<PAGE>

                                  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 September 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) 460-6291
              (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
October 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...................................................... 5

                                PART II-OTHER INFORMATION

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


Signatures     ............................................................ 7


                              PART I-FINANCIAL INFORMATION

ITEM 1.**

Index to Financial Statements:

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

Consolidated statements of operations for the three and nine months
ended September 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
nine months ended September 30, 2000 (unaudited)                          F-3

Consolidated Statements of Cash Flows for the three and nine months
ended September 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,  SEPTEMBER 30,
                                   ASSETS                1999          2000
                                                    -------------  -------------
                                                                    (Unaudited)
Current assets:
   Cash                                             $  2,552,113   $      9,915
   Accounts Receivable                                         -         77,115
   Receivable from related party (Note 2)                332,006        184,347
   Note Receivable                                             -        349,250
   Prepaid and other current assets                      293,032         86,230
                                                    -------------  -------------
     Total current assets                              3,177,151        706,857
                                                    -------------  -------------

Property and equipment:
   Operating equipment                                 2,825,700      2,149,552
   Equipment, furniture and software
       under capital leases                              549,685      1,208,651
   Leasehold improvements                                114,490        207,956
   Furniture, fixtures and equipment                      60,524        424,600
                                                    -------------  -------------
                                                       3,550,399      3,990,759
Less - Accumulated depreciation and amortization        (459,428)      (883,482)
                                                    -------------  -------------
                                                       3,090,971      3,107,277
                                                    -------------  -------------

   Goodwill, net                                       8,907,517      8,441,062
   Other noncurrent assets                               280,377        148,384
                                                    -------------  -------------
     Total noncurrent assets                          12,278,865     11,696,723
                                                    -------------  -------------
                                                    $ 15,456,016   $ 12,403,580
                                                    =============  =============

              LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
                        AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Accounts payable                                 $    823,860   $  4,456,026
   Accrued expenses                                      526,074        752,047
   Unearned revenue                                      334,130         80,539
   Note payable to shareholder (Note 3)                        -        210,000
   Long-term debt-current portion                         82,696         60,724
   Capital lease obligations-current portion             114,078        417,347
                                                    -------------  -------------
   Total current liabilities                           1,880,838      5,976,683
                                                    -------------  -------------


Long-term debt, net of current portion (Note 4)        5,034,813      5,028,688
Capital lease obligations, net of current portion        209,836        530,134
Commitments and contingencies (Note 7)                         -              -
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 September 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 September 30, 2000
      Issued and outstanding-3,167,974 at December 31,
          1999 and September 30, 2000                   4,847,000     4,847,000
    Series A-1 preferred stock subscribed                (218,500)            -
Stockholders' equity (deficit):
    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
          September 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)   (26,850,294)
Treasury stock                                          (113,301)      (113,301)
                                                    -------------  -------------
    Total stockholders' equity (deficit)               3,702,029     (3,978,925)
                                                    -------------  -------------
                                                    $ 15,456,016   $ 12,403,580
                                                    =============  =============

              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 nine months ended
                                          September 30,                       September 30,
                                     ---------------------------       ---------------------------
                                          1999          2000                1999          2000
                                     -------------  ------------       -------------  ------------
                                                     (Unaudited)                       (Unaudited)
<S>                                  <C>            <C>                <C>             <C>

Revenues                             $    323,153   $  1,312,428       $    624,832   $  2,708,773

Operating expenses:
   Data communications and
     telecommunications                   842,209      2,306,157          1,305,894      4,856,746
   Selling, general & administrative
     expenses                           3,062,903      1,510,079          4,264,133      4,460,882
   Depreciation and amortization          226,648        372,953            483,690      1,099,177
   Write-down of impaired assets                -              -          2,554,819              -
                                     -------------  -------------      -------------  -------------
       Total operating expenses         4,131,760      4,189,189          8,608,536     10,416,805
                                     -------------  -------------      -------------  -------------
Loss from operations                   (3,808,607)    (2,876,761)        (7,983,704)    (7,708,032)
                                     -------------  -------------      -------------  -------------
Other income (expense):
   Interest income                              0             69                557          9,358
   Interest expense                       (89,451)      (196,552)          (138,443)      (709,991)
   Realized gain on sale
      of investment                             -              -                  -        992,329
   Gain on casualty loss, net               6,622              -            137,628              -
   Loss on sale of assets                       -              -                  -       (346,116)
   Write-off of assets                          0              -           (216,600)             -
   Minority interest in losses
      of subsidiary                       570,295              -            570,295              -
   Other income (expense), net                  -        (91,670)                 -        (91,287)
                                     -------------  -------------      -------------  -------------
                                          487,466       (288,153)           353,437       (145,707)
                                     -------------  -------------      -------------  -------------
Net loss                             $ (3,321,141)  $ (3,164,914)      $ (7,630,267)  $ (7,853,739)
                                     =============  =============      =============  =============

