consulting  company  specializing in public
companies. From November 1994 to March 1995, Mr. Rodriguez was the Treasurer and
Chief Financial Officer for Bullet-Cougar Golf Equipment  Manufacturing  Company
(a NASDAQ company),  Irvine,  California. Mr. Rodriguez has a Master in Business
Administration.

Benjamin Leboe, age 54, was appointed Chief Financial  Officer of the Company on
June 3, 1999. From July 1995 to present,  he is the Owner/Manager of Independent
Management Consultants of British Columbia..  From 1991 to June 1995, he was the
Vice-President  and Chief Financial Officer of VECW Industries Ltd. Director and
President of CPT  Pemberton  Technologies  Ltd.  (Symbol "CPT"  Vancouver  Stock
Exchange).  Mr. Leboe is a British Columbia  Chartered  Accountant and Certified
Consultant.

Peter Francis,  age 50, was appointed as a Director on June 3, 1999. Mr. Francis
resides in Hong Kong.  From 1984 to present he has operated  his own  investment
and corporate advisory company.  During this time, he was a member of the Boards
of, or was a  shareholder  of, or advisor  to 12  companies  that were  publicly
listed for trading on Asian  markets.  Mr.  Francis has the  responsibility  for
development of the Company's  business in Southeast Asia especially  Vietnam and
China.

Hans van Yzeren, age 52, was appointed as a Director on June 3, 1999. From April
1999 to present he has been  self-employed  providing services to the Company in
its efforts to  research  and  develop  markets in Europe.  During 1996 to April
1999,  he was  employed  by Data  Services  NV,  Belgium  as a  Partner/Managing
Director  developing and  establishing a brand name of computer  peripherals and
computer   monitors  in  the  European   market.   From  1990  to  1996,   G-Tel
Communications S.a.r.l., Luxembourg,  employed him as a Partner/Director and was
involved in the development of a new style cordless  telephone  including R & D,
products design, manufacturing, cost reduction and marketing.

                                       22
<PAGE>

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

Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended (the "1934
Act") requires  officers and directors of a company with  securities  registered
pursuant to Section 12 of the 1934 Act, and persons who own more than 10% of the
registered  class  of such  company's  equity  securities,  to file  reports  of
ownership and changes in ownership with the  Securities and Exchange  Commission
(the "SEC"). Officers,  directors and greater than 10% stockholders are required
by SEC  regulation  to furnish  the subject  company  with copies of all Section
16(a) forms filed. In connection with the Company  becoming a reporting  Company
as of December 15,  1999,  Form 3 was  inadvertently  not filed on behalf of the
Americana  International  Inc. of Hong Kong,  whose owner is Gary Kenneth Urwin,
Chartered Accountant.  These Forms are in the process of being prepared and will
be filed in short order.

Item 10.EXECUTIVE COMPENSATION

A.       Cash Compensation

During the fiscal years ending  December 31, 1999 the company paid the following
compensation to its Chief Executive Officer and President.

                                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                        Securities
                                                                                     Underlying, Stock
           Name and Principal Position                     Year       Compensation        Options
           ---------------------------                     ----       ------------   -----------------
<S>                                                        <C>         <C>              <C>
Robert Clarke, CEO, President                              1999        $    48,000      1,000,000
Charles Yang, Director,   Former President and             1999        $    55,000        500,000
COO (1)
</TABLE>

1.       Mr. Yang ceased providing  services to the Company by January 31, 2000.
         Mr.  Yang's  positions as President and Chief  Operating  Office of the
         Company were formally terminated March 9, 2000. Details are provided in
         Part III-Item 12 "Certain Relationships and Related Transactions".

   --------------------------------------------------------------------------



Other than Charlie Yang, no directors or executive  officers are presently under
any employment agreement pursuant to which they are guaranteed a salary or other
direct   compensation.   For  further   information   regarding   the  Company's
relationship with Mr. Yang, see Section B of Item 12 below. During 1999, certain
directors and executive officers were paid $232,000 to perform functions for the
Company on a consulting basis.  These officers and directors were paid for their
services rendered from time to time on such basis as was negotiated by the Chief
Executive Officer, Mr. Clarke.


During 1999,  consulting fees were paid to Messrs.  John Fraser ($38,000),  Hans
van Yzeren ($32,000), Charlie Rodriguez ($45,000), and Ben Leboe ($14,000).

