UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                   For the quarterly period ended June 30, 2000

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
    EXCHANGE ACT OF 1934

               For the transition period from         to
                                              -------    -------

                        Commission file number 000-27967

                     Integrated Communication Networks, Inc.
             (Exact Name of Registrant as Specified in Its Charter)

                      Nevada                                     33-0670130
         (State or Other Jurisdiction of                     (I.R.S. Employer
         Incorporation or Organization)                      Identification No.)

        27061 Aliso Creek Road, Suite 100
              Aliso Viejo, California                               92656
      (Address Principal Executive Offices)                       (Zip Code)

                                 (949) 349-1770
              (Registrant's telephone number, including area code)


    Indicate  by check mark  whether  the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO / /

    The number of shares of the Registrant's Common Stock outstanding as of July
31, 2000 was approximately 5,889,231 shares.



<PAGE>

                                    TABLE OF CONTENTS                       PAGE
               ------------------------------------------------------------ ----

                              PART I-FINANCIAL INFORMATION

Item 1.        Financial Statements........................................ **
Item 2.        Management's Discussion and Analysis of Financial Condition
                 and Results of Operations................................. 1
Item 3.        Quantitative and Qualitative Disclosures About Market
                 Risk...................................................... 6

                                PART II-OTHER INFORMATION

Item 1.        Legal Proceedings........................................... 6


Signatures     ............................................................ 6


                              PART I-FINANCIAL INFORMATION

ITEM 1.**

Index to Financial Statements:

                                                                          PAGE
                                                                          ----
Consolidated balance sheets as of June 30, 2000 (unaudited)
and December 31, 1999                                                      F-1

Consolidated statements of operations for the three and six months
ended June 30, 2000 and 1999 (unaudited)                                   F-2

Statement of Redeemable  Convertible  Preferred Stock and
Stockholders'  Equity from inception (January 16, 1997) through
December 31, 1997, Year-ended December 31, 1998 and Consolidated
Statement of Redeemable  Convertible  Preferred Stock and
Stockholders'  Equity (Deficit) for the year ended December 31, 1999
and the six months ended June 30, 2000 (unaudited)                         F-3

Consolidated Statements of Cash Flows for the three and six months
ended June 30, 2000 and 1999 (unaudited)                                   F-4

Notes to Consolidated Financial Statements                                 F-5




<PAGE>
             INTEGRATED COMMUNICATION NETWORKS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


                                                     DECEMBER 31,    JUNE 30,
                                   ASSETS                1999          2000
                                                    -------------  -------------
                                                     (Unaudited)
Current assets:
   Cash                                             $  2,552,113   $    243,212
   Accounts Receivable                                         -         29,095
   Receivable from related party                         332,006        126,007
   Note Receivable                                             -        474,250
   Prepaid and other current assets                      293,032         95,281
                                                    -------------  -------------
     Total current assets                              3,177,151        967,845
                                                    -------------  -------------

Property and equipment:
   Operating equipment                                 2,825,700      2,308,350
   Equipment, furniture and software
       under capital leases                              549,685      1,305,526
   Leasehold improvements                                114,490        117,669
   Furniture, fixtures and equipment                      60,524        429,765
                                                    -------------  -------------
                                                       3,550,399      4,161,310
Less - Accumulated depreciation and amortization        (459,428)      (719,830)
                                                    -------------  -------------
                                                       3,090,971      3,441,480
                                                    -------------  -------------

   Goodwill, net                                       8,907,517      8,596,548
   Other noncurrent assets                               280,377        302,228
                                                    -------------  -------------
     Total noncurrent assets                          12,278,865     12,340,256
                                                    -------------  -------------
                                                    $ 15,456,016   $ 13,308,101
                                                    =============  =============

              LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
                            AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                 $    823,860   $  2,170,887
   Accrued expenses                                      526,074        972,774
   Unearned revenue                                      334,130         80,069
   Long-term debt-current portion                         82,696         58,697
   Capital lease obligations-current portion             114,078        345,097
                                                    -------------  -------------
   Total current liabilities                           1,880,838      3,627,524
                                                    -------------  -------------


Long-term debt, net of current portion (Note 2)        5,034,813      5,030,089
Capital lease obligations, net of current portion        209,836        617,499
Commitments and contingencies (Note 3)                         -              -
Redeemable, convertible preferred stock:
    Series A 8%  redeemable  convertible  preferred
    stock,  $.01 par  value per share:
      Authorized - 50,000 shares
      Issued and outstanding - no shares at
          December 31, 1999 and June 30, 2000                 -               -
    Series A-1 12% redeemable convertible preferred
        stock, $.01 par value per share:
      Authorized - 7,500,000 shares at December 31,
          1999 and June 30, 2000
      Issued and outstanding-3,167,974 at December 31,
          1999 and June 30, 2000                       4,847,000      4,847,000
    Series A-1 preferred stock subscribed               (218,500)             -
Stockholders' equity:
    Common stock, $.01 par value:
      Authorized - 250,000,000 shares
      Issued and outstanding 5,867,780 and 5,889,231
          at December 31, 1999 and
          June 30, 2000, respectively                     58,677         58,892
     Common stock subscribed                            (105,750)             -
Additional paid-in capital                            22,858,958     22,925,778
Accumulated deficit                                  (18,996,555)   (23,685,380)
Treasury stock                                          (113,301)      (113,301)
                                                    -------------  -------------
    Total stockholders' equity                         3,702,029       (814,011)
                                                    -------------  -------------
                                                    $ 15,456,016   $ 13,308,101
                                                    =============  =============

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

                                       F-1
<PAGE>
<TABLE>
             INTEGRATED COMMUNICATION NETWORKS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>


                                     For the three months ended         For the six months ended
                                             June 30,                           June 30,
                                     ---------------------------       ---------------------------
                                          1999          2000               1999          2000
                                     -------------  ------------       -------------  ------------
<S>                                  <C>             <C>               <C>            <C>
                                             (Unaudited)                        (Unaudited)

Revenues                             $    259,572   $    773,135       $    301,679   $  1,396,345

