SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                       ----------------------------------
                                   FORM 10-KSB

              [X] Annual report pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

                   For the Fiscal Year ended February 28, 2001

    [ ] Transition report pursuant to Section 13 or 15(d) of the Exchange Act

                         Commission file number 0-26949

                               INTERNET VIP, INC.
        (exact name of small business issuer as specified in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)

                                   11-3500919
                        (IRS Employer Identification No.)

          1155 University Street., Suite 602, Montreal, Canada H3B 3A7
                    (Address of principal executive offices)

                                 (514) 448-4847
                         (Registrant's telephone number)

Securities registered pursuant to Section 12 (b) of the Act:  NONE

Securities  registered  pursuant  to  Section 12 (g) of the Act:  Common  Stock,
$.0001 par

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 of 15(d) of the Exchange Act during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days. YES [X] NO [ ]

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

State issuer's revenues for its most recent fiscal year. $970,171

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified date within the past 60 days. $8,712,344 on May 18, 2001.

As of May 18,  2001  the  issuer  had  28,104,337  shares  of its  Common  Stock
outstanding.

<PAGE>

                                     PART 1

Item 1.  Description of Business

The  following  discussion  should  be read in  conjunction  with the  financial
statements  and  related  notes which are  included  elsewhere  in this  report.
Statements  made below  which are not  historical  in facts are  forward-looking
statements.   Forward-looking   statements   involve   a  number  of  risks  and
uncertainties  including,  but not  limited  to,  general  economic  conditions,
competition and our ability to market our product.

(a)      Business Development

         Internet  VIP,  Inc.  (the  "Company"),  a  Delaware  corporation,  was
organized on November 13, 1998. The Company also operates through a wholly owned
Canadian subsidiary  corporation IVIP Telcom Canada,  Inc.,  previously known as
V.I. Internet Telecommunications Inc. The Company has not been involved with any
bankruptcy,  receivership  or similar  proceedings.  On May 17, 2001 the Company
announced a joint venture with Polykvart  Telecom,  a Russian entity,  to create
"PT-Intertel  XXI",  in  which  the  Company  would  hold  51% of  the  venture.
PT-Intertel  XXI would offer  telecommunication  services to and from Russia and
the Commonwealth of Independent States  ("C.I.S.").  On June 1, 2001 the Company
announced an agreement to acquire 100% of the issued and  outstanding  shares of
Yapalot  Holdings Inc., a Toronto-based  company that provides VoIP ("Voice over
the Internet  Protocol")  communication  services through the issuance of common
shares to Yapalot shareholders. Subsequent to the transaction,  shareholders' of
each company shall own 50% of the  Company's  outstanding  stock.  Completion of
this  transaction  is  subject  to  all  requisite  regulatory  and  shareholder
approvals.

The Company

         The Company was formed to sell  international  long distance  telephone
services through the use of Internet based technology,  specifically, Voice over
Internet Protocol ("VoIP").

         The  Company's  business  has been  organized  into two  separate,  yet
complementary, divisions so that its revenues are derived from two markets:

         1. (Wholesale) Providing carrier and termination  services,  worldwide,
for other telecom companies, at ----- competitive rates; and

         2. (Retail) Providing telephone calling origination and termination, at
attractive  prices,  servicing  areas of the world that currently have expensive
and/or poor quality long distance  service,  primary through the use of pre-paid
telephone cards. Competitive rates are to be achieved by using low-cost Internet
Protocol gateways and taking advantage of the efficacy of VoIP technology.

Our Business Strategy

         The  major  determining  factors  as to  where  we seek to  locate  our
gateways  (POPs),  and where we intend to focus our  services  are driven by (a)
existing  high  tariffs  and (b) the  termination  points for our  customers  of
pre-paid telephone cards.

                                       2

<PAGE>

         (a) High Tariff Regions

         We  intend  to  locate  our  POPs in  geographic  regions  based on the
following criteria:

         1. that currently have high telephone  tariffs
         2. that have  antiquated  telephone  infrastructure
         3. where  contacts,  especially  governmental,  underlie  most business
            development
         4. where the telecommunications  industry is undergoing a modernization
         5. where we understand  the cultural and business  environment
         6. that have a large ex-patriot community in the "west".