                                       23
<PAGE>

B.       Option Grants

No options were  granted by the Company  during any period prior to December 31,
1998.  The Company  does not have a stock  option  plan.  The  Company  granted,
effective  June 7, 1999,  share  purchase  incentive  options  to 12  directors,
executive officers, non-executive officers and individuals providing services to
the Company  entitling  them to purchase up to an  aggregate  total of 3,500,000
shares of the Company exercisable at $0.50 per share on or before June 30, 2002.
The options  granted to any individual  will terminate  within 30 days after the
individual  ceases to perform  services for the Company or within 6 months after
the date of the death of such  individual.  Charles Yang was granted  options on
500,000  shares in the agreement  with him  described  below in Part III-Item 12
"Certain Relationships and Related Transactions". The numbers of shares optioned
to each of the Company's  Directors  and Executive  Officers is shown in Item 11
below.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table contains information with respect to beneficial ownership of
the  outstanding  common  shares of the Company as of December 31, 1999 for: (i)
each  shareholder  known  to be  the  beneficial  owner  of 5% or  more  of  the
outstanding  common shares;  (ii) each of the Company's  executive  officers and
directors;  and (iii) all  executive  officers and directors of the Company as a
group. In general,  a person is deemed to be a "beneficial  owner" of a security
if that  person  has or shares  the power to vote or direct  the  voting of such
security,  or has the  power  to  dispose  or  direct  the  disposition  of such
security.  A person is also deemed to be a beneficial owner of any securities of
which the person has the right to acquire beneficial ownership within 60 days.

At December 31, 1999 the Company had  12,000,000  shares issued and  outstanding
and has agreed to issue  1,350,000  shares  pursuant  to the  private  placement
described above, and had outstanding  options entitling the purchase,  within 60
days,  of 4,000,000  shares.  The  following  information  as to  percentage  of
beneficial  ownership is therefore of the total shares  issued or under  option,
being 17,350,000.
<TABLE>
<CAPTION>
   Name and Address                          Number of Common Shares                  Percent of
or Identity of Individual                      Beneficially Owned                     Beneficial
      or Group                            or Deemed Beneficially Owned                Ownership
-------------------------                 ----------------------------                ----------
<S>                                             <C>                                     <C>
Robert G. Clarke
West Vancouver, B.C.                            Nil  shares
Director, Chairman, President                   1,000,000 options                        5.76%
and Chief Executive Officer and
Promoter

Charles Yang
39767 Paseo Padre Parkway
Suite E,                                         Nil  shares
Fremont, California, 94538                       500,000 options                         2.88%
Director

Peter Francis
Suite 3C, Tung Shan Terrace,                     Nil shares
Stubbs Road,                                     250,000 options                         1.44%
Hong Kong
Director
</TABLE>

                                       24
<PAGE>
<TABLE>
<CAPTION>
<S>                                           <C>                                   <C>

Willem Johan Henri ("Hans")
  van Ijzeren
Gorzendreef 12                                   Nil shares
2360 Oud-Turnhout                                250,000 options                         1.44%
Belgium
Director

Charlie Rodriguez
162 West Petunia Place                           Nil shares
Tucson, Arizona                                  250,000 options                         1.44%
U.S.A. 85737
Secretary and Vice-President

John Fraser
104 Elm Avenue                                   Nil shares
Toronto, Ontario                                 250,000 options                         1.44%
M4W 1P2
Director and Executive Vice-President

Ben Leboe
16730 Carrs Landing Rd.                          Nil shares
Lake Country, B.C.                               250,000 options                         1.44%
V4V 1B2
Chief Financial Officer

Executive Officers and Directors                 Nil shares
as a group of seven (7) persons                  2,750,000 options                      15.85%

Americana International Inc.*
Hong Kong                                        2,550,000 shares                       14.7%
Holder of more than 5%
</TABLE>

* Management is advised that the owner of 100% of the issued shares of Americana
International Inc. is Gary Kenneth Urwin,  Chartered Accountant,  of 27 Hamilton
Parade,  Pymble, Sydney,  Australia.  Mr. Urwin has no other relationship to the
Company.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

A.       Founding Shares

On May 8, 1996,  immediately  following the  incorporation  of the Company,  the
Company issued 1,000,000 common shares for services  rendered to the Company for
a deemed  price of  $0.001  per share for a total of  $1,000.  Of these  975,000
shares were issued by the Company to Ira Schwartz,  the Company's  sole director
and officer at the time.