Operating expenses:
   Data communications and
     telecommunications                   364,781      1,158,348            463,685      2,550,589
   Selling, general & administrative
     expenses                             785,129      1,694,951          1,201,230      2,950,804
   Depreciation and amortization          202,423        353,344            257,042        726,225
   Write-down of impaired assets                -              -          2,554,819             -
                                     -------------  -------------      -------------  -------------
       Total operating expenses         1,352,333      3,206,643          4,476,776      6,227,618
                                     -------------  -------------      -------------  -------------
Loss from operations                   (1,092,761)    (2,433,507)        (4,175,097)    (4,831,272)
                                     -------------  -------------      -------------  -------------
Other income (expense):
   Interest income                            434              4                557          9,289
   Interest expense                       (39,598)      (272,382)           (48,992)      (513,439)
   Realized gain on sale
      of investment                             -             (0)                 -        992,329
   Gain on casualty loss, net             131,006              -            131,006              -
   Loss on sale of assets                       -             (0)                 -       (346,116)
   Write-off of assets                          -              -           (216,600)             -
   Other income (expense), net                  -         (7,286)                              385
                                     -------------  -------------      -------------  -------------
                                           91,842       (279,664)          (134,029)       142,448
                                     -------------  -------------      -------------  -------------
Net loss                             $ (1,000,919)  $ (2,713,172)      $ (4,309,126)  $ (4,688,825)
                                     =============  =============      =============  =============

Basic and diluted weighted average
    common shares outstanding           2,233,558      5,867,780          3,072,152      5,867,780
                                     =============  =============     ==============  =============
Basic and diluted net loss per
    share                            $      (0.45)  $      (0.46)      $      (1.40)  $      (0.80)
                                     =============  =============     ==============  =============

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

                                       F-2

</TABLE>

<PAGE>

<TABLE>
                                    INTEGRATED COMMUNICATION NETWORKS, INC. AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED
                                                 STOCK AND STOCKHOLDERS' EQUITY
                             FROM YEAR ENDED DECEMBER 31, 1998 THROUGH YEAR ENDED DECEMBER 31, 1999
                                        AND FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Unaudited)

<CAPTION>
                                              SERIES A 8% REDEEMABLE
                                                   CONVERTIBLE                    SERIES A-1 12% REDEEMABLE
                                                 PREFERRED STOCK                 CONVERTIBLE PREFERRED STOCK
                                           ----------------------------  -------------------------------------------
                                               SHARES        AMOUNT         SHARES         AMOUNT       SUBSCRIBED
                                           -------------  -------------  -------------  -------------  -------------
<S>                                        <C>            <C>               <C>         <C>            <C>

Balance, December 31, 1998                            -              -              -              -              -
                                           -------------  -------------  -------------  -------------  -------------
Stock to be issued for
  assets acquired January
  1999                                                -              -              -              -              -

Stock cancelled                                       -              -              -              -              -

Stock issued for acquisition
  of PhoneXchange, Inc.                               -              -              -              -              -

Common stock issued for
  conversion of debt                                  -              -              -              -              -

Stock issued for receivable                           -              -              -              -              -

Effective options issued for services                 -              -              -              -              -

Stock issued for cash and
  receivable                                          -              -      3,267,974      5,000,000       (218,500)

Stock issued to Directors for services                -              -              -              -              -

Stock issued for services                             -              -              -              -              -

Stock issued for cash                                 -              -              -              -              -

Conversion of preferred
  stock                                               -              -       (100,000)      (153,000)             -

Purchase of common stock                              -              -              -              -              -

Stock issued for additional
  shares in phoneXchange, Inc.                        -              -              -              -              -

Net loss                                              -              -              -              -              -

                                           -------------  -------------  -------------  -------------  -------------
Balance, December 31, 1999                            -   $          -      3,167,974   $  4,847,000   $   (218,500)
                                           =============  =============  =============  =============  =============

Proceeds from subscription                            -              -              -              -        218,500

Stock issued for true-up (Note 5)                     -              -              -              -              -

Net loss                                              -              -              -              -              -

                                           -------------  -------------  -------------  -------------  -------------
Balance, June 30, 2000, (Unaudited)                   -   $          -      3,167,974   $  4,847,000   $          -
                                           =============  =============  =============  =============  =============

(CONTINUED BELOW)



<PAGE>


                                                                                                                          TOTAL
                                             COMMON STOCK                  ADDITIONAL      RETAINED                       STOCK-
                             -------------------------------------------     PAID-IN       EARNINGS       TREASURY       HOLDERS'
                                SHARES          AMOUNT      SUBSCRIBED       CAPITAL       (DEFICIT)       STOCK          EQUITY
                             -------------  -------------  -------------  -------------  -------------  -------------  -------------
<S>                          <C>            <C>            <C>            <C>            <C>            <C>            <C>

Balance, December 31,
  1998                          5,262,206         52,620              -      8,047,480     (8,107,099)             -         (6,999)
                             -------------  -------------  -------------  -------------  -------------  -------------  -------------
Stock to be issued for
  assets acquired                 441,600          4,416              -      2,589,984              -              -      2,594,400

Stock cancelled                (3,475,000)       (34,750)             -         34,750              -              -              -

Stock issued for acquisition
  of PhoneXchange, Inc.           921,428          9,215              -      6,440,788              -              -      6,450,003

Common stock issued for
  conversion of debt               25,296            253              -        132,550              -              -        132,803

Stock issued for receivable       141,000          1,410       (105,750)       104,340              -              -              -

Effective options issued
  for services                          -              -              -      2,250,000              -              -      2,250,000

Stock issued for cash and
  receivable                            -              -              -              -              -              -              -

Stock issued to Directors
for services                       10,500            105              -         56,164              -              -         56,269

Stock issued for services          23,500            235              -        142,528              -              -        142,763

Stock issued for cash           1,332,000         13,320              -        985,680              -              -        999,000

Conversion of preferred
  stock                         1,000,000         10,000              -        143,000              -              -        153,000

Purchase of common stock                -              -              -              -              -       (113,301)      (113,301)

Stock issued for additional
  shares in phoneXchange, Inc.    185,250          1,853              -      1,931,694              -              -      1,933,547

Net loss                                -              -              -              -    (10,889,456)             -    (10,889,456)

                             -------------  -------------  -------------  -------------  -------------  -------------  -------------
Balance, December 31, 1999      5,867,780   $     58,677   $   (105,750)  $ 22,858,958   $(18,996,555)  $   (113,301)  $  3,702,029
                             -------------  -------------  -------------  -------------  -------------  -------------  -------------

Proceeds from subscription              -              -        105,750              -              -              -        105,750

Stock issued for true-up           21,451            215              -         66,820              -              -         67,035

Net loss                                -              -              -              -     (4,688,825)             -     (4,688,825)

                             -------------  -------------  -------------  -------------  -------------  -------------  -------------
Balance, June 30, 2000,
 (Unaudited)                    5,889,231   $     58,892   $          -   $ 22,925,778   $(23,685,380)  $   (113,301)  $   (814,011)
                             =============  =============  =============  =============  =============  =============  =============


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


                                                                             F-3
</TABLE>

<PAGE>
<TABLE>
             INTEGRATED COMMUNICATION NETWORKS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>
                                     For the three months ended        For the six months ended
                                              June 30,                            June 30,
                                     ----------------------------      ----------------------------
                                          1999           2000              1999           2000
                                     -------------  -------------      -------------  -------------
<S>                                  <C>             <C>               <C>             <C>
                                             (Unaudited)                        (Unaudited)

