<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 March 31, 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
April 30, 2000 was approximately 5,867,780 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 March 31, 2000 (unaudited)
and December 31, 1999                                                      F-1

Consolidated statements of operations for the three months
ended March 31, 2000 (unaudited) and 1999                                  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
three months ended March 31, 2000 (unaudited)                              F-3

Consolidated Statements of Cash Flows for the three months ended
March 31, 2000 (unaudited) and 1999                                        F-4

Notes to Consolidated Financial Statements                                 F-5







<PAGE>
            INTEGRATED COMMUNICATION NETWORKS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


                                                     DECEMBER 31,    MARCH 31,
                                   ASSETS                1999          2000
                                                    -------------  -------------
                                                                    (Unaudited)
Current assets:
   Cash                                             $  2,552,113   $    111,929
   Accounts Receivable                                         -        124,791
   Receivable from related party                         332,006        356,208
   Note Receivable (Note 2)                                    -      1,675,000
   Prepaid and other current assets                      293,032        118,531
                                                    -------------  -------------
     Total current assets                              3,177,151      2,386,459
                                                    -------------  -------------

Property and equipment:
   Operating equipment                                 2,825,700      2,280,603
   Equipment, furniture and software
       under capital leases                              549,685      1,298,263
   Leasehold improvements                                114,490        114,490
   Furniture, fixtures and equipment                      60,524        151,022
                                                    -------------  -------------
                                                       3,550,399      3,844,378
Less - Accumulated depreciation and amortization        (459,428)      (523,221)
                                                    -------------  -------------
                                                       3,090,971      3,321,157
                                                    -------------  -------------

   Goodwill, net                                       8,907,517      8,752,032
   Other noncurrent assets                               280,377        235,972
                                                    -------------  -------------
     Total noncurrent assets                          12,278,865     12,309,161
                                                    -------------  -------------
                                                    $ 15,456,016   $ 14,695,620
                                                    =============  =============

              LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
                            AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                 $    823,860   $  1,260,168
   Accrued expenses                                      526,074        748,836
   Unearned revenue                                      334,130        150,984
   Long-term debt-current portion                         82,696         64,671
   Capital lease obligations-current portion             114,078        300,342
                                                    -------------  -------------
   Total current liabilities                           1,880,838      2,525,001
                                                    -------------  -------------



<PAGE>



Long-term debt, net of current portion (Note 4)        5,034,813      5,032,147
Capital lease obligations, net of current portion        209,836        683,596
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 March 31, 2000                 -              -
    Series A-1 12% redeemable convertible preferred
        stock, $.01 par value per share:
      Authorized - 7,500,000 shares at December 31,
          1999 and March 31, 2000
      Issued and outstanding-3,167,974 at December 31,
          1999 and March 31, 2000                     4,847,000      4,847,000
    Series A-1 preferred stock subscribed               (218,500)      (218,500)
Stockholders' equity:
    Common stock, $.01 par value:
      Authorized - 250,000,000 shares
      Issued and outstanding 5,867,780 at
          December 31, 1999 and March 31, 2000            58,677         58,677
     Common stock subscribed                            (105,750)        (5,750)
Additional paid-in capital                            22,858,958     22,858,958
Accumulated deficit                                  (18,996,555)   (20,972,208)
Treasury stock                                          (113,301)      (113,301)
                                                    -------------  -------------
    Total stockholders' equity                         3,702,029      1,826,376
                                                    -------------  -------------
                                                    $ 15,456,016   $ 14,695,620
                                                    =============  =============

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

                                       F-1





<PAGE>
             INTEGRATED COMMUNICATION NETWORKS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                     For the three months ended
                                                      March 31,
                                     ---------------------------
                                          1999          2000
                                     -------------  -------------
                                                      (Unaudited)