                                       25
<PAGE>

B.       Charlie Yang

By an  Agreement,  dated  July 8, 1999,  which is now in  dispute,  the  Company
engaged  Charles  Yang to  provide  his  services  on a  full-time  basis as the
President  and Chief  Operating  Officer  of the  Company  for a basic term of 4
years. The Agreement provides for the payment to Mr. Yang of a fee of $7,500 per
month  initially,  escalating to $17,500 per month for the period April 1 - June
30, 2000. For the second,  third and fourth years of Mr. Yang's engagement,  his
compensation  would be reviewed  but would have  increased  by a minimum of, not
less than 15% over the amount paid to him in the preceding year.

The  Agreement  also provided for Mr. Yang to be granted  options and,  pursuant
thereto,  Mr. Yang was granted  option to purchase  500,000 common shares of the
Company  exercisable  at $0.50  per  share,  during  the term of his  Engagement
Agreement, the options vesting on the following schedule:

(a)      100,000 shares on execution of the Agreement
(b)      200,000 shares October 1, 1999
(c)      200,000 shares January 1, 2000

In the  Agreement,  the Company also agreed to acquire from Mr. Yang 100% of the
issued  shares of a company  owned by him,  General-Tel  Inc.,  in exchange  for
1,500,000 voting common shares of the Company.  The Agreement  provides that the
Company must,  within 6 months of the closing of the acquisition of General-Tel,
raise  funding for itself (and possibly to be used by  General-Tel)  of not less
than  $1,100,000,  and if such  financing is not raised within the said deadline
Mr.  Yang  will be  entitled  to  cancel  the  negotiations  or the  acquisition
agreement and have 100% of the shares of General-Tel transferred back to him. In
consideration,  he must return 1,350,000 of the Company's shares. As part of the
dispute with Mr. Yang, the Company will not purchase the shares of General-Tel.

The Company has agreed to issue Mr. Yang  2,000,000  voting common shares (which
it has not yet done). The Company's  Canadian lawyers will hold the certificates
for the shares in escrow, and 25% of such shares - i.e. 500,000 shares - will be
released  to Mr.  Yang upon the  Company  achieving  the  following  performance
thresholds of up to $50,000,000 in sales.

The  Agreement  required  that Mr.  Yang bring to the company the benefit of all
negotiations and technical  knowledge  initiated or held by him to sell hardware
or services  with  respect to a  technology  referred to as Wireless  Local Loop
("WLL"). The Company had agreed to issue Mr. Yang 1,000,000 voting common shares
if he succeeded in  developing  an agreement  for the sale of WLL to one or more
purchasers  brought to the Company - such  shares to be issued on the  following
schedule:

(a)      300,000 shares upon completion of negotiation and signing of Memorandum
         of Understanding with the purchaser of WLL;

(b)      300,000 shares upon  completion of signing of a formal contract for the
         sale of WLL;

(c)      400,000  shares upon the receipt by the Company from the sale of WLL of
         payments and revenues of not less than $500,000.

Further,  Mr. Yang would have  received 10% of the gross  profits  earned by the
Company from the sales of WLL.

                                       26
<PAGE>

Mr.  Yang was also,  from the sale of the  Company's  products or  services,  to
receive royalties on the following basis:

(a)  from sales of equipment or services in China,  Vietnam or Taiwan,  provided
     the Company's gross profit margin is not less than 20% from such sales, Mr.
     Yang will be paid 5% of the gross profits from such business; and

(b)  for countries  other than China,  Vietnam or Taiwan where the Company would
     pay sales commissions to  representatives  or agents in such other country,
     Mr. Yang would have been paid monies equal to 1% of the amount of the gross
     sales revenues from such countries;

(c)  where sales to China,  Vietnam or Taiwan produce gross profits of less than
     20%  then  Mr.  Yang  would  have,  in lieu of the  aforesaid  5%,  receive
     commissions equal to 1% of the gross sales revenues from such countries.


A breakdown in the  relationship  between the Company and Mr. Yang developed and
he ceased  providing  services to the Company by January 31,  2000.  Mr.  Yang's
positions as President and Chief Operating  Officer of the Company were formally
terminated  on March 9, 2000.  Mr. Yang has given a notice that he requires  his
dispute with the Company to be arbitrated.  The Company  believes that it has no
further  liabilities or  obligations to Mr. Yang. The Company  believes that the
termination  of the Agreement  with Mr. Yang will not have a material  effect on
the Company's business.