Basic and diluted weighted average
    common shares outstanding           2,463,975      5,889,231          2,867,199      5,876,079
                                     =============  =============      =============  =============
Basic and diluted net loss per
    share                            $      (1.35)  $      (0.54)      $      (2.66)  $      (1.34)
                                     =============  =============      =============  =============

              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 NINE MONTHS ENDED SEPTEMBER 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                              -              -              -              -              -

Net loss                                              -              -              -              -              -

                                           -------------  -------------  -------------  -------------  -------------
Balance, September 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                                -              -              -              -     (7,853,739)             -     (7,853,739)

                             -------------  -------------  -------------  -------------  -------------  -------------  -------------
Balance, September 30, 2000,
 (Unaudited)                    5,889,231   $     58,892   $          -   $ 22,925,778   $(26,850,294)  $   (113,301)  $ (3,978,925)
                             =============  =============  =============  =============  =============  =============  =============
                The accompanying notes are an integral part of these consolidated financial statements
</TABLE>

                                                                             F-3



<PAGE>
<TABLE>

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

                                     For the three months ended        For the nine months ended
                                            September 30,                      September 30,
                                     ----------------------------      ----------------------------
                                          1999           2000               1999           2000
                                     -------------  -------------      -------------  -------------
                                                      (Unaudited)                      (Unaudited)
<S>                                  <C>             <C>                <C>             <C>
Cash Flows From Operating Activities:
  Net loss                           $ (3,321,141)  $ (3,164,914)      $ (7,630,267)  $ (7,853,739)
  Adjustments to reconcile net loss
    to net cash used in operating
    activities:
  Depreciation and amortization           226,648        372,953            483,690      1,099,177
  Write-down of impaired assets                 -              -          2,554,819              -
  Write-off assets casualty loss                -              -             39,581              -
  Write-off assets legal settlement             -        117,632                  -        117,632
  Gain on sale of marketable security           -              -                  -       (992,329)
  Loss on sale of equipment                     -              -                  -        346,116
  Compensation expense related to
    stock option grant                  2,250,000              -          2,250,000              -
  Minority interest                      (570,296)             -           (570,296)             -
  Shares issued for services                7,456              -              7,456         67,034
  Decrease (increase) in assets:
    Accounts receivable                     3,778        (47,495)            25,234        (27,362)
    Notes receivable                      (21,319)       174,858            (21,319)       373,186
    Prepaid expenses and other
      assets                             (484,731)        73,343           (719,029)       178,561
  Increase (decrease) in liabilities:
    Accounts payable                      311,215      2,118,304            402,570      3,470,169
    Accrued expenses                       58,679        (59,014)           152,558        381,693
    Unearned revenue                      247,153         (7,030)           245,983       (261,091)
    Customer deposits                      20,000              -             21,000          7,500
    Other advance                               -              -           (317,802)             -
    Payable to related party             (336,001)             -           (208,296)             -
                                     -------------  -------------      -------------  -------------
     Net cash used in operating
     activities                        (1,608,559)      (421,363)        (3,284,118)    (3,093,453)
                                     -------------  -------------      -------------  -------------

Cash Flows From Investing Activities:
  Purchases of property and equipment     (72,692)             -         (1,112,153)      (384,643)
  Proceeds from sale of equipment               -              -                  -         50,000
  Purchase of investment in marketable
      security                                  -              -                  -     (1,000,000)
  Proceeds from sale of marketable
      security                                  -              -                  -      1,525,750
                                     -------------  -------------      -------------  -------------
    Net (cash used in) provided by
    investing activities                  (72,692)             -         (1,112,153)       191,107
                                     -------------  -------------      -------------  -------------