Revenues                             $     42,107   $    623,210

Operating expenses:
   Data communications and
     telecommunications                    98,904      1,392,241
   Selling, general & administrative
     expenses                             416,101      1,255,853
   Depreciation and amortization           54,619        372,881
   Write-down of impaired assets        2,554,819             -
                                     -------------  -------------
       Total operating expenses         3,124,443      3,020,975
                                     -------------  -------------
Loss from operations                   (3,082,336)    (2,397,765)
                                     -------------  -------------
Other income (expense):
   Interest income                            123          9,285
   Dividend income                              -          7,671
   Interest expense                        (9,394)      (241,057)
   Realized gain on sale
      of investment (Note 2)                    -        992,329
   Loss on sale of assets (Note 3)              -       (346,116)
   Write-off of assets                (216,600)             -
                                     -------------  -------------
                                         (225,871)       422,122
                                     -------------  -------------
Net loss                             $ (3,308,207)  $ (1,975,653)
                                     =============  =============

Basic and diluted weighted average
    common shares outstanding           3,915,313      5,867,780
                                     =============  =============
Basic and diluted net loss per
    share                            $      (0.84)  $      (0.34)
                                     =============  =============

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

                                       F-2






<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 THREE MONTHS ENDED MARCH 31, 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                            -              -              -              -              -

Net loss                                              -              -              -              -              -

                                           -------------  -------------  -------------  -------------  -------------
Balance, March 31, 2000, (Unaudited)                  -   $          -      3,167,974   $  4,847,000   $   (218,500)
                                           =============  =============  =============  =============  =============

(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              -              -        100,000              -              -              -        100,000


Net loss                                -              -              -              -     (1,975,653)             -     (1,975,653)

                             -------------  -------------  -------------  -------------  -------------  -------------  -------------
Balance, March 31, 2000,
 (Unaudited)                    5,867,780   $     58,677   $     (5,750)  $ 22,858,958   $(20,972,208)  $   (113,301)  $  1,826,376
                             =============  =============  =============  =============  =============  =============  =============
                The accompanying notes are an integral part of these consolidated financial statements
</TABLE>

                                                                             F-3





<PAGE>

            INTEGRATED COMMUNICATION NETWORKS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                     For the three months ended
                                                      March 31,
                                     ----------------------------
                                          1999           2000
                                     -------------  -------------
                                                      (Unaudited)

Cash Flows From Operating Activities:
  Net loss                           $ (3,308,207)  $ (1,975,653)
  Adjustments to reconcile net loss
    to net cash used in operating
    activities:
  Depreciation and amortization            54,619        372,881
  Write-down of impaired assets         2,554,819              -
  Gain on sale of marketable security           -       (992,329)
  Loss on sale of equipment                     -        346,116
  Decrease (increase) in assets:
    Accounts receivable                    (8,129)       (75,562)
    Notes receivable                            -        (31,873)
    Prepaid expenses and other
      assets                             (358,931)       153,496
  Increase (decrease) in liabilities:
    Accounts payable                      (37,975)       436,308
    Accrued expenses                      105,936        222,762
    Unearned revenue                       (1,104)      (183,146)
    Other advance                        (317,802)             -
    Payable to related party              (11,181)             -
                                     -------------  -------------
     Net cash used in operating
     activities                        (1,327,955)    (1,727,000)
                                     -------------  -------------

Cash Flows From Investing Activities:
  Purchases of property and equipment    (290,927)       (74,974)
  Proceeds from sale of equipment               -         50,000
  Purchase of investment in marketable
      security                                  -     (1,000,000)
  Proceeds from sale of marketable
      security                                  -        325,000
                                     -------------  -------------
    Net cash used in investing
    activities                           (290,927)      (699,974)
                                     -------------  -------------

Cash Flows From Financing Activities:
  Principal payments of capital lease
    obligation                             (9,106)       (92,517)
  Principal payments on long-term debt     (5,689)       (20,692)
  Proceeds from preferred stock
    subscription                        1,658,315              -
  Proceeds from issuance of common
    stock                                       -        100,000
                                     -------------  -------------
    Net cash provided by financing
      activities                        1,643,520        (13,209)
                                     -------------  -------------
Increase (decrease) in cash                24,638     (2,440,184)
                                     -------------  -------------
Cash at the beginning of the period             -      2,552,113
                                     -------------  -------------
Cash at the end of the period        $     24,638   $    111,929
                                     =============  =============

Supplemental disclosure of cash flow
  information:
  Cash paid during the year for
    interest                         $      9,394   $     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
<PAGE>

            INTEGRATED COMMUNICATION NETWORKS, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                 March 31, 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  months  ended March 31, 2000 are not  necessarily  indicative  of the
results that may be expected for the year ending March 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 subsidiary Internet Call Centers,  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 March 2000 presentation.

2.       REALIZED GAIN ON SALE OF INVESTMENT

         On January 24, 2000, the Company  purchased  1,000,000 shares of Series
A, 5% Convertible Preferred Stock, $.01 par value of OMNI Neutraceuticals,  Inc.
for  $1,000,000.  On March 1, 2000,  the Company  sold its interest in 1,000,000
shares of  Series  A, 5%  Convertible  Preferred  Stock,  $.01 par value of OMNI
Neutraceuticals,  Inc.  for  $325,000  in cash and a short  term,  non  interest
bearing note receivable of $1,675,000 due at the end of each month commencing on
April 30, 2000 in the amount of $325,000 with the remaining  payment of $375,000
due on August 30, 2000. The Company recorded a realized gain of $992,329, net of
accrued dividend income, on the sale of the investment as of March 31, 2000.

3.       LOSS ON SALE OF EQUIPMENT

           The Company sold certain telecommunications equipment for $50,000 and
recorded a realized loss on the sale of $346,116.

4.       LONG-TERM DEBT

         Long-term debt consists of the following:

(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.                                         $  56,931


(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.                            39,887

(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
                                                                     -----------
                                                                       5,096,818
                                                                     -----------

         Less:  Current maturities                                      (64,671)
                                                                     -----------

                                                                      $5,032,147
                                                                     ===========


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

                  Year Ending
                  March 31:                          Amount
                  -----------                        ------

                  2001                            $   64,671
                  2002                                 6,332
                  2003                                 9,214
                  2004                             5,016,601
                  2005                                     -
                                                  ----------
                                                  $5,096,818
                                                  ==========

              Convertible Debenture

              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.

              The Debentures automatically convert into common stock on December
              2, 2004 at the then effective conversion price. The holders of the
              Debentures  have the right,  at any time after  April 1, 2000,  to
              convert all or any portion of the Debentures  into common stock at
              the lesser of (i) 80% of the  averaged  three  lowest  closing bid
              prices, as reported by Bloomberg, LP, for the common stock for the
              20 trading days immediately preceding the conversion date, or (ii)
              $10.00.  The Company has the right to redeem the Debentures at any
              time for 120% of the  principal  amount  of the  Debentures,  plus
              accrued interest up to the date of redemption.

5.       INCOME TAXES

The Company's effective tax benefit on pretax loss differs from the U.S. Federal
Statutory  tax  rate for the  three  months  ended  March  31,  1999 and 2000 as
follows:

                                                  For the three months ended
                                                            March 31,
                                              ----------------------------------
                                                    1999                2000
                                              ---------------    ---------------

Federal statutory tax (benefit)                       (34.0%)            (34.0%)
State taxes, net of federal tax benefit               (5.83%)            (5.83%)
                                              ---------------    ---------------
                                                     (39.83%)           (39.83%)
                                              ===============    ===============

Deferred  income tax assets and  liabilities  are  computed  based on  temporary
differences  between the financial  statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year in
which the differences  are expected to reverse.  Deferred income tax expenses or
credits  are  based  on the  changes  in  the  deferred  income  tax  assets  or
liabilities  from period to period.  The components of deferred tax  liabilities
and assets at December 31, 1997, 1998 and 1999 are as follows:

                                                 For the three months ended
                                                           March 31,
                                              ----------------------------------
                                                    1999                2000
                                              ---------------    ---------------

DEFERRED TAX LIABILITIES
DEPRECIATION                                  $      136,000     $      642,000
                                              ---------------    ---------------
    TOTAL DEFERRED LIABILITI                         136,000            642,000
                                              ---------------    ---------------
DEFERRED TAX ASSETS
STATE TAXES                                          255,000            515,000
NET OPERATING LOSS CARRY FORWARD                   3,773,000          7,971,000
                                              ---------------    ---------------
    TOTAL DEFERRED ASSETS                          4,028,000          8,486,000
                                              ---------------    ---------------
VALUATION ALLOWANC                                (3,892,000)        (7,844,000)
                                              ---------------    ---------------
NET DEFERRED TAX ASS                          $            -     $            -
                                              ===============    ===============


         The Company and its majority-owned  subsidiaries  report separately for
income  tax  reporting  purposes.   The  Company  had  available   approximately
$18,540,000  and  $18,863,000 of unused  federal and state  operating loss carry
forwards,  respectively,  at March 31, 2000,  that may be applied against future
taxable  income.  These net  operating  loss carry  forwards  expire for federal
purposes from 2018 to 2020 and will expire for state purposes in 2006. There can
be no assurance  that the Company will realize the benefit of the net  operating
loss carry forwards.

         SFAS No. 109 requires a valuation  allowance to be recorded  when it is
more  likely  than not that some or all of the  deferred  tax assets will not be
realized.  At March 31, 1999 and 2000,  valuations  for 100% of the net deferred
tax assets were recorded due to uncertainties as to the amount of taxable income
that will be generated in future years.  No income tax benefit has been recorded
for all periods presented because of the valuation allowance.

         Due to the "change in ownership"  provisions  in Internal  Revenue Code
Section 382, the availability of the Company's net operating loss carry forwards
may be subject to an annual limitation against taxable income in future periods,
which could substantially limit the eventual  utilization of these net operating
loss carry forwards.

6.       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.


7.       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 March 31,  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 March 31, 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  $37,417 and $83,465,  for the three months ended
March 31, 1999 and 2000, 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.

         In  February  2000,  the Company  entered  into a lease  agreement  for
certain  computer  equipment and office  furniture.  The lease  agreement  bears
interest  at an annual  rate of 20.7% and  calls  for 36 equal  minimum  monthly
payments of $2,186 and a deposit of $4,939.

         In February and March of 2000,  the Company  entered into various lease
agreements for certain  desktop  computers,  network  servers and  communication
switching  equipment.  The lease  agreements  bear  interest  at an annual  rate
ranging from 17% to 21% and call for 60 equal minimum monthly payments of $3,962
and  deposits  totaling  $3,962.  As of March 31,  2000 the  Company had tested,
accepted  and recorded the assets on the balance  sheet.  The capital  lease was
secured by the related assets.

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

                                                         Dedicated      Other
Year Ending                                  Capital      Private     Operating
March 31:                                    Leases        Lines       Leases
-----------------                          -----------  -----------  -----------
2001                                       $  459,520   $  832,789   $  379,777
2002                                          431,657      338,549      356,478
2003                                          291,784      191,556      329,528
2004                                           65,221       90,193      323,154
2005                                           41,214          -0-      302,855
Thereafter                                        -0-          -0-        8,794
                                           -----------  -----------  -----------
Total minimum lease payments               $1,289,396   $1,453,087   $1,700,586
                                                        ===========  ===========
   Less: amount representing interest        (305,457)
Net present value of minimum
  lease payments                              983,938
                                           -----------
   Less: current portion                     (300,342)
                                           -----------
Long-term capitalized lease obligation     $  683,596
                                           ===========

8.       SUBSEQUENT EVENTS

         On January 5, 2000, the Company filed a Registration  Statement on Form
S-1 (Registration  No. 333-94105)  registering up to 13,775,061 shares of Common
Stock issuable upon conversion of certain securities of the Company. The Company
intends to use the proceeds, if any, for capital  expenditures,  working capital
and general corporate purposes.  The Company  subsequently filed an amendment to
the registration statement on May 11, 2000.

           In April 2000, the Company  incorporated a wholly owned subsidiary in
the  Philippines  known as C3.com,  which has no asset value at this time.  This
entity  will  act as a  point  of  presence  for  the  Company's  long  distance
operations and is expected to decrease  international  termination  costs and to
eventually initiate outbound calls from the local market.

           In May 2000,  the  Company  reserved  3,000,000  common  shares in an
OMNIBUS Stock Incentive Plan for its employees.



<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 March 31,
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 months ended March 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, accelerated
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.

                                       1
<PAGE>



         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.

         On January 5, 2000, the Company filed a Registration  Statement on Form
S-1 (Registration  No. 333-94105)  registering up to 13,775,061 shares of Common
Stock issuable upon conversion of certain securities of the Company. The Company
filed an amendment to the Registration Statement on May 11, 2000.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 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 March 31, 2000 increased $581,103 to $623,210
from $42,107 for the three months ended March 31, 1999.  This increase is due to
the fact that the Company began  operations in February 28, 1999.  Revenues from
prepaid long distance voice services  represented  approximately  99% and 99% of
its total revenue for the three months ended March 31, 2000 and 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.

                                      2

<PAGE>



         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 ended March 31, 2000
increased $1.3 million to $1.4 from $98,904 for the three months ended March 31,
1999.  This  increase is due to the fact that the Company  began  operations  on
February  28,  1999.  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 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.

         Selling, general and administrative expenses for the three months ended
March 31, 2000  increased  $839,752 to $1.3 million from  $416,101 for the three
months ended March 31, 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 March 31, 2000  increased  $318,262 to $372,881  from
$54,619 for the three months ended March 31 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  for the three
months ended March 31, 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 $231,663 to $241,057 for the three months
ended March 31, 2000 from $9,394 for the three months ended March 31, 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 $9,162 to $9,285 for the three months ended March 31, 2000
from $123 for the three months ended March 31, 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 March 31, 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.

                                       3
<PAGE>



         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.

         Net cash used by financing  activities was $13,209 for the three months
ended  March  31,  2000  and net  cash  provided  by  financing  activities  was
$1,643,520  for the three months ended March 31, 1999.  The March 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  March  2000  amount  is
attributable to debt repayments.

         Net cash used in  operating  activities  was $1.7 million for the three
months  ended March 31, 2000 and $1.3 for the three months ended March 31, 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 used in investing activities was $699,974 for the three months
ended March 31, 2000 and  $290,927  for the three  months  ended March 31, 1999.
Cash used in investing  activities was primarily  related to purchases and sales
of equipment and the purchase and sale of marketable securities.

         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.

         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 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 March 31, 2000,  the Company had no outstanding  borrowings  under the Master
Lease Agreement. The Company is currently attempting to negotiate an increase in
the total  financing to $25  million.  However,  there is no assurance  that any
increase will be approved.  If an increase is not approved,  the Company may not
be able to maintain its current and projected growth.

         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.

                                       4
<PAGE>



         In June 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.

                                       5
<PAGE>


                           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.



                                       6
<PAGE>




                                   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 May 15, 2000.

                                         INTEGRATED COMMUNICATION NETWORKS, INC.



Date: May 15, 2000                       /S/ DAVID J. CHADWICK
                                         ---------------------------------------
                                         David J. Chadwick
                                         President, Chief Executive Officer and
                                         Chairman of the Board of Directors


Date: May 15, 2000                       /S/ GARY L. KILLORAN
                                         ---------------------------------------
                                         Gary L. Killoran
                                         Secretary, Treasurer, Chief Financial
                                         Officer (principal accounting officer)
                                         and Director


Date: May 15, 2000                       /S/ PAUL E. HYDE
                                         ---------------------------------------
                                         Paul E. Hyde
                                         Vice President and Director


Date: May 15, 2000                       /S/ RUSSELL J. HENSLEY
                                         ---------------------------------------
                                         Russell J. Hensley
                                         Director







                                       7
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                                  EXHIBIT INDEX

27.1     Financial Data Schedule

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