C. Loans from Officers

During 1999 the Company was loaned approximately $62,000,  interest free, by its
Promoter and former Chief Executive  Officer Robert Clarke as monies were needed
by the Company from time to time. No formal loan  documentation  was executed in
connection with these advances of funds, Mr. Clarke was not granted any security
interest in any assets of the Company and no date was fixed for the repayment of
these  advances.  These  amounts were fully repaid to Mr.  Clarke by the Company
prior to December 31, 1999, as the Company  received  proceeds from the sales of
securities discussed in Section B of Item 5 above.



Item 13. EXHIBITS AND REPORTS ON FORM 8K.

3.1   Articles of Incorporation (1)
3.2   First Amendment to Articles of Incorporation (1)
3.3   Bylaws (1)
4.1   Form of Option Incentive Agreement (1)
10.1  Engagement  Agreement dated July 8, 1999 with Charles Yang (1)
10.2  Form of Option Incentive Agreement (1)
10.3  Agreement  in  Principle  dated  October  22,  1999 with  Saigon  Post and
      Telecommunications Corp. (2)
27.1  Financial Data Schedule

          (1)-Previously filed with Securities and Exchange Commission on
              October 15,1999, Form 10SB
          (2)-Previously filed on January 5,2000 as Amendment No. 2 to Form 10SB

REPORTS ON FORM 8K.  None









                                       27
<PAGE>




                                   SIGNATURES

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

(Registrant)


By:/s/Robert G. Clarke
----------------------
CEO


Date: June 5, 2000
--------------------


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


By /s/Robert G. Clarke
----------------------------------
(Robert G. Clarke, CEO, Director )



Date: June 5, 2000
--------------------


By:/s/Ben Reboe
----------------------------------
(Ben Reboe, Chief Financial Officer)


Date: June 5, 2000
--------------------


By: /s/John Fraser
----------------------------------
(John Fraser, Director)


Date: June 5, 2000
--------------------


By:/s/Peter Francis
----------------------------------
(Peter Francis, Director)


Date: June 5, 2000
--------------------




                                       28
<PAGE>


           Supplemental information to be furnished With Reports Filed

     Pursuant to Section 15(d) of the Exchange Act by Non-reporting Issuers

As of March 31,  2000,  no  annual  report  or proxy  material  has been sent to
security holders.

Proxy material is to be furnished to security  holders  subsequent to the filing
of this annual report for a  shareholders  meeting to be held no later than June
30,  2000.  The  Company  intends  to  furnish  copies of such  material  to the
Commission when it is sent to security holders.








                                       29
<PAGE>



Contents

                                                                    Page

Independent Auditor's Report on the Financial Statements             F-1

Balance Sheet                                                        F-2

Statement of Operations                                              F-3

Statement of Cash Flows                                              F-4

Statement of Stockholders' Equity                                    F-5

Notes to the Financial Statements                                 F-6 - F-11

















<PAGE>



Grant Thornton LLP
Chartered Accountants
Management Consultants

Canadian Member Firm of
Grant Thornton International

         Independent Auditors' Report on the Financial Statements

         To the Shareholders of
         ePHONE Telecom, Inc.

         We have audited the balance sheet of ePHONE Telecom, Inc. (formerly IFB
         Corp.) (a  Development  Stage  Company) as at December 31, 1999 and the
         statements of operations,  cash flows and stockholders'  equity for the
         year then ended.  These financial  statements are the responsibility of
         the Company's  management.  Our responsibility is to express an opinion
         on these financial statements based on our audit.

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

         In our opinion,  these  financial  statements  present  fairly,  in all
         material respects, the financial position of ePHONE Telecom, Inc. as at
         December 31, 1999 and the results of its  operations and its cash flows
         for  the  year  then  ended  in  accordance  with  generally   accepted
         accounting principles in the United States of America.

         The accompanying  financial  statements have been prepared assuming the
         Company will continue as a going concern. As discussed in Note 1 to the
         financial statements,  the Company has no established source of revenue
         and is dependent on its ability to raise substantial  amounts of equity
         funds. This raises substantial doubt about its ability to continue as a
         going concern.  The financial statements do not include any adjustments
         that might result from the outcome of this uncertainty.

         The  financial  statements  as at December  31, 1998 and for the period
         from inception to December 31, 1998 were audited by a certified  public
         accountant  who expressed an opinion on those  statements in his report
         dated July 16, 1999 which  included an emphasis  paragraph with respect
         to issues  raising  substantial  doubt about the  Company's  ability to
         continue as a going concern.