Cash Flows From Financing Activities:
  Proceeds from issuance of
    short-term debt                       331,965        210,000            331,965        210,000
  Principal payments of capital lease
    obligation                            (12,215)       (15,116)           (31,135)      (138,560)
  Proceeds from issuance of
    long-term debt                        671,790              -          1,573,180              -
  Principal payments on long-term debt    (18,184)        (6,818)           (79,209)       (35,542)
  Proceeds from preferred stock
    subscription                                -              -          1,950,000        218,500
  Proceeds from issuance of common
    stock                                       -              -            750,000        105,750
                                     -------------  -------------      -------------  -------------
    Net cash provided by financing
      activities                          973,356        188,066          4,494,801        360,148
                                     -------------  -------------      -------------  -------------
Increase (decrease) in cash              (707,895)      (233,297)            98,530     (2,542,198)
                                     -------------  -------------      -------------  -------------
Cash at the beginning of the period       806,425        243,212                  -      2,552,113
                                     -------------  -------------      -------------  -------------
Cash at the end of the period        $     98,530   $      9,915       $     98,530   $      9,915
                                     =============  =============      =============  =============
Supplemental disclosure of cash flow
  information:
  Cash paid during the year for
    interest                         $          -   $          -       $     18,959   $     38,213
                                     =============  =============      =============  =============
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
                               September 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.  The
Company's  auditors'  interim review of this quarterly  report and the quarterly
report for the six and three months ended June 30, 2000 have not been  completed
as required by Rule 10-01(d) of Regulation  S-X. The Company intends to have the
reviews  completed  as  soon as  practicable  upon  the  receipt  of  additional
financing.  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 nine months ended September 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  interconnection  agreements,  international  gateway  switches,
leased and owned transport  facilities and resale  arrangements  with other long
distance providers.

         (b)      GOING CONCERN

     The Company has been engaged in the identification, development, deployment
and  operation of domestic and  international  long distance  telephone  network
facilities for the purpose of providing domestic and international long distance
telephone service. The Company has incurred substantial losses to date and needs
to obtain additional  funding  sufficient to operate its  long-distance  network
facilities and ultimately, achieve a sufficient level of sales and profitability
to  support  its  current  and  ongoing  operations.   Management  is  currently
attempting  to obtain  financing.  However,  no assurance  can be provided  that
management will be able to obtain  financing on terms acceptable to the Company,
or at all. If the  financing  is not  obtained by December 1, 2000,  the Company
will be unable to continue its operations.  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 September 2000 presentation.

2.      RELATED PARTY TRANSACTIONS

     David Chadwick and Gary Killoran are executive  officers of the Company and
part owners of C/Net:  Solutions,  Inc., a private company formed on November 1,
1997.  From January 1, 2000 through  September  30, 2000,  the Company  advanced
$325,000 to C/Net under an Advance  Agreement  without  interest  and payable on
demand at any time. On July 1, 2000, the parties  entered into an Asset Purchase
Agreement  pursuant to which the  Company  agreed to accept  certain  furniture,
fixtures and office equipment in partial satisfaction of the outstanding debt in
the amount of $90,795. Beginning in July 2000, C/Net's subsidiary,  Leading Edge
Broadband  Services,  Inc.  began  providing   telecommunication   services  and
outsourced  technical and administrative  support services to the Company. As of
September 30, 2000,  the Company had a receivable in the amount of $184,347.  As
of November 20, 2000, no amounts were due under the Advance Agreement.


3.      SENIOR SECURED NOTE

     On July 28, 2000,  the Company sold  $210,000  principal  amount of its 10%
Senior Secured Notes,  due November 1, 2000 to a shareholder.  The principal 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  certain  assets of the  Company.  As of
September 30, 2000,  the principal  amount due under the note was $210,000.  The
Company is currently in default upon its 10% Senior Secured Notes,  due November
1,  2000.The  Company's  shareholder  has not  provided  notice of default.  The
Company is not able to repay the note a this time.

4.       LONG-TERM DEBT

         Long-term debt consists of the following:
                                                                   September 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.                            38,651

(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
                                                                     -----------
                                                                       5,089,412
                                                                     -----------

         Less:  Current maturities                                      (60,724)
                                                                     -----------

                                                                      $5,028,688
                                                                     ===========

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

                  Year Ending
                 September 30:                      Amount
                  -----------                     ----------

                  2001                            $   60,724
                  2002                                 8,987
                  2003                                 9,928
                  2004                             5,009,773
                  2005                                     -
                                                  ----------
                                                  $5,089,412
                                                  ==========

5.       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  September  30,  2000,  the  Company  has
received  equipment  eligible to be financed  under the Master  Lease  Agreement
valued at  approximately  $4 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 September 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  $73,622 and  $111,883 for the three months ended
September  30,  1999 and  2000,  respectively  and  approximately  $188,088  and
$305,650 for the nine months ended September 30, 1999 and 2000, respectively.