Cash Flows From Operating Activities:
  Net loss                           $ (1,000,919)  $ (2,713,172)      $ (4,309,126)  $ (4,688,825)
  Adjustments to reconcile net loss
    to net cash used in operating
    activities:
  Depreciation and amortization           202,423        353,344            257,042        726,224
  Write-down of impaired assets                 -              -          2,554,819              -
  Write-off assets casualty loss           39,581              -             39,581              -
  Gain on sale of marketable security           -              -                  -       (992,329)
  Loss on sale of equipment                     -              -                  -        346,116
  Shares issued for services                    -         67,034                  -         67,034
  Decrease (increase) in assets:
    Accounts receivable                    29,585         95,695             21,456         20,133
    Notes receivable                            -        230,201                  -        198,328
    Prepaid expenses and other
      current assets                      124,633        (48,281)          (234,298)       105,216
  Increase (decrease) in liabilities:
    Accounts payable                      129,330        915,558             91,355      1,351,865
    Accrued expenses                      (12,057)       217,946             93,879        440,708
    Unearned revenue                          (66)       (70,914)            (1,170)      (254,059)
    Customer deposits                       1,000          7,500              1,000          7,500
    Other advance                               -              -           (317,802)             -
    Payable to related party              138,886              -            127,705              -
                                     -------------  -------------      -------------  -------------
     Net cash used in operating
     activities                          (347,604)      (945,089)        (1,675,559)    (2,672,089)
                                     -------------  -------------      -------------  -------------

Cash Flows From Investing Activities:
  Purchases of property and equipment    (748,534)      (309,670)        (1,039,461)      (384,644)
  Proceeds from sale of equipment               -              -                  -         50,000
  Purchase of investment in marketable
      security                                  -              -                  -     (1,000,000)
  Proceeds from sale of marketable
      security                                  -      1,200,750                  -      1,525,750
                                     -------------  -------------      -------------  -------------
    Net cash used in investing
    activities                           (748,534)       891,080         (1,039,461)       191,106
                                     -------------  -------------      -------------  -------------

Cash Flows From Financing Activities:
  Principal payments of capital lease
    obligation                             (9,814)       (30,927)           (18,920)      (123,444)
  Proceeds from issuance of
    long-term debt                        901,390              -            901,390              -
  Principal payments on long-term debt    (55,336)        (8,032)           (61,025)       (28,724)
  Proceeds from preferred stock
    subscription                          291,685        218,500          1,950,000        218,500
  Proceeds from issuance of common
    stock                                 750,000          5,750            750,000        105,750
                                     -------------  -------------      -------------  -------------
    Net cash provided by financing
      activities                        1,877,925        185,291          3,521,445        172,081
                                     -------------  -------------      -------------  -------------
Increase (decrease) in cash               781,787        131,282            806,425     (2,308,901)
                                     -------------  -------------      -------------  -------------
Cash at the beginning of the period        24,638        111,929                  -      2,552,113
                                     -------------  -------------      -------------  -------------
Cash at the end of the period        $    806,425   $    243,212       $    806,425   $    243,212
                                     =============  =============      =============  =============
Supplemental disclosure of cash flow
  information:
  Cash paid during the year for
    interest                         $      9,565   $     21,730       $     18,959   $     59,943
                                     =============  =============      =============  =============
Supplemental disclosure of noncash
  investing and financing activities:
  Equipment and software acquired
    under capital lease obligations                            -                           755,733
                                     =============  =============      =============  =============
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                       F-4
</TABLE>



<PAGE>


            INTEGRATED COMMUNICATION NETWORKS, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                  June 30, 2000
                                   (Unaudited)

(1) GENERAL

     The  financial  statements  included  herein  are  unaudited  and have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and Securities and Exchange Commission ("SEC")  regulations.
Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been  condensed  or  omitted  pursuant  to such rules and  regulations.  In
management's  opinion,  the financial  statements  reflect all adjustments (of a
normal and recurring nature) which are necessary to present fairly the financial
position,  results of  operations,  stockholders'  equity and cash flows for the
interim periods.  These financial  statements should be read in conjunction with
the audited  financial  statements  for the year ended December 31, 1999, as set
forth in the Company's  Annual Report on Form 10-K.  Certain prior year balances
have been reclassified to conform to the current year presentation.  The results
for the three and six months ended June 30, 2000 are not necessarily  indicative
of the results that may be expected for the year ending December 31, 2000.

         (a)      FORMATION AND DESCRIPTION OF BUSINESS

     The  Company  began  operation  in  February  1999  through  the  Company's
acquisition of phoneXchange,  Inc. phoneXchange is a facilities-based  wholesale
carrier that provides switched voice and data services,  primarily to U.S.-based
carriers. phoneXchange provides domestic and international long distance service
through  foreign  termination  relationships,  international  gateway  switches,
leased and owned transport  facilities and resale  arrangements  with other long
distance providers.

         (b)      GOING CONCERN

     Management has spent a significant  amount of time identifying,  evaluating
and pursuing strategic acquisitions to accomplish this objective. To achieve the
objectives outlined in its plan, the Company must obtain sufficient financing to
obtain and  complete  its  long-distance  network  facilities  and,  ultimately,
achieve  a  sufficient   level  of  sales  and   profitability  to  support  its
contemplated  operations.  Management is currently  pursuing  various  financing
alternatives. However, no assurance can be provided that management will be able
to  obtain  financing  on terms  acceptable  to the  Company,  or at all.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going  concern.  The  accompanying  financial  statements  do  not  include  any
adjustments  to reflect the possible  future effects on the  recoverability  and
classification  of assets or the amounts and  classification of liabilities that
may result from the outcome of this uncertainty.

         (c)      PRINCIPLES OF CONSOLIDATION

     The consolidated  financial  statements  include the accounts of Integrated
Communication  Networks, Inc. and its majority-owned  subsidiary,  phoneXchange,
Inc. and its wholly owned subsidiaries  Internet Call Centers,  Inc. and C3.Com,
Inc.  All  significant   inter-company   transactions  and  balances  have  been
eliminated.    Minority   interest   represents   the   minority   shareholders'
proportionate  share of the  equity or income  of the  Company's  majority-owned
subsidiary phoneXchange, Inc.

         (d) CONCENTRATION OF CUSTOMERS

         The loss of any significant  customer could have a significant negative
impact on our revenues from operations.

         (e)      RECLASSIFICATIONS

         Certain   reclassifications  have  been  made  to  the  1999  financial
statements to conform to the June 2000 presentation.