Kelowna, Canada
April 11, 2000                                             Chartered Accountants

247 Lawrence Avenue
Kelowna
British Columbia
V1Y 6L2
Tel:  (250) 762-4434
Fax: (250) 762-8896

                                       F-1
<PAGE>

ePHONE Telecom, Inc.
(Formerly IFB Corp.)

(a Development Stage Company)
Balance Sheet

December 31                                              1999           1998
                                                     -----------    -----------
Assets
Current

   Cash ...........................................  $    82,747
   Equipment purchase advances ....................      269,200
                                                     -----------
                                                         351,947

Capital assets (Note 4) ...........................      125,474    $     4,875
                                                     -----------    -----------
                                                     $   477,421    $     4,875
                                                     ===========    ===========

Liabilities

Current

   Accounts payable ...............................  $   282,899    $    11,073
   Accrued liabilities ............................      332,000
   Due to related parties .........................       91,995         12,046
                                                     -----------    -----------
                                                         706,894         23,119
                                                     -----------    -----------
Stockholders' Equity

Capital stock (Note 5) ............................       13,171          1,000
   Authorized:
       50,000,000 common shares of $0.001 par value
   Issued:
       12,000,000 shares (1998: 1,000,000)
Additional paid-in capital ........................      499,125
Stock subscriptions for 1,170,667 shares ..........      876,829
Deficit accumulated during the development stage ..   (1,618,598)       (19,244)
                                                     -----------    -----------
                                                        (229,473)       (18,244)
                                                     -----------    -----------
                                                     $   477,421    $     4,875
                                                     ===========    ===========


Contingency (Note 7)


               See accompanying notes to the financial statements.

                                       F-2
<PAGE>


ePHONE Telecom, Inc.
(Formerly IFB Corp.)

(a Development Stage Company)
Statement of Operations
<TABLE>
<CAPTION>

                                                       For the          For the            For the
                                                     period from         year            period from
                                                    inception to         ended          inception to
                                                     December 31      December 31        December 31
                                                        1999             1999               1998
                                                   -------------     -------------       ------------
<S>                                                <C>               <C>                 <C>
Bank charges                                       $      11,066     $       8,550       $      2,516
Communication                                             16,623            16,623
Consulting fees                                          542,625           542,625
Depreciation                                              32,072            31,530                542
Management services                                      383,000           383,000
Market development                                       211,879           210,889                990
Office                                                    38,505            38,355                150
Professional fees                                         96,338            81,695             14,643
Regulatory costs                                           3,735             3,735
Rent                                                      95,766            95,766
Travel                                                   178,989           178,586                403
                                                   -------------     -------------       ------------
Total expenses                                         1,610,589         1,591,354             19,244
                                                   -------------     -------------       ------------
Net loss                                           $  (1,610,598)    $  (1,591,354)      $    (19,244)
                                                   =============     =============       ============
Weighted average number

   of shares outstanding                               5,198,646        11,027,473          1,000,000
                                                   =============     =============       ============
Loss per share - basic and diluted                 $       (0.29)    $       (0.14)      $      (0.02)
                                                   =============     =============       ============




</TABLE>



               See accompanying notes to the financial statements.



                                       F-3
<PAGE>


ePHONE Telecom, Inc.
(Formerly IFB Corp.)

(a Development Stage Company)
Statement of Cash Flows
<TABLE>
<CAPTION>

                                                      For the         For the             For the
                                                    period from        year             period from
                                                   inception to        ended           inception to
                                                    December 31,    December 31,        December 31,
                                                       1999            1999                1998
                                                   -------------     -------------       ------------
Cash flows derived from

   Operating Activities

<S>                                                <C>               <C>                 <C>
       Net loss                                    $  (1,610,598)    $  (1,591,354)      $    (19,244)
       Depreciation                                       32,072            31,530                542
       Stock issued for services rendered                  1,000                                1,000
       Stock option benefits charged
           to operations                                 402,125           402,125
       Changes in non-cash operating
           working capital
           Accounts payable                              282,899           271,826             11,073
           Accrued liabilities                           332,000           332,000
                                                   -------------     -------------       ------------
                                                        (560,502)         (553,873)            (6,629)
                                                   -------------     -------------       ------------
   Financing Activities