        The  Company is  currently  in  default  on the lease for its  corporate
headquarters and has entered into a stipulated judgment which allows the Company
to retain  occupancy  until December 1, 2000 at which time $74,485 is due to the
landlord as payment for a portion of the past due amount and monthly payments of
$75,202 are due thereafter  starting on January 1, 2001 until the remaining past
due  balance  has  been  paid  and  monthly  payments  of  $19,720  are then due
thereafter. The Company is currently unable to pay the $74,485 and expects to be
ordered to vacate the premises on or about December 5, 2000.


        (c)      Capital Leases

     The Company is obligated under various capital lease agreements for certain
computer software, office furniture,  telecommunications switching equipment and
desktop workstations.  The Comapny has received notices of default on certain of
its capital leases.

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

                                                         Dedicated     Other
Year Ending                                  Capital      Private     Operating
September 30:                                 Leases       Lines       Leases
-----------------                          -----------  -----------  -----------
2001                                       $  627,915   $  954,784   $  516,673
2002                                          364,272      257,925      444,195
2003                                          147,868          -0-      410,695
2004                                           53,421          -0-      410,695
2005                                           19,501          -0-      308,021
Thereafter                                        -0-          -0-          -0-
                                           -----------  -----------  -----------
Total minimum lease payments               $1,212,977   $1,212,708   $2,090,278
                                                        ===========  ===========
   Less: amount representing interest        (265,497)
Net present value of minimum
  lease payments                              947,480
                                           -----------
   Less: current portion                     (417,347)
                                           -----------
Long-term capitalized lease obligation     $  530,134
                                           ===========
          (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.  would 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.

6.      SUBSEQUENT  EVENTS

     On October 12, 2000, the Company entered into a Subscription Agreement with
Hitech  Resource  Corporation  for the  issuance  of 14  million  shares  of the
Company's  restricted  $.001 par value common stock at a per share price of $.50
for gross  proceeds of $7.0 million.  The agreement  calls for placement fees of
$280,000 in cash and 560,000 shares of the Company's  restricted $.001 par value
common stock for net proceeds to the Company of $6,720,000.  Closing is expected
to occur by November 30, 2000. The failure to obtain such capital by December 1,
2000 would have a material  adverse  effect on the  Company's  business  and its
ability to continue as a going concern.

<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 September
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, Mexico
City 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 nine
months ended September 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  attempts 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
interexchange carriers which have interconnection agreements with local exchange
carriers.

         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, accelerated
expansion into Latin  America,  and  investment in systems and  facilities.

         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.

         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 SEPTEMBER 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 September 30, 2000 increased $989,276 to $1.3 million from $323,153
for the three  months  ended  September  30,  1999.  This  increase is due to an
increase in customer traffic.  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  September 30, 2000  increased  $1.5 million to $2.3 million from $842,209
for the three months ended  September 30, 1999.  The primary  increase is due to
the increased  termination  costs  directly  related to the increase in customer
traffic.  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  in the Latin  America  and  Philippine  markets.  By
establishing its own  transmission  network and termination  relationships,  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.  The  Company  has  ceased
operations of its facilities located in Dallas and Laredo,  Texas, New York, New
York, Mexico City and Manila,  Philippines and continues to operate its facility
in Los Angeles, California. The Company has relocated a portion of the equipment
at these  locations  to its  facility in Los  Angeles.  The  Company  intends to
re-deploy  the  equipment to these  facilities  subject to receipt of additional
financing.

         Selling, general and administrative expenses for the three months ended
September 30, 2000  decreased $1.5 million to $1.5 million from $3.0 million for
the three months ended September 30, 1999. The decrease in selling,  general and
administrative  expenses is largely attributable to reduced investments in human
resources and reduced marketing and sales efforts  associated with the Company's
scale back of operations and lay off of the majority of its employees.

         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  September  30, 2000  increased  $146,305 to $372,953
from  $226,648  for the three months  ended  September 30 1999.  The increase in
depreciation  and amortization is largely  attributable 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 $107,100 to $196,552 for the three months
ended  September 30, 2000 from $89,451 for the three months ended  September 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 $69 to $69 for the three months ended
September 30, 2000 from $-0- for the three months ended September 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 three  months
ended  September  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.