2.       LONG-TERM DEBT

         Long-term debt consists of the following:
                                                                  June 30, 2000
(a)      7.5% note payable to a vendor. Principal and interest     -----------
are payable in monthly installments of $6,525, December 2001,
secured by related equipment.                                         $  50,761

(b)      10% note payable to the Company's landlord. Principal and
interest are payable in monthly installments of $948 through
July 2004, secured by leasehold improvements.                            38,024

(c)      In November 1999, the Company sold $5.0 million
principal amount of its 4% Convertible Debenture, and received
net proceeds of $4,480,000 on December 2, 1999. The Convertible
Debenture is due on December 2, 2004.                                 5,000,000
                                                                     -----------
                                                                      5,088,785
                                                                     -----------

         Less:  Current maturities                                      (58,697)
                                                                     -----------

                                                                     $5,030,088
                                                                     ===========


         Aggregate  maturities of long-term  debt over the next five years is as
follows:

                  Year Ending
                  June 30:                          Amount
                  -----------                     ----------

                  2001                            $   58,697
                  2002                                 8,766
                  2003                                 9,684
                  2004                             5,010,698
                  2005                                   940
                                                  ----------
                                                  $5,088,785
                                                  ==========



3.       COMMITMENTS AND CONTINGENCIES

         (a) Master Lease

     On July 30, 1999, the Company and Lucent Technologies, Inc. InterNetworking
Systems  signed a Master  Lease  Agreement  pursuant to which  Lucent  agreed to
provide  the  Company  $3 million in credit for  leasing  Lucent  equipment.  On
February 7, 2000,  Lucent  amended this agreement to increase the Company's line
of  credit  to $10  million.  As of June 30,  2000,  the  Company  has  received
equipment  eligible to be financed  under the Master Lease  Agreement  valued at
approximately  $5 million but has not completed  type testing and  acceptance of
the equipment.  Upon type testing and  acceptance,  the equipment will be placed
under  operating  leases.  As of June 30, 2000,  the Company had no  outstanding
borrowings under the Master Lease Agreement.

         (b)      Operating Leases

     The  Company  leases  office  space for its  co-location  space,  dedicated
private  telephone  lines,  equipment and other items under  various  agreements
expiring through 2005.

     Rent  expense  included  in  the  unaudited   consolidated   statements  of
operations was  approximately  $110,302 and $77,049,  for the three months ended
June 30, 2000 and 1999,  respectively and  approximately  $193,766 and $114,466,
for the six months ended June 30, 2000 and 1999, respectively.

         (c)      Capital Leases

     The Company is obligated under various capital lease agreements for certain
computer software, office furniture,  telecommunications switching equipment and
desktop workstations.


     Future minimum lease payments  associated with the leases described herein,
including renewal options are as follows:

                                                          Dedicated      Other
Year Ending                                  Capital       Private     Operating
June 30:                                     Leases        Lines         Leases
-----------------                          -----------  -----------  -----------
2001                                       $  518,199   $  954,784   $  516,673
2002                                          414,932      241,262      444,195
2003                                          217,452       16,662      410,695
2004                                           59,321          -0-      410,695
2005                                           29,327          -0-      308,020
Thereafter                                        -0-          -0-          -0-
                                           -----------  -----------  -----------
Total minimum lease payments               $1,239,231   $1,212,708   $2,090,278
                                                        ===========  ===========
   Less: amount representing interest        (276,843)
Net present value of minimum
  lease payments                              962,388
                                           -----------
   Less: current portion                     (356,554)
                                           -----------
Long-term capitalized lease obligation     $  605,834
                                           ===========
          (d)      Legal  Matters

     On August 30, 1999, J&W Ventures, Inc. filed a claim against the Company in
the Superior Court of Los Angeles County, alleging that the Company is in breach
of a contract to purchase telecommunications equipment. The plaintiff is seeking
performance   of  the   contract   plus   damages.   The  Company  has  filed  a
cross-complaint  seeking  rescission  and damages,  asserting that J&W Ventures,
Inc.  breached certain  representations  and warranties.  The Company intends to
vigorously contest the litigation and to pursue its own remedies fully. While no
assurance  can be given  regarding  the  outcome  of this  matter,  the  Company
believes  that the  Company  has strong and  meritorious  defenses to the claims
asserted.  However,  a determination that the Company breached its contract with
J&W  Ventures,  Inc.  could  have a  material  adverse  effect on its  business,
operating results and financial condition.

     Pursuant to the J&W Ventures  Asset  Purchase  Agreement,  the Company paid
$300,000 in cash,  issued  441,600  shares of common stock and was  obligated to
designate and issue 850,000 shares of a new series of preferred stock, $2.50 par
value.  Pending the outcome of the litigation  between the parties,  the Company
has  placed  a stop  transfer  order on the  common  stock  issued,  and has not
designated  or issued  any  preferred  stock to the J&W  Ventures  sellers.  The
Company has not made any reserve on its balance  sheet in  connection  with this
litigation.

4.       EQUITY TRANSACTION

     In June, 2000, the Company issued 21,451 shares of restricted  common stock
pursuant to a true-up  provision related to the previous payoff of a note due by
its subsidiary in the amount of $132,804.

5.       SUBSEQUENT EVENTS

     On July 28, 2000,  the Company sold  $210,000  principle  amount of its 10%
Senior Secured Notes,  due November 1, 2000 to a shareholder.  The principle and
accrued  interest are due on the earlier of (i) November 1, 2000 or (ii) receipt
by the Company of net proceeds of $400,000 from the next financing  completed by
the Company. The note is secured by all assets of the Company.




<PAGE>

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

     OVERVIEW.   The  Company  is  an  emerging  multinational  carrier  focused
primarily on the international  long distance market. The Company seeks to offer
highly  reliable,  low-cost  switched  voice  services  on  a  wholesale  basis,
primarily  to  U.S.-based   long  distance   carriers.   The  Company   provides
international  long distance  service to various foreign  countries  through its
flexible  network  comprised  of  various  foreign  termination   relationships,
international  gateway switches,  leased transport lines and resale arrangements
with other long distance providers.

     The following  discussion  should be read in conjunction with the Company's
consolidated  audited  financial  statements  and the  unaudited  June 30,  2000
financial  statements.   Integrated  Communication  Networks,  Inc.,  which  was
incorporated on January 16, 1997 began operations through its acquisition of its
majority owned subsidiary phoneXchange, Inc. in February 1999. The Company began
offering long  distance  services on February 28, 1999 by reselling the services
of other long distance  carriers.  The Company offers domestic and international
wholesale long distance  services,  including  switched,  private line,  special
access and prepaid long distance services, to other telecommunications  carriers
and agents and  brokers  of prepaid  phone  cards.  The  Company  operates  long
distance  switching  centers in Los Angeles,  Dallas and New York.  For the year
ended December 31, 1998 and for the period from inception on January 16, 1997 to
December 31, 1997,  the Company had no revenue and no material  operations.  The
following is  management's  discussion  and analysis of financial  condition and
results of operations for the three and six months ended June 30, 1999 and 2000,
respectively.

     REVENUES.  Most of the  Company's  revenues  are  generated  by the sale of
international  long distance  services on a wholesale basis to other,  primarily
domestic, long distance providers. The Company records revenues from the sale of
long distance  services at the time of customer usage. The Company's  agreements
with its wholesale customers are short-term in duration and the rates charged to
customers  are  subject to change  from time to time,  generally  with five days
notice to the customer.

     OPERATING  EXPENSES.  The Company's primary operating expenses include data
communications  and  telecommunications   expenses  and  selling,   general  and
administrative  expenses.  The  Company  has  pursued a strategy  of  attracting
customers and building  calling volume and revenue by offering  favorable  rates
compared to other long distance  providers.  The Company  continues to lower its
data  communications  and  telecommunications  expenses  by  (i)  expanding  the
Company's  owned  network  facilities,  (ii)continuing  to utilize the Company's
sophisticated  information  systems to route calls over the most  cost-effective
routes and (iii)  leveraging  the  Company's  traffic  volumes  and  information
systems to negotiate lower variable  usage-based costs with domestic and foreign
providers of transmission capacity.

     Data  communications  and  telecommunications  expenses include those costs
associated with the transmission and termination of international  long distance
services.  Currently, a majority of transmission capacity used by the Company is
obtained on a variable,  per minute  basis.  As a result,  some of the Company's
current cost of services is variable.  The Company's  contracts with its vendors
provide that rates may fluctuate,  with rate change notice periods  varying from
five days to one year,  with certain of the Company's  longer term  arrangements
requiring  the  Company  to meet  minimum  usage  commitments  in order to avoid
penalties.  Such variability and the short-term  nature of many of the contracts
subject the Company to the possibility of  unanticipated  cost increases and the
loss of  cost-effective  routing  alternatives.  Included in the Company's  data
communications and telecommunications  expenses are accruals for rate and minute
disputes  and  unreconciled  billing  differences  between  the  Company and its
vendors.   Each  quarter   management   reviews  the  data   communications  and
telecommunications  expenses accrual and adjusts the balance for resolved items.
Data  communications and  telecommunications  expenses also includes fixed costs
associated with the leasing of network facilities.

     Selling, general and administrative expenses consist primarily of personnel
costs,  depreciation  and  amortization,   tradeshow  and  travel  expenses  and
commissions  and consulting  fees.  These expenses have been increasing over the
past year, which is consistent with the Company's recent growth,  expansion into
Latin America,  and investment in systems and  facilities.  The Company  expects
this trend to  continue,  and to include,  among  other  things,  a  significant
increase in depreciation and amortization.  Management  believes that additional
selling,  general and  administrative  expenses will be necessary to support the
expansion of the Company's network  facilities,  its sales and marketing efforts
and the Company's expansion into other international markets.

     Prices in the  international  long distance  market have declined in recent
years and, as  competition  continues to  increase,  the Company  believes  that
prices are likely to  continue to decline.  Additionally,  the Company  believes
that the  increasing  trend  of  deregulation  of  international  long  distance
telecommunications  will result in greater  competition,  which could  adversely
affect the Company's revenue per minute and gross margin.  The Company believes,
however, that the effect of such decreases in prices will be offset by increased
calling volumes and decreased costs.
                                                                             (1)
<PAGE>
     FOREIGN  EXCHANGE.  The  Company's  cost  of  long  distance  services  are
sensitive  to  foreign  currency  fluctuations.  The  Company  expects  that  an
increasing portion of the Company's revenues and expenses will be denominated in
currencies  other than U.S.  dollars,  and changes in exchange  rates may have a
significant effect on the Company's results of operations.

     FACTORS  AFFECTING  FUTURE  OPERATING  RESULTS.   The  Company's  quarterly
operating  results are difficult to forecast with any degree of accuracy because
a number of factors  subject these  results to  significant  fluctuations.  As a
result, the Company believes that period-to-period  comparisons of its operating
results  are  not  necessarily  meaningful  and  should  not be  relied  upon as
indications of future performance.

     The Company's revenues, costs and expenses have fluctuated significantly in
the past and are likely to continue to fluctuate  significantly in the future as
a result of numerous  factors.  The  Company's  revenues in any given period can
vary due to factors such as call volume  fluctuations,  particularly  in regions
with relatively high per-minute  rates, the addition or loss of major customers,
whether through  competition,  merger,  consolidation or otherwise,  the loss of
economically  beneficial  routing  options for the  termination of the Company's
traffic,  financial difficulties of major customers,  pricing pressure resulting
from  increased  competition,  and  technical  difficulties  with or failures of
portions of the Company's  network that impact the Company's  ability to provide
service to or bill its  customers.  The Company's cost of services and operating
expenses in any given  period can vary due to factors  such as  fluctuations  in
rates  charged by carriers to terminate  the  Company's  traffic,  the timing of
capital  expenditures,  and other costs  associated  with acquiring or obtaining
other  rights to switching  and other  transmission  facilities,  changes in the
Company's sales  incentive  plans and costs  associated with changes in staffing
levels of sales, marketing,  technical support and administrative  personnel. In
addition,  the  Company's  operating  results  can vary due to  factors  such as
changes in  routing  due to  variations  in the  quality of vendor  transmission
capability, loss of favorable routing options, the amount of, and the accounting
policy for,  return traffic under operating  agreements,  actions by domestic or
foreign  regulatory  entities,  the  level,  timing  and  pace of the  Company's
expansion  in  international  markets and  general  domestic  and  international
economic  and  political   conditions.   Further,   a  substantial   portion  of
transmission capacity used by the Company is obtained on a variable,  per minute
and short term basis, subjecting the Company to the possibility of unanticipated
price increases and service cancellations.  Since the Company does not generally
have  long-term  arrangements  for the  purchase  or  resale  of  long  distance
services,  and since rates fluctuate  significantly  over short periods of time,
the Company's gross margins are subject to significant short term  fluctuations.
The Company's  gross margins also may be negatively  impacted in the longer term
by competitive pricing pressures.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1999 AND 2000

     REVENUE: The Company generates the majority of its revenue from the sale of
wholesale  long distance  voice  services,  largely to other  telecommunications
carriers seeking overflow capacity,  and the sale of prepaid long distance voice
services to agents and  brokers of prepaid  phone  cards.  Revenue for the three
months ended June 30, 2000 increased  $513,563 to $773,135 from $259,572 for the
three  months  ended June 30,  1999.  This  increase  is due to the  increase in
volumes of  wholesale  long  distance  voice  services  which the Company  began
operations in February 28, 1999.  During the past several  years,  market prices
for telecommunications  services have been declining,  which is a trend that the
Company believes will likely continue.  This decline will have a negative effect
on its revenue and gross margin,  which may not be offset  completely by savings
from decreases in its cost of services.

     OPERATING  EXPENSES:  The Company's primary  operating  expense  categories
include data communications and telecommunications expenses and selling, general
and administrative expenses. Data and telecommunications include the fixed costs
of  leased  facilities,  leased  transport  lines  and  the  variable  costs  of
origination,  termination  and access services  provided  through local exchange
carriers and other long distance telecommunications  companies. Selling, general
and administrative  expenses include all  infrastructure  costs, such as selling
expenses,   customer  support,   corporate  administration,   personnel  network
maintenance,  depreciation  and  amortization and a write-off of certain assets.
Selling  expenses  include  commissions  for its direct sales  program.  Selling
expenses  also  include  commissions  paid to its dealers and agents,  which are
based on a fixed percentage of the customers' monthly billings.

     Data  communication  and  telecommunication  expenses  for the three months
ended June 30, 2000 increased $793,567 to $1,158,348 from $364,781 for the three
months ended June 30, 1999. This increase is due to the fact that in addition to
incurring  the  costs   associated  with  the   origination,   transmission  and
termination  from  other  carriers,  the  Company  has also  incurred  the costs
associated  with  establishing  its own  transmission  network  and  termination
relationships  primarily in the Latin America market.  By  establishing  its own
transmission network and termination relationships,  which became operational in
the fourth  quarter of 1999,  the  Company  believes  it will be able to carry a
significant  portion of its  international  long  distance  traffic over its own
facilities,  thereby  reducing its costs of services by  decreasing  payments to
other  carriers for the use of their  facilities.  The Company is  continuing to
install  switching and transmission  equipment,  which will allow the Company to
increase the  percentage of the long distance  services the Company  provides on
its own network, thereby improving its margins.
                                                                             (2)
<PAGE>
     Selling,  general and  administrative  expenses  for the three months ended
June 30, 2000  increased  $909,822 to  $1,694,951  from  $785,127  for the three
months ended June 30, 1999. The increase in selling,  general and administrative
expenses  is  largely  attributable  to the  significant  investments  in  human
resources  and  increased  marketing  and  sales  efforts  associated  with  the
continued expansion of its services.  Since these investments often occur before
the Company realizes  significant revenue from operations,  they have the effect
of increasing  selling,  general and administrative  expenses as a percentage of
revenue. These investments in infrastructure and support are intended to provide
the Company  with the ability to continue to expand into new  markets,  maximize
customer  retention and provide for growth.  In addition,  the Company has hired
additional personnel to facilitate the deployment of its network.

     Depreciation and amortization is primarily related to switching  equipment,
facilities,  computer  equipment and software and is expected to increase as the
Company incurs substantial capital expenditures to continue the expansion of its
network facilities. Depreciation and amortization also includes the amortization
of  goodwill  related to its  acquisition  of  phoneXchange,  Inc.  and  certain
telecommunications  equipment.  Depreciation and  amortization  expenses for the
three months ended June 30, 2000  increased  $150,920 to $353,343  from $202,423
for the three  months  ended June 30 1999.  The  increase  in  depreciation  and
amortization is largely  attributable due to capital expenditures related to the
establishment  and  expansion  of its  network  operations  center  and  support
infrastructure  to accommodate  increased  traffic  volume and expanded  service
offerings.

     INTEREST  INCOME  AND  INTEREST  EXPENSE:  Interest  expense  is  primarily
comprised  of interest  incurred  on the  Company's  long-term  debt and various
capital leases. Interest expense increased by $232,784 to $272,382 for the three
months  ended June 30,  2000 from  $39,598 for the three  months  ended June 30,
1999.  This  increase  was  attributable  to the new  borrowings  under  certain
long-term  notes, the proceeds of which were primarily used for working capital.
Interest  income  is  primarily  composed  of  income  earned  on cash  and cash
equivalents.  Interest income decreased by $430 to $4 for the three months ended
June 30, 2000 from $434 for the three months ended June 30, 1999.  This decrease
was primarily attributable to reduced interest earnings on the Company's cash.

     INCOME TAXES:  The Company  generated a net loss for the three months ended
June 30,  2000 and 1999.  Based on the  Company's  plans to expand  through  the
construction and expansion of its network,  customer base and product offerings,
the Company expects this trend to continue.  Given these  circumstances  and the
level of taxable  income  expected  to be  generated  from  reversing  temporary
differences,  the Company has established a valuation allowance for the deferred
tax assets associated with these net operating losses.

SIX MONTHS ENDED JUNE 30, 1999 AND 2000

     REVENUE: The Company generates the majority of its revenue from the sale of
wholesale  long distance  voice  services,  largely to other  telecommunications
carriers seeking overflow capacity,  and the sale of prepaid long distance voice
services  to agents and  brokers of prepaid  phone  cards.  Revenue  for the six
months ended June 30, 2000 increased  $1,094,666 to $1,396,345 from $301,679 for
the six months  ended June 30,  1999.  This  increase  is due to an  increase in
volumes of wholesale  long distance  voice services and due to the fact that the
Company began  operations in February 28, 1999.  During the past several  years,
market prices for  telecommunications  services have been declining,  which is a
trend that the Company believes will likely  continue.  This decline will have a
negative  effect  on its  revenue  and  gross  margin,  which  may not be offset
completely by savings from decreases in its cost of services.

     OPERATING  EXPENSES:  The Company's primary  operating  expense  categories
include data communications and telecommunications expenses and selling, general
and administrative expenses. Data and telecommunications include the fixed costs
of  leased  facilities,  leased  transport  lines  and  the  variable  costs  of
origination,  termination  and access services  provided  through local exchange
carriers and other long distance telecommunications  companies. Selling, general
and administrative  expenses include all  infrastructure  costs, such as selling
expenses,   customer  support,   corporate  administration,   personnel  network
maintenance,  depreciation  and  amortization and a write-off of certain assets.
Selling  expenses  include  commissions  for its direct sales  program.  Selling
expenses  also  include  commissions  paid to its dealers and agents,  which are
based on a fixed percentage of the customers' monthly billings.

     Data communication and telecommunication  expenses for the six months ended
June 30, 2000  increased  $2,086,904  to  $2,550,589  from  $463,685 for the six
months  ended June 30, 1999.  This  increase is due to the fact that the Company
began  operations  on February 28, 1999,  increased  costs  associated  with the
origination,  transmission  and  termination  from other  carriers due to volume
increases,  and costs associated with establishing its own transmission  network
and  termination  relationships  primarily  in  the  Latin  America  market.  By
establishing its own transmission network and termination  relationships,  which
became operational in the fourth quarter of 1999, the Company expects to be able
to carry a significant  portion of its international  long distance traffic over
its own  facilities,  thereby  reducing  its  costs of  services  by  decreasing
payments to other  carriers for the use of their  facilities.  In addition,  the
Company  is   establishing   its  own   transmission   network  and  termination
relationships in the Philippines. The Company is continuing to install switching
and  transmission  equipment,  which will  allow the  Company  to  increase  the
percentage  of the  long  distance  services  the  Company  provides  on its own
network, thereby improving its margins.
                                                                             (3)
<PAGE>

     Selling,  general and administrative expenses for the six months ended June
30, 2000 increased  $1,749,574 to $2,950,804  from $1,201,230 for the six months
ended June 30,  1999.  The  increase  in  selling,  general  and  administrative
expenses  is  largely  attributable  to the  significant  investments  in  human
resources  and  increased  marketing  and  sales  efforts  associated  with  the
continued expansion of its services.  Since these investments often occur before
the Company realizes  significant revenue from operations,  they have the effect
of increasing  selling,  general and administrative  expenses as a percentage of
revenue. These investments in infrastructure and support are intended to provide
the Company  with the ability to continue to expand into new  markets,  maximize
customer  retention and provide for growth.  In addition,  the Company has hired
additional personnel to facilitate the deployment of its network.

     Depreciation and amortization is primarily related to switching  equipment,
facilities,  computer  equipment and software and is expected to increase as the
Company incurs substantial capital expenditures to continue the expansion of its
network facilities. Depreciation and amortization also includes the amortization
of  goodwill  related to its  acquisition  of  phoneXchange,  Inc.  and  certain
telecommunications equipment. Depreciation and amortization expenses for the six
months ended June 30, 2000 increased  $469,182 to $726,224 from $257,042 for the
six months ended June 30 1999. The increase in depreciation  and amortization is
largely  attributable due to capital  expenditures  related to the establishment
and expansion of its network  operations  center and support  infrastructure  to
accommodate increased traffic volume and expanded service offerings.

     INTEREST  INCOME  AND  INTEREST  EXPENSE:  Interest  expense  is  primarily
comprised of interest paid on the Company's  long-term debt and various  capital
leases.  Interest  expense  increased by $464,447 to $513,439 for the six months
ended June 30, 2000 from $48,992 for the six months  ended June 30,  1999.  This
increase was attributable to the new borrowings  under certain  long-term notes,
the proceeds of which were primarily used for working  capital.  Interest income
is primarily  composed of income earned on cash and cash  equivalents.  Interest
income increased by $8,732 to $9,289 for the six months ended June 30, 2000 from
$557 for the six  months  ended  June 30,  1999.  This  increase  was  primarily
attributable to increased interest earnings on the Company's cash.

     INCOME  TAXES:  The Company  generated a net loss for the six months  ended
June 30,  2000 and 1999.  Based on the  Company's  plans to expand  through  the
construction and expansion of its network,  customer base and product offerings,
the Company expects this trend to continue.  Given these  circumstances  and the
level of taxable  income  expected  to be  generated  from  reversing  temporary
differences,  the Company has established a valuation allowance for the deferred
tax assets associated with these net operating losses.

     LIQUIDITY  AND  CAPITAL  RESOURCES:  The  Company's  principal  capital and
liquidity  needs  historically  have related to the  development  of its network
infrastructure,  its sales and marketing  activities and general  capital needs.
The Company's  capital needs have been met, in large part, from the net proceeds
from  borrowings  under  long-term  notes and the sale of its  common  stock and
preferred stock. As the Company placed greater emphasis on expanding its network
infrastructure,  the Company has also sought to meet its capital  needs  through
vendor leases and other equipment financings.

     As of June 30, 2000, the Company had cash of $243,212,  note receiveable of
$474,250 and a working captial deficit of $2,659,679.

     Net cash provided by financing  activities  was $172,081 for the six months
ended June 30, 2000 and net cash provided by financing activities was $3,521,445
for the six  months  ended  June 30,  1999.  The June 1999  amount is  primarily
attributable  to the net  proceeds  from the issuance of long term notes and the
sale of its common and preferred  stock. The June 2000 amount is attributable to
proceeds from preferred and common stock subscriptions.

     Net cash used in operating  activities  was  $2,672,089  for the six months
ended June 30, 2000 and $1,675,559 for the six months ended June 30, 1999.  Cash
used in  operating  activities  for all  periods  resulted  from net  losses and
increases in accounts  receivable,  deposits and prepaids,  which were partially
offset by the  write-off of certain  assets,  increases in accounts  payable and
accrued liabilities.

     Net cash provided by investing  activities  was $191,106 for the six months
ended June 30, 2000 and net cash used in investing activities was $1,039,461 for
the six months ended June 30, 1999.  Cash provided by investing  activities  for
the six months ended June 30, 2000 was primarily  attributable  to proceeds from
the sale of  marketable  securities  net of the  purchase  price.  Cash  used in
investing activities was primarily related to purchases of equipment.
                                                                             (4)
<PAGE>
     On July 28, 2000,  the Company sold  $210,000  principle  amount of its 10%
Senior Secured Notes,  due November 1, 2000 to a shareholder.  The principle and
accrued  interest are due on the earlier of (i) November 1, 2000 or (ii) receipt
by the Company of net proceeds of $400,000 from the next financing  completed by
the Company. The note is secured by all assets of the Company.

     The continued  development and expansion of its sales and marketing efforts
and  network   infrastructure   are   expected  to  require   substantial   cash
expenditures.  In addition,  the Company's existing operations are not currently
profitable on a stand-alone  basis. As a result, the Company expects to continue
to incur  operating  losses and  negative  cash flows  from  operations  for the
foreseeable  future.  The Company has budgeted its future  capital  requirements
based on  current  estimates  of its future  revenue  and with a view on current
competitive  factors and the domestic and international  regulatory  environment
pertaining to its business.  The Company  cannot be certain that actual  revenue
will be in line with management's  expectations or that expenditures will not be
significantly  higher than anticipated.  In addition,  there can be no assurance
that the  Company  will be able to meet  its  strategic  objectives  or that the
Company will have access to adequate capital  resources on a timely basis, or at
all, or that such capital will be available on terms that are  acceptable to the
Company. The failure to obtain such capital would have a material adverse effect
on the Company's  business and its ability to implement its business  plan.  The
Company may consider potential acquisitions or other strategic arrangements that
may fit the  Company's  strategic  plan.  Any  such  acquisitions  or  strategic
arrangements likely would require additional equity or debt financing, which may
result in dilution.


     EFFECTS OF NEW ACCOUNTING STANDARDS

     In 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 130,
"Reporting  Comprehensive  Income" and SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related  Information",  which are both effective for fiscal
years  beginning  after  December 15,  1997.  SFAS No. 130  addresses  reporting
amounts  of other  comprehensive  income and SFAS No.  131  addresses  reporting
segment information. In 1999, the Company implemented SFAS No. 130. There are no
material  differences between net income and comprehensive  income as defined by
SFAS 130 for the  periods  presented.  SFAS 131 uses a  management  approach  to
report  financial  and  descriptive  information  about  a  company's  operating
segments.  Operating segments are revenue-producing components of the enterprise
for  which  separate  financial  information  is  produced  internally  for  the
company's  management.  Under this definition,  the Company operated as a single
segment for periods presented.

     In June 1998, the Financial  Accounting Standards Board issued SFAS No. 33,
Accounting for Derivative  Instruments and Hedging Activities,  which stablishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts,  and for hedging activities.
In June  1999,  SFAS  No.  133 was  amended  by SFAS  No.  137,  Accounting  for
Derivative  Instruments and Hedging  Activities - Deferral of the Effective Date
of SFAS 133. As a result of this amendment,  SFAS No. 133 shall be effective for
all fiscal  quarters  of all fiscal  years  beginning  after June 15,  2000.  In
accordance with SFAS No. 133, an entity is required to recognize all derivatives
as either  assets or  liabilities  in the  statement of  financial  position and
measure those  instruments at fair value.  SFAS No. 133 requires that changes in
the derivative's fair value be recognized  currently in earnings unless specific
hedge  accounting  criteria are met.  Special  accounting for qualifying  hedges
allows a derivative's  gains and losses to offset related  results on the hedged
item in the income  statement  and requires  that a company  formally  document,
designate  and assess the  effectiveness  of  transactions  that  receive  hedge
accounting.  The Company does not expect the adoption of this standard to have a
material effect on its consolidated financial position or results of operations.

     On December 3, 1999, the Securities  and Exchange  Commission  staff issued
SAB No. 101,  Revenue  Recognition in Financial  Statements.  The SAB spells out
four basic criteria that must be met before companies can record revenue.  These
are:  (a)  persuasive  evidence  that an  arrangement  exists;  (b) delivery has
occurred or services have been rendered;  (c) the seller's price to the buyer is
fixed or determinable; and (d) collectibility is reasonably assured.

     Many of the  examples in the SAB address  situations  that give rise to the
potential for recording revenue  prematurely.  They include transactions subject
to uncertainties regarding customer acceptance,  including rights to refunds and
extended payment terms, and require continuing involvement by the seller.

     In March 2000, the SEC issued SAB 101A - Amendment:  Revenue Recognition in
Financial Statements,  that delays the implementation date of certain provisions
of SAB 101.  Under the  amendment,  the  Company is not  required to restate its
prior  financial  statements  provided  that the  Company  reports  a change  in
accounting  principle no later than the second fiscal  quarter  (ending June 30,
2000) in accordance with FASB Statement No. 3, Reporting  Accounting  Changes in
Interim Financial Statements. In accordance with FAS 3, for companies that adopt
SAB 101 in the second quarter, financial information for the first quarter would
be restated by including a cumulative  effect  adjustment in that quarter (i.e.,
the first  quarter).  The Company does not believe the adoption of SAB 101 would
have a material impact on its continuing operations.

     INFLATION:  The Company does not believe  inflation  has had a  significant
impact on its operations.
                                                                             (5)
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     To date,  the  Company  has not  entered  into any  market  risk  sensitive
instruments  or  purchased  any  hedging  instruments  for  trading  purposes or
otherwise  that would be likely to expose the  Company to market  risk,  whether
interest rate, foreign currency exchange,  commodity price or equity price risk.
The Company has not purchased options or entered into swaps of forward or future
contracts.  While its global  operations  currently  generate revenues in United
States  dollars,  the  Company is  evaluating  the  impact of  foreign  currency
exchange risk on its results of  operations  as the Company  continues to expand
globally.

                            PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     On August 30, 1999, J&W Ventures, Inc. filed a claim against the Company in
the Superior Court of Los Angeles County, alleging that the Company is in breach
of a contract to purchase telecommunications equipment. The plaintiff is seeking
performance   of  the   contract   plus   damages.   The  Company  has  filed  a
cross-complaint  seeking  rescission  and damages,  asserting that J&W Ventures,
Inc.  breached certain  representations  and warranties.  The Company intends to
vigorously contest the litigation and to pursue its own remedies fully. While no
assurance  can be given  regarding  the  outcome  of this  matter,  the  Company
believes  that the  Company  has strong and  meritorious  defenses to the claims
asserted.  However,  a determination that the Company breached its contract with
J&W  Ventures,  Inc.  could  have a  material  adverse  effect on its  business,
operating results and financial condition.

     Pursuant to the J&W Ventures  Asset  Purchase  Agreement,  the Company paid
$300,000 in cash,  issued  441,600  shares of common stock and was  obligated to
designate and issue 850,000 shares of a new series of preferred stock, $2.50 par
value.  Pending the outcome of the litigation  between the parties,  the Company
has  placed  a stop  transfer  order on the  common  stock  issued,  and has not
designated  or issued  any  preferred  stock to the J&W  Ventures  sellers.  The
Company has not made any reserve on its balance  sheet in  connection  with this
litigation.




                                   SIGNATURES

     Pursuant to the  requirements of the Securities Act of 1933, the registrant
has duly caused this  registration  statement  to be signed on its behalf by the
undersigned,  thereunto duly  authorized,  in the city of Aliso Viejo,  state of
California, on August 21, 2000.

                                         INTEGRATED COMMUNICATION NETWORKS, INC.



Date: August 21, 2000                    /S/ DAVID J. CHADWICK
                                         ---------------------------------------
                                         David J. Chadwick
                                         President, Chief Executive Officer and
                                         Chairman of the Board of Directors


Date: August 21, 2000                    /S/ GARY L. KILLORAN
                                         ---------------------------------------
                                         Gary L. Killoran
                                         Secretary, Treasurer, Chief Financial
                                         Officer (principal accounting officer)
                                         and Director


Date: August 21, 2000                    /S/ PAUL E. HYDE
                                         ---------------------------------------
                                         Paul E. Hyde
                                         Director


                                                                             (6)



<PAGE>




                                  EXHIBIT INDEX

27.1     Financial Data Schedule

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