       Capital stock issued for cash, net                100,000           100,000
       Capital stock subscriptions received              878,000           878,000
       Advances from related parties                      91,995            79,949             12,046
                                                   -------------     -------------       ------------
                                                       1,069,995         1,057,949             12,046
                                                   -------------     -------------       ------------
   Investing Activities

       Capital assets                                   (157,546)         (152,129)            (5,417)
       Equipment purchase advances                      (269,200)         (269,200)
                                                   -------------     -------------       ------------
                                                        (426,746)         (421,329)            (5,417)
                                                   -------------     -------------       ------------
Cash, end of period                                $      82,747     $      82,747              Nil
                                                   =============     =============       ============

Non-cash activities not included in cash flows

   Additional paid-in capital resulting from
   stock option benefits charged to operations     $     402,125      $    402,125

   Stock issued for services rendered              $       1,000                         $      1,000




</TABLE>

               See accompanying notes to the financial statements.

                                       F-4

<PAGE>


ePHONE Telecom, Inc.
(Formerly IFB Corp.)

(a Development Stage Company)
Statement of Stockholders' Equity

From the date of incorporation to December 31, 1999

<TABLE>
<CAPTION>

                                 Common Shares           Additional
                                                          Paid-In
                             Shares        Amount         Capital          Deficit        Total
                           ----------   -----------     -----------     ------------   -------------
Common stock
   issued by offering
<S>                      <C>           <C>             <C>            <C>            <C>
   at $0.001 per share      1,000,000   $     1,000                                    $       1,000

Net loss for the period
   from inception to
   December 31, 1998                                                    $    (19,244)        (19,244)
                           ----------   -----------     -----------     ------------   -------------
Balance,
   December 31, 1998        1,000,000         1,000                          (19,244)        (18,244)

Common stock
   issued for cash          3,000,000         3,000     $    97,000                          100,000

Stock Dividend              8,000,000         8,000                           (8,000)              0

Market value of
   options issued
   to non-employees                                         402,125                          402,125

Net loss
   for the year ended
   December 31, 1999                                                      (1,591,354)     (1,591,354)
                           ----------   -----------     -----------     ------------   -------------
Issued capital stock,
   December 31, 1999       12,000,000        12,000         499,125       (1,618,598)     (1,509,598)

Stock subscribed for
   but not yet issued
   at $0.75 per share       1,170,667         1,171         876,829                          878,000
                           ----------   -----------     -----------     ------------   -------------
Balance,
   December 31, 1999       13,170,667   $    13,171     $ 1,375,954     $ (1,618,598)    $  (229,473)
                           ==========   ===========     ===========     ============     ===========

</TABLE>

               See accompanying notes to the financial statements.

                                       F-5
<PAGE>


ePHONE Telecom, Inc.
(Formerly IFB Corp.)

(a Development Stage Company)
Notes to the Financial Statements

December 31, 1999


1.   Operations and going concern

The Company was  incorporated  as IRA Fund Brokers  Corp.  under the laws of the
State  of  Florida  on  May  3,  1996  to  engage  in  the  business  of  global
telecommunications.  On April 6, 1998, the Company changed its name to IFB Corp.
and to ePHONE  Telecom,  Inc. on March 22, 1999.  The Company was inactive until
1998.

The Company has not yet commenced its planned  principal  operations  and it has
not yet earned any revenue.

The  Company's  current  operational  focus  is to build a  world-wide  Internet
Protocol   (IP)  network  and  to  use  that  network  to  deliver  a  range  of
telecommunications   services   to  the  end  user.   Management   is   devoting
substantially  all the resources of the company to marketing and developing this
technology.  This  development and marketing will require cash  significantly in
excess of its  current  resources.  The  ability of the  Company to develop  and
market this technology is dependent on the Company's  ability to obtain adequate
financing,  develop a commercial  saleable  technology and to achieve profitable
operation.

2.   Summary of significant accounting policies

These financial  statements are presented in U.S. dollars and in accordance with
accounting principles generally accepted in the United States.

Use of estimates

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

Capital assets

Capital assets are recorded at cost less accumulated depreciation.  Depreciation
is recorded on the straight line method at the following rates:

             Computer hardware                                  3 years
             Telecommunications equipment                     2.5 years


                                       F-6

<PAGE>


ePHONE Telecom, Inc.
(Formerly IFB Corp.)