NINE MONTHS ENDED SEPTEMBER 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 nine
months  ended  September  30, 2000  increased  $2.1 million to $2.7 million from
$624,832 for the nine months ended  September 30, 1999.  This increase is due to
an increase in customer  traffic.  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 nine months
ended  September  30, 2000  increased  $1.5  million to $4.8  million  from $1.3
million for the nine months ended  September 30, 1999.  The primary  increase is
due to the  increased  termination  costs  directly  related to the  increase in
customer  traffic  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  in the Latin  America  and  Philippine  markets.  The Company has
ceased  operations of its facilities  located in Dallas and Laredo,  Texas,  New
York, New York, Mexico City and Manila, Philippines and continues to operate its
facility in Los Angeles,  California. The Company has relocated a portion of the
equipment at these locations to its facility in Los Angeles. The Company intends
to re-deploy the equipment to these facilities  subject to receipt of additional
financing.

         Selling,  general and administrative expenses for the nine months ended
September 30, 2000 increased  $196,749 to $4.5 million from $4.3 million for the
nine months  ended  September  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 for the first half of the year 2000.  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. This has been offset by the
decrease in  selling,  general  and  administrative  expenses as a result of the
Company's scale back of operations and lay off of the majority of its employees.


         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 nine months ended September 30, 2000 increased  $615,487 to $1.1 million
from  $483,690  for the nine months  ended  September  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.

         IMPAIRMENT  OF  ASSETS:   The  Company   wrote-down  certain  switching
equipment previously acquired in the amount of $ 2.5 million in February 1999 as
the result of an impairment of value.

         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 $571,547 to $709.991 for the nine months
ended  September 30, 2000 from $138,443 for the nine months ended  September 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 $8,801 to $9,358 for the nine months
ended September 30, 2000 from $557 for the nine months ended September 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 nine months
ended  September  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.

     Cash from  operations has not been  sufficient to maintain the operation of
the Company's entire network.  The Company has terminated certain contracts with
other  telecommunication  providers  for  domestic and  international  long haul
circuits used in its network.  As a result,  the Company has reduced the monthly
recurring  cost of offering its  services.  The Company has focused on reselling
domestic  and  international   long  distance  services   purchased  from  other
providers.

     The  Company  has  a  working  capital  deficiency  of  $(5,269,827)  as of
September  30,  2000.  The  Company  frequently  has been  unable to make timely
payments to its trade creditors and  telecommunication  carriers. As of December
31, 1999,  the Company had past due trade payables in the amount of $114,979 and
$1,433,051,  respectively. Deferred payment terms have been negotiated with many
trade  vendors,  however,  the majority of trade  vendors have ceased  providing
services to the Company.  The Company has been sued by certain  trade vendors in
the aggregate  amount of  approximately  $22,720.  As of December 31, 1999,  the
Company  had past due  payables to  telecommunication  carriers in the amount of
$101,537  and  $2,218,469,   respectively.  Of  the  past  due  amounts  due  to
telecommunication  carriers, the Company owed Sprint Telecom $-0- and $1,534,933
as  of  December   31,  1999  and   September   30,  2000,   respectively.   All
telecommunication  carriers with past due amounts have ceased providing services
to the  Company.  As a result,  the Company is limited in its ability to provide
service to its  customers.  The Company has focused on  reselling  domestic  and
international long distance services to its customers.

     The  Company  is  currently  in  default  on the  lease  for its  corporate
headquarters and has entered into a stipulated judgment which allows the Company
to retain  occupancy  until December 1, 2000 at which time $74,485 is due to the
landlord as payment for a portion of the past due amount and monthly payments of
$75,202 are due thereafter  starting on January 1, 2001 until the remaining past
due  balance  has  been  paid  and  monthly  payments  of  $19,720  are then due
thereafter. The Company is currently unable to pay the $74,485 and expects to be
ordered to vacate the premises on or about December 5, 2000.

     The Company has laid off the majority of its employees and has entered into
a services  agreement to outsource  technical,  customer support and general and
administrative functions to a related third party.