Then, to develop in each selected geographic location, we:

         1. use our  worldwide  contacts to seek out a local Joint  Venture (JV)
            partner; (usually a government or very prominent local commercial
            entity),
         2. obtain a license to operate a telecom business in that jurisdiction,
         3. build and operate one or more IP gateways,
         4. link up this  gateway  to the rest of our  network  through  private
            leased fiber-optic lines or IP telephony,
         5. supply immediate inbound traffic from existing customers, and
         6. work with our new JV partners to develop outbound traffic from three
            major market sectors; government, industrial, and retail (pre-paid
            cards).

         (b) Pre-Paid Customers

         Most of our pre-paid  telephone  cards are directed at specific  ethnic
communities  and therefore  can be expected to generate  high volume  traffic to
very  specific  global  termination  points.  We plan to either  install our own
gateways at these  destinations  or seek strategic  partnerships  that yield the
lowest cost for us to terminate traffic there.

Our operations

         In  Canada,  the  Company  operates  through  a wholly  owned  Canadian
subsidiary,  IVIP Telcom Canada, that shares office space at our head offices in
Montreal.  IVIP  Telcom  was  formed  to  develop  business  in  Canada  and  is
responsible  for oversight and  maintaining our equipment and gateway located in
Montreal.

         All of the Company's technology is state of the art, but the Company is
not dependent on any one vendor in particular. For the hardware in the switching
centers in Montreal,  Moscow, and St. Petersburg,  we employ a configuration and
equipment manufactured by Ericsson Inc.

         In the pre-paid  card  division we are  directing  our efforts  towards
so-called  "switch-less  operators" as an important  part of our customer  base.
"Switch-less  operators"  are  those  companies  that  have an  established  and
well-developed  distribution network, and have begun utilizing their channels to
sell and distribute  pre-paid long distance telephone cards, yet they do not own
or maintain any telecom  equipment.  We have made our network available to these
types of companies,  whereby we provide a "turnkey"  telecom network  underlying
the service that these  distributors  sell. We have, to date, signed up one such
customer  and  during  our  first 5 months  have  $970,171  in  revenue.  We are
currently negotiating with several additional such operators.

                                       3

<PAGE>

International Division

         Our initial international operation is in Russia. Currently, we operate
two IP telephony gateway centers in that country,  one in Moscow,  and the other
in St. Petersburg.  Both centers are connected to our hub in Montreal, and serve
as the core  switches  that  allow  calls to be routed  from  anywhere  in North
America or from Russia to over 240 countries and territories at very low cost.

         Our  potential  customers  in Russia  can be  characterized  into three
subgroups.  The first subgroup is government ministry and related agencies.  The
second  group  are  large  users  derived  from  industry  that  are to  receive
preferential rates. And finally, the third group of customers are individuals or
small  corporate  users  that  will  have  purchased  prepaid  calling  cards or
contracts. As with most prepaid calling card systems, the customer places a call
from any  telephone  in Russia,  by dialing a local  access  number to reach our
equipment  and then inputs his card number and  personal  identification  number
("PIN").  The  equipment  validates  the card  number and PIN and then gives the
caller a second dial tone allowing him to make the long distance  call.  For all
types of customers,  our  technology  and equipment  will process these steps in
milliseconds and the customer will be unable to detect the difference  between a
traditional long distance call between Moscow and the world and a call utilizing
our network.  The process for a call to Moscow originating in North America over
our network  operates the same way with the customer  calling an "800" number to
access  the  Montreal  platform  in  the  same  manner  as if he  were  using  a
conventional  calling  card.

         In Russia,  we operate our business  under the corporate  name Intertel
XXI  which is a  Russian  entity  owned  100% by us.  We had  owned  80% and the
remaining  20% of the Russian  company was owned by the "Special  Technique  and
Communication  Services  Institute",  an  agency  of  the  Russian  Ministry  of
Interior, but this 20% was repurchased by us for a nominal amount.