(a Development Stage Company)
Notes to the Financial Statements

December 31, 1999


2.   Summary of significant accounting policies (Continued)

Financial instruments

The Company has various  financial  instruments that include cash,  payables and
amounts due to related  parties.  It was not  practicable  to estimate  the fair
value of the  amounts  due to  related  parties.  The  carrying  values of other
financial instruments approximate their fair value.

Deferred income taxes

Deferred income taxes are provided for significant  carryforwards  and temporary
differences  between  the tax basis of an asset or  liability  and its  reported
amount in the  financial  statements  that will result in taxable or  deductible
amounts in future periods.  Deferred tax assets or liabilities are determined by
applying presently enacted tax rates and laws. A valuation allowance is required
when it is more likely  than not that some  portion or all of the  deferred  tax
asset will not be realized.

Equity transactions (or stock options)

The  Company  accounts  for stock  options  under SFAS No. 123,  Accounting  for
Stock-Based  Compensation,  which contains a fair value-based method for valuing
stock-based compensation that entities may use, which measures compensation cost
at the grant date based on the fair  value of the  award.  Compensation  is then
recognized  over the  service  period,  which is  usually  the  vesting  period.
Alternatively, the standard permits entities to continue accounting for employee
stock options and similar equity  instruments under Accounting  Principles Board
(APB)  Opinion 25,  Accounting  for Stock  Issued to  Employees.  Entities  that
continue to account for stock  options using APB Opinion 25 are required to make
pro forma  disclosures  of net income  and  earnings  per share,  as if the fair
value-based method of accounting  defined in SFAS No. 123 had been applied.  The
Company's employee stock option plans are accounted for under APB Opinion 25.

3.   Related party transactions

The Company had the following  transactions,  recorded at their exchange amount,
with related parties:

a)   Incurred $383,000 (1998: Nil) for management services provided by companies
     in which certain directors have a controlling interest.
b)   Paid consulting fees of $117,000  (1998:  Nil) to certain  directors of the
     Company.


                                       F-7
<PAGE>

ePHONE Telecom, Inc.
(Formerly IFB Corp.)

(a Development Stage Company)
Notes to the Financial Statements

December 31, 1999


3.   Related party transactions (Continued)

At December 31, 1999 the following balances with companies controlled by certain
officers and/or directors were outstanding:

         Due to Access International Capital Corporation       $        100
         Due to AXON Management                                      74,670
         Due to Independent Management Consultants of BC              3,225
         Due to Fraser Leishman                                       6,000
         Due to Management Services of Arizona                        8,000

There are no fixed terms of repayment
<TABLE>
<CAPTION>


4.   Capital assets                                                        1999               1998
                                                                           ----               ----

                                                      Accumulated           Net                Net
                                        Cost         Depreciation       Book Value         Book Value
                                   ------------     ------------      ------------       ------------
<S>                                <C>              <C>               <C>                <C>
Computer hardware                  $     19,820     $      4,527      $     15,293       $      4,875
Telecommunications
   equipment                            137,726           27,545           110,181
                                   ------------     ------------      ------------       ------------
                                   $    157,546     $     32,072      $    125,474       $      4,875

</TABLE>

5.   Capital stock

Private placement

The Company has agreed to issue  1,350,000  shares at $0.75 per share to certain
private investors  (including some of the directors and officers)  pursuant to a
Regulation S private  placement.  These shares to be issued include a warrant to
purchase a further 1,350,000 shares at $1.25 per share. These shares are subject
to a one year hold. As at December 31, 1999, subscriptions had been received for
1,170,667 for $878,000.  Subsequent to December 31, 1999, the remaining  179,333
shares were subscribed for $134,500.

Stock options

The Company has granted  2,250,000 options to purchase common stock at $0.50 per
share to directors and officers of the company.


                                       F-8

<PAGE>

ePHONE Telecom, Inc.
(Formerly IFB Corp.)

(a Development Stage Company)
Notes to the Financial Statements

December 31, 1999


5.   Capital stock (Continued)

Had  compensation  cost for the plans been determined based on the fair value of
the options at the grant dates  consistent  with the method of SFAS No. 123, the
Company's net loss and loss per share of common stock would have been reduced to
the pro forma amounts indicated below:

                                                   For the year ended
                                                   December 31, 1999

     Net loss                               As reported        $ (1,591,354)
                                            Pro forma            (2,315,179)

     Loss per share of common stock         As reported        $     (0.14)
                                            Pro forma                (0.21)

The company has also granted 1,250,000 options to purchase common stock at $0.50
per share to consultants.  The company recorded  $402,125 in consulting  expense
for the year ended  December 31,  1999,  which is equal to the fair value of the
options.