     On  October  16,  2000,  the  Company  received  a notice  of  default  and
acceleration from the holder of its 4% Convertible  Debenture,  in the principal
amount of  $5,000,000.  Pursuant to the  placement,  the Company  entered into a
Registration  Rights  Agreement  whereby  the Company  was  obligated  to file a
registration statement by January 5, 2000 and have it declared effective 90 days
thereafter.  To date, the registration statement has not been declared effective
and the Company has been incurring a penalty in the amount of $100,000 per month
as liquidated  damages.  On October 16, 2000,  the Company  received a notice of
default by the debt-holder  alleging,  among other things,  that the Company has
failed to make  payments  totaling  $793,333.34  (through  October 14,  2000) as
required by the  Registration  Rights  Agreement.  The debt-holder  also demands
payment, in full, of the principal amount of Five Million ($5,000,000), together
with accrued interest and the liquidated  damages set forth above. The debenture
is unsecured. The Company is currently unable to pay the amounts demanded and is
attempting to negotiate a settlement with the debt-holder.

     The Company is currently in default upon its 10% Senior Secured Notes,  due
November 1, 2000. The principle and accrued  interest were due on the earlier of
(i)  November  1, 2000 or (ii) upon  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 note  holder  has not  provided  notice of
default. The Company is unable to repay the note at this time.

     The Company has engaged an  investment  banker and is  attempting  to raise
capital  through the sale of assets and the private  placement of debt or equity
securities.  There can be no assurance that the Company will be able to continue
operations or reestablish  operations  upon the successful  completion of any of
the aforementioned transactions.

     On October 12, 2000, the Company entered into a Subscription Agreement with
Hitech  Resource  Corporation  for the  issuance  of 14  million  shares  of the
Company's  restricted  $.001 par value common stock at a per share price of $.50
for gross  proceeds of $7.0 million.  The agreement  calls for placement fees of
$280,000 in cash and 560,000 shares of the Company's  restricted $.001 par value
common stock for net proceeds to the Company of $6,720,000.  Closing is expected
to occur by November 30, 2000. The failure to obtain such capital by December 1,
2000 would have a material  adverse  effect on the  Company's  business  and its
ability to continue as a going concern.

     The Company has a note receivable in the amount of $349,250  related to the
sale of its investment in marketable securities.  Amounts due under the note are
delinquent and the Company has given notice of default.

     Net cash provided by financing  activities was $360,148 for the nine months
ended  September 30, 2000 and $4,494,801 for the nine months ended September 30,
1999.  The September 1999 amount is primarily  attributable  to the net proceeds
from the  issuance  of long term  notes and the sale its  common  and  preferred
stock.  The September  2000 amount is  attributable  to proceeds from short term
note and  proceeds  from stock  subscriptions  offset by debt and capital  lease
peyments.

     Net cash used in operating  activities  was  $3,093,453 for the nine months
ended  September 30, 2000 and $3,284,118 or the nine months ended  September 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 $191,107 for the nine months
ended  September  30,  2000  and net  cash  used  by  investing  activities  was
$1,112,153  for the nine months  ended  September  30,  1999.  Cash  provided by
investing  activites is primarily  due to proceeds  from the sale of  marketable
securites.  Cash used in investing activities was primarily related to purchases
and sales of equipment and the purchase and sale of marketable securities.

         MASTER  LEASE  AGREEMENT  WITH LUCENT  TECHNOLOGIES:  On July 30, 1999,
phoneXchange  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.
The  Company has  received  equipment  eligible to be financed  under the Master
Lease Agreement valued at approximately  $4.9 million but has not completed type
testing and acceptance of the equipment.  Upon type testing and acceptance,  the
equipment will be placed under an operating lease with 36 monthly  payments.  As
of  September  30, 2000,  the Company had no  outstanding  borrowings  under the
Master Lease Agreement.

         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 September 1998, the Financial Accounting Standards Board issued SFAS
No. 133,  Accounting for Derivative  Instruments and Hedging  Activities,  which
establishes  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.

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.




<PAGE>




                                   SIGNATURES

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

                                         INTEGRATED COMMUNICATION NETWORKS, INC.



Date: November 20, 2000                  /S/ DAVID J. CHADWICK
                                         ---------------------------------------
                                         David J. Chadwick
                                         President, Chief Executive Officer and
                                         Chairman of the Board of Directors
                                               (Principal Executive Officer)


Date: November 20, 2000                  /S/ GARY L. KILLORAN
                                         ---------------------------------------
                                         Gary L. Killoran
                                         Secretary, Treasurer, Chief Financial
                                         Officer (principal accounting officer)
                                         and Director







<PAGE>





                                  EXHIBIT INDEX

27.1     Financial Data Schedule

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