         We have letters of intent with  governmental  and  industrial  entities
expressing  an interest to purchase  telephone  service for calls from Russia to
the  world.  The  network  has  been  installed  and  tested  and is  now  fully
functional.  However,  the  commencement  of revenues  from  Russia  suffered an
unexpected delay due to the fact that the Ericsson equipment installed by us was
the most advanced available and had as yet not been certified for use in Russia,
by the Ministry of  Communications.  This procedure was finally  completed April
11, 2001.

         With  this  successful  certification,   we  continue  the  process  of
converting the letters of intent to firm contracts. If the Company is successful
in converting these letters to firm contracts,  the Company  anticipates that by
the end of the first year of long distance  service between Russia and the world
the Company will be providing  1,000,000  minutes of long  distance  traffic per
month. However, there can be no assurance that such usage and/or revenue levels,
if any, will be attained.

         In addition,  the Company is still in the process of analyzing the long
distance traffic between Russia and Europe.  However,  there can be no assurance
that any business will develop in this market.

Our Technology

         Conventional telephone service (PSTN) is a circuit-switched technology.
When a call is placed,  the system switches open a direct connection between the
sender, and then over a series of switching facilities,  to the receiving party.
The connection  remains open during the duration of the telephone call. Since no

                                       4

<PAGE>

one else can use the circuit  while a call is in  progress,  more  circuits  are
required,  which leads to  inefficiency  and expense.  This,  together with high
tariffs in many  jurisdictions,  are the basic reasons why telephone  companies,
and the intermediate switching companies, charge high prices for their services.

         Internet Protocol (IP) telephony is a packet-switched  technology,  the
basis of all Internet communication. IP breaks network data up into small chunks
or packets,  which is then sent out on the Net.  These  packets are routed using
the  most  expedient  path  available  at  the  time,  until  they  reach  their
destination. The data can consist of e-mail, video, and for our purposes--voice.
Additionally,  IP compression  techniques  allow five to ten times the number of
voice calls over the same bandwidth as compared to traditional  circuit-switched
voice traffic, substantially reducing the cost of carrying this traffic.

         Thus,  a caller  does not  have to place a  conventional  long-distance
telephone call to reach a party anywhere in the world,  since with IP telephony,
every call is simply a "voice" e-mail away. The caller initiates a local call to
a specialized switching center or gateway connected to an IP provider.  The call
travels  over the  Internet to the  receiver's  geographic  area and a switching
center in that area  completes  the call over that local's  telephone  lines.  A
growing number of  individuals,  governments,  and  corporations  are using this
technology every day to send data, voice conversations, and even money.

         On the North American side, the Company has established a presence with
a prepaid  telephone card  distributor in the New York City area. On May 3, 2001
the company  received a purchase  order of  approximately  $2.6 million USD. The
company  continues to develop and market its services  throughout Canada and the
United States as well as the Caribbean.

         The Company  does not expect to incur any  material  costs in complying
with environmental laws.

         The  Company  has  total  of 5  employees  all of whom  are  full  time
employees,  including 3 members of management. None of our employees are members
of a union and we believe we have a good relationship with our employees.

Item 2.  Description of Property

         The Company maintains its corporate offices at 1155 University  Street,
Suite 602, Montreal,  Canada where we have approximately 1,550 square feet at an
annual rental of approximately $20,000 per year which includes all utilities and
applicable taxes. The lease expires on November 30, 2002.

         Our Moscow facility is comprised of approximately 1,750 square feet and
is located at 6 Marksistki  per,  Moscow,  Russia.  The lease was for six months
expiring  on  December  31,  2000.  The  annual  rent is  approximately  $37,200
annually.  The company  continues to maintain  its office at this  location on a
month to month basis with the same monthly rent amount.

Item 3.  Legal Proceedings

         The  Company  is  not   currently   involved  in  any  material   legal
proceedings.

                                       5

<PAGE>

Item 4.  Submission of matters to a vote of security holders

         None

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

         (a) Market Information

         As of February 28,  2001,  there was no public  trading  market for the
Company's  securities.  Subsequent to year-end,  our common shares were accepted
for quotation on the NASD OTC Bulletin Board.

         The Company,  on February 28, 2001, had 600,000 class A warrants issued
and  outstanding.  Each  Warrant  entitles  the holder to purchase  one Share of
restricted  Common Stock at an exercise  price of $1.00,  subject to adjustment,
until December 31, 2002.

         In  addition,  the Company had 354,250  class B warrants.  Each Warrant
entitles  the holder to  purchase  one Share of  restricted  Common  Stock at an
exercise price of $1.50, subject to adjustment, until March 31, 2003.

         None of the  shares  underlying  the  warrants  have  any  registration
rights.

         As of February 28, 2001, the  Registrant  had 25,178,232  shares of its
Common Stock outstanding.

         Of the 25,178,232 shares of common stock outstanding, 23,516,932 shares
are currently subject to the resale restrictions and limitations of Rule 144. In
general,  under Rule 144 as currently in effect,  subject to the satisfaction of
certain other  conditions,  a person,  including an affiliate,  or persons whose
shares are aggregated with affiliates, who has owned restricted shares of common
stock  beneficially  for at least  one year is  entitled  to  sell,  within  any
three-month  period,  a number  of shares  that does not  exceed 1% of the total
number of outstanding shares of the same class. In the event the shares are sold
on an exchange or are reported on the automated quotation system of a registered
securities association, you could sell during any three-month period the greater
of such 1% amount or the average  weekly trading volume as reported for the four
calendar weeks preceding the date on which notice of your sale is filed with the
SEC. Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about us.
A person who has not been an affiliate for at least the three months immediately
preceding the sale and who has beneficially  owned shares of common stock for at
least two years is entitled to sell such shares under Rule 144 without regard to
any of the limitations described above.

         (b) Holders

         On February 28, 2001,  there were 238 holders of the  Company's  common
stock,  one  holder of the  Company's  Class A  warrants  and 6  holders  of the
Company's Class B warrants.

         (c) Dividends

         The  Company has had no earning to date,  nor has the Company  declared
any dividends to date.  The payment by the Company of dividends,  if any, in the
future,  rests within the  discretion of its Board of Directors and will depend,
among other things,  upon the Company's earnings,  its capital  requirements and
its financial condition,  as well as other relevant factors. The Company has not

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<PAGE>

declared any cash  dividends  since  inception  and has no current  intention to
declare any.

Item 6.  Plan of Operations

         The  following  discussion  should  be read  in  conjunction  with  the
financial  statements  and  related  notes  that  are  included  under  Item  6.
Statements  made  below  which  are not  historical  facts  are  forward-looking
statements.   Forward-looking   statements   involve   a  number  of  risks  and
uncertainties  including,  but not limited to, general economic conditions,  our
ability to market our  services,  competitive  factors and other risk factors as
stated  in  other  of our  public  filings  with  the  Securities  and  Exchange
Commission.

         Internet VIP, Inc.  (hereafter,  the "Company" or "IVIP") was formed in
November, 1998, to sell long distance international telephone services using the
technology,  Voice over Internet Protocol  ("VoIP').  From its control center in
Montreal,  Canada,  calls are to be routed  from  anywhere  in North  America to
anywhere in the world using VoIP technology. The first phase of operations plans
to encompass  calls,  primarily,  from North  America to St.  Petersburg  and/or
Moscow, Russia and vice versa.

         We established our business  presence in Montreal,  with the opening of
an office at 1155 University Avenue in February 1999. This office has become the
Company's worldwide headquarters and the hub of its telecommunications network.

         We  continue  to be in the  development  stage.  During  the year ended
February 28, 2001, we incurred an operating loss of $2,706,361 as compared to an
operating loss of $1,451,275 for the year ended February 29, 2000. The increased
loss is primarily due to an increase in our marketing  efforts,  the recognition
of  salaries  payable  to  management  and staff and  additional  administrative
expenditures.  Since inception (November 13, 1998) we have incurred an operating
loss of $4,376,646.  Revenues were generated for the first time since  inception
during the year ended February 28, 2001. Revenues totaled $970,171. To date, all
of our revenues have come from the sale of pre-paid  calling cards. In fact, all
of our  sales  have  been to one  customer.  High  concentration  of  sales  are
generally  viewed  with  some  apprehension  and we hope to  attract  additional
customers.  At the moment,  our  relationship  with our  customer is good and as
discussed below, we expect additional sales.

         As reflected in our  February 28, 2001 balance  sheet,  we have minimal
cash on hand and negative  working  capital.  The Company's  operations  are not
generating sufficient cash to maintain its present operations. We currently have
five  employees in our Montreal  office,  which  includes  the  President,  Vice
President  and  Chief  Executive  Officer.  Projected  annual  salaries  are  an
aggregate  of  $250,000,  which  is  based  on the  current  headcount  with  no
additional  hiring of personnel.  Our projected  annual rent for the next twelve
months  in  Montreal  is  approximately  $20,000.  Professional  fees  should be
significantly  lower than prior years since we have  completed the  registration
process  with  the  Securities  and  Exchange   Commission.   Projected   annual
professional  fees are  $100,000  based  on the  company  maintaining  reporting
compliance.  Travel in the past was necessary to develop the Russian hubs. Since
these  locations  are now  operational,  travel  will  be  reduced  and  limited
primarily as a monitoring  tool.  Projected  annual  travel  expense is $50,000.
During the year we  increased  our  marketing  activity in an effort to generate
more sales.  Projected  marketing costs for the next twelve months are $100,000.
The company is also reviewing all non essential  activities and expenditures and
fixed costs such as line rentals,  office leases,  salaries and consulting  fees
and will be aggressively  curtailing  these items to assist in reducing the cash
used in operating activities.

                                       7

<PAGE>

         Our North American  operations has seen increased  activity in the sale
of  prepaid  calling  cards.  A major  customer  in New York has agreed to order
approximately  $2.6 million USD in prepaid  calling  cards.  Although  this is a
significant  order  and will  certainly  contribute  cash to  cover  some of the
monthly operating expenses,  we believe we will still be deficient in satisfying
our cash  requirements  over the next 12 months. We anticipate that we will have
to raise  additional  funds in the next twelve months through equity  financing.
The  Company  is  also  exploring  areas  of  strategic   alliances  with  other
organizations  in an effort to better position itself in the  telecommunciations
market.

         Our  operations in Russia have  required  major cash outlays to develop
the necessary  infrastructure for its operations.  We do not anticipate any more
major  cash  outlays in this area  since at this time the  operations  are fully
functional.  Our efforts in this area will now focus on selling  services to the
targeted markets.

         On May 30,  2001,  we entered  into an agreement to acquire 100% of the
common shares of Yapalot  Communications  Holdings Inc., a Delaware  corporation
("Yapalot")  through a newly  formed  subsidiary.  The basic  parameters  of the
merger are that post merger,  the total  ownership of the Company will be shared
approximately  equally  between  our  shareholders  and  those of  Yapalot;  the
companies, at least initially,  will be operated as two entities, with decisions
shared by a balanced Board of Directors.

         Yapalot  and its wholly  Canadian  subsidiary,  Yapalot  Communications
Inc.,  were  formed to  deploy  and  market a global  Internet  Protocol  ("IP")
telecommunications   network.   Yapalot  specializes  in  voice   communications
solutions over the Internet, specifically in the area of long distance telephone
service.

         The Company believes this merger entails a synergy strongly  beneficial
to both  entities,  as Yapalot has  installed,  to date, 13 VoIP POPs in various
first  world  countries,  while we have  shown  our forte in  obtaining  telecom
licenses  and  operating  in  the  emerging   markets.   The  merger  will  also
substantially  reduce our cost for terminating  traffic in those locations where
Yapalot has their installations.

         Yapalot is subject to the reporting  requirements of the Securities and
Exchange  Act of 1934,  as  amended,  and is  current  in its  filings  with the
Securities and Exchange Commission.

Item 7.  Financial Statements

         The financial  statements are included  herein  commencing on page F-1.
The Company is not required to provide supplementary financial information.

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

         A change in accountants was previously  reported on a Current Report on
Form 8-K filed on October 23, 2000.

                                       8

<PAGE>

                                    PART III

ITEM 9. Directors,  Executive Officers, Promotes and Control Persons; Compliance
with Section 16(a) of the Exchange Act.

Directors  serve for one year terms and until their  successors  are elected and
assume office.

Name                                Age         Position

Dr. Ilya Gerol                      61          Chairman

Christian P. Richer                 52          Interim President

Derek Labell                        41          Vice-President,
                                                Sales (N. America)

Viatcheslav Makarov                 46          Secretary, Treasurer and
                                                Director


Dr. Ilya Gerol:  Chairman

         Dr.  Ilya  Gerol is an expert in  communications  with over 28 years of
experience. A Canadian of Russian descent, Dr. Gerol is Chairman of the Board of
Directors.  He  has  consulted  to the  Economic  Council  of  Canada,  and  has
researched  and  analyzed   international   information  and  economic   trends,
specializing in energy, communications, and the world economy. From 1991 to 1994
he was a consultant on Eastern Europe and Commonwealth of Independent  States to
Economic Counsel of Canada for Amberoute  International Group. From 1994 to 1997
Dr.  Gerol  was  Editor-in  Chief and Vice  President  -  International,  of the
newsletter D.A. & G. Information and Analysis,  a publication  covering economic
and political news from Russia and Eastern  Europe.  Dr. Gerol has been on staff
and/or visiting professor for over 14 universities throughout to world including
State  University  of Winnipeg,  University  of British  Columbia,  Moscow State
University, Hebrew University and others.

Christian P. Richer, Interim President

         Mr.  Richer was the  President,  CEO and  Director of the Company  from
March 1, 2000 to May 1, 2001. Since that date he resigned all his positions with
the Company and is now acting as Interim  President.  Mr. Richer is an authority
in the field of telecommunications,  and a marketing expert in the international
marketplace.  Mr. Richer has 25 years of experience with Bell Canada and several
of its many  subsidiaries,  working mostly in sales and  marketing.  Recently he
formed  his  own  company,   C2  Marketing   International,   selling  specialty
telecommunications   products.  Mr.  Richer  brings  to  the  Company  extensive
international  contacts.  Mr. Richer has a D.E.C. diploma from the University of
Quebec.

Derek Labell: Vice-President and Director of Sales and Marketing (North America)

         Mr. Labell is Vice-President and Director of Sales and Marketing (North
America)  and  comes to the  Company  with  over 20 years  experience  in sales,
marketing  and  management.  Mr.  Labell has an in-depth  knowledge  of he North
American  telecommunications long distance telephone card market, including card

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<PAGE>

marketing,  applications,   production,   distribution,   franchising  and  card
application  platforms.  From  1995 to  1997,  Mr.  Labell  provided  consulting
services to Monit  International  Inc. (a privately  held  Montreal  Real Estate
company owning and managing more than sixty properties throughout Eastern Canada
and United States) on leasing and tenant improvement  construction  issues. From
1997 to present he has been the director of leasing for Tidan,  a privately held
Montreal  Real Estate  company  owning and managing  more than fifty  properties
throughout  Eastern  Canada and United  States.  Mr. Labell was President of the
Company from June 15, 1999 to February 29, 2000.

Viatcheslav Makarov:  Secretary, Treasurer and Director

         Mr.  Makarov has been the  Secretary and  Treasurer  since  February 1,
2001,  and prior  thereto he was the Vice  President  and  Director of Sales and
Marketing  (Russia).  Mr.  Makarov was  trained as an  engineer  and his initial
career was as an  avionics  scientist  in the  former  Soviet  Union.  From 1989
through 1995, he was the chief  representative  of Volvo  (automotive) in Russia
and,  as well,  worked as a member of  Renault  bureau in Moscow.  In 1996,  Mr.
Makarov  moved to  Canada  where he  established  and  currently  operates,  the
Interservice  Group,  a group of companies  that  consult to U.S.,  Canadian and
European business circles on financial and industrial development within Eastern
European and C.I.S.  countries utilizing the many contracts and connections that
he has  cultivated  in the last ten  years in both the  Russian  government  and
industry.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16 (a) of the  Securities  Exchange  Act of 1934  requires  the
Company's officers,  directors and beneficial owners of more than ten percent of
any class of Company's  equity  securities,  to file  reports of  ownership  and
changes in ownership  with the  Securities  and Exchange  Commission.  Officers,
directors  and  beneficial  owners of more than ten percent are  required by SEC
regulation  to furnish the Company  with copies of all Section  16(a) forms they
file.  During the fiscal year ending  February  28, 2001,  all of the  officers,
directors and 10% stockholders did not fail to make any filings, except that Mr.
Richer did not file any Form 4 regarding the exercise of stock options.  It also
appears that one 10% beneficial owner did not file a Form 4.


Item 10.  Executive Compensation

(a) General

         Commencing  on March 1, 2000,  the Company  agreed to pay Dr. Gerol and
Mr. Makarov an annual salary of $72,000 USD each.

         Commencing May 1, 2000, Mr.  Richer's  salary is $90,000 USD per annum.
From May 1, 2000 to February 28, 2001,  Mr. Richer earned  $75,000 of the annual
$90,000 in salaries.  Mr. Richer also received  100,000  shares of the Company's
common stock at $.0001 as part of his employment contract. Mr. Richer's contract
also grants him options to purchase  annually  100,000  shares of the  Company's
common stock at a price of $0.05 while his employment contract is in effect. Mr.
Richer's employment contract also allows a car allowance of approximately $4,000
USD annually.  As at May 1, 2001,  Mr. Richer  indicated that he would not renew
his contract,  but remain as interim President on a month to month basis, as the
Company searches for a replacement.

                                       10

<PAGE>

(b) Summary Compensation Table

                           SUMMARY COMPENSATION TABLE

<TABLE>
<S>                        <C>             <C>         <C>         <C>             <C>

Name and                                                              Other             Long-term
Principal Position         Year            Salary      Bonus       Compensation     Compensation:Options
------------------         ----            ------      -----       ------------     --------------------

Dr. Ilya Gerol             2000            12,000        0              0                      0
Chairman & Chief           2001(1)         65,000        0
Executive Officer

Christian Richer           2001(2)         90,000        0         $100,000(3)           100,000
President & CEO

</TABLE>

(1)      CEO from March 1, 2000 (start of fiscal year through April 30, 2000.
(2)      Covers the fiscal year period from May 1, 2000 (date of hire) to
         February 28, 2001.
(3)      Consists of 100,000 shares of common stock.  Does not include a $4,000
         car allowance.

(c) Option/SAR Grants Table

                      Option/SAR Grants in Last Fiscal Year

                                Individual Grants

<TABLE>
<S>                     <C>                  <C>             <C>                   <C>         <C>
------------------------------------------------------------------------------------------------------------------

                         Number of
                         Securities          % of Total
                         Underlying          Options/SARs
                         Options/            Granted to
                         SARs                Employees in     Exercise or Base     Market      Expiration
Name                     Granted (#)         Fiscal Year        Price ($/Sh)        Price      Date
-------------------------------------------------------------------------------------------------------------------

CEO - C. Richer          100,000             100%                  $0.05            $1.00      March 31, 2001

</TABLE>

These options were exercised on March 30, 2001.

(d) Aggregated  Option/SAR  Exercises in Last Fiscal Year and FY-End  Option/SAR
Values

         None

(e) Long-Term Incentive Plans - Awards in Last Fiscal Year

         None

(f) Compensation of Directors

         No Director receives any compensation for his service as a Director

(g) Employment contracts and termination of employment and change-in-control
    arrangements.

                                       11

<PAGE>

         On April  28,  2000 the  Company  entered  into a  one-year  employment
agreement with its CEO, Mr. Christian Richer. The agreement was effective May 1,
2000 through April 30, 2001 and was automatically  renewable unless either party
gives notice to terminate  within 60 days of the expiration date (April 30). The
contract  reflects an annual  salary of $90,000  USD. Mr.  Richer also  received
100,000 shares of the Company's common stock at $.0001 as part of his employment
contract.  Mr.  Richer's  contract  also grants him options to purchase  100,000
shares of the  Company's  common stock on March 31 each year the agreement is in
effect at a price of $0.05 per share.  Mr.  Richer's  employment  contract  also
allows a car allowance of  approximately  $4,000 USD annually.  The Contract has
not been renewed,  and Mr. Richer is continuing to act on an interim basis until
a