The fair  value of each  option  granted is  estimated  on the date of the grant
using  the  Black-Scholes  options-pricing  model  with the  following  weighted
average  assumptions  used for grants in 1999:  dividend  yield of 0%,  expected
volatility of 98%, the risk free  interest rate of 5.64% for 1999,  and expected
lives of 3 years for the options.
<TABLE>
<CAPTION>

A summary as of December 31, 1999 is presented below:

                                                                              Weighted Average
                                                               Shares          Exercise Price
                                                              ---------          ----------
     Outstanding, beginning of year
<S>                                                           <C>              <C>
         Granted                                              3,500,000            $   0.50
         Exercised
         Forfeited
                                                              ---------          ----------
     Outstanding, end of year                                 3,500,000          $     0.50
                                                              ---------          ----------
     Options exercisable at year-end                          3,500,000          $     0.50
                                                              =========          ==========
     Weighted average fair value of
         Options granted during year                                             $     0.32
                                                                                 ==========
     Weighted average remaining

         contractual life (years)                                                      2.50
                                                                                 ==========
</TABLE>

                                       F-9

<PAGE>

ePHONE Telecom, Inc.
(Formerly IFB Corp.)

(a Development Stage Company)
Notes to the Financial Statements

December 31, 1999

5.   Capital stock (Continued)

Reserved shares

The  Company  intends  to  issue  in  escrow   14,000,000  shares  for  no  cash
consideration,  which will be released in four  tranches,  conditional  upon the
company's  operations  reaching a series of  performance  targets.  The  targets
envisioned pertain to achieving levels of operations defined by reference to the
degree of  development of the operating  network and  cumulative net sales.  The
recipients  of  these  escrowed   performance  shares  will  include  directors,
executive officers, non-executive officers and individuals providing services to
the company.

At December 31, 1999 no part of the network was  operational and no revenues had
been generated, and as such no shares were issuable. Reservation of these shares
and their issue is dependent  upon  finalizing an agreement and receiving  board
approval,  and  upon  receiving  shareholder  approval  of an  amendment  to the
Company's  Articles  of  Incorporation  in  order  to  increase  the  number  of
authorized common shares.

6.   Income taxes

The  potential  tax  benefits  of the  losses  carried  forward  are offset by a
valuation allowance of the same amount as there is substantial  uncertainty that
the losses carried forward will be utilized before their expiry.

7    Contingency

The Company is involved in arbitration relating to the termination of the former
President and Chief Operating Officer.  The claim against the company is for the
issue of 1,500,000 common shares and 500,000 options to purchase common stock at
$0.50 per share.  Management  does not  anticipate  that the outcome will have a
material impact on earnings or financial position.

                                      F-10
<PAGE>


ePHONE Telecom, Inc.
(Formerly IFB Corp.)

(a Development Stage Company)
Notes to the Financial Statements

December 31, 1999

8.   Subsequent events

1)   Subsequent  to December  31, 1999,  the Company  issued  7,851,239  Special
     Warrants  at $1.10 for total cash  consideration  of  $8,636,363.  The cash
     consideration to be received will be reduced by an 8% agent's commission of
     $690,909.  Also  12.5% of the funds  raised or  $1,079,545  will be held in
     trust until the Company meets its obligation to commence trading of shares.
     In  addition  to the 8%  commission  the agent has been  granted a 24 month
     option to purchase 250,000 common shares exercisable at $1.60 per share.

     Each Special Warrant is exchangeable  for one share in the capital stock of
     the Company and one additional warrant to purchase one further share of the
     Company at $1.60 per share until March 31, 2002.

2)   Subsequent to December 31, 1999,  the Company  formed a strategic  alliance
     with Array Telecom  Corporation and Comdial  Corporation.  The Company paid
     $2,650,000  for Array Telecom  Corporation's  capital  assets and access to
     technology and signed a license  agreement to pay a further  $2,180,000 for
     technology  over the next 5 years with  $180,000  due in the first year and
     $500,000 in each of the next four years.  Additional  royalty payments will
     be payable to the extent that 2% of gross sales as defined in the agreement
     exceed these further  payments for technology.  As part of the arrangement,
     the company has agreed to pay  compensation  of  $350,000 to  employees  of
     Array Telecom Corporation as compensation for benefits forfeited by them as
     a result of the creation of the strategic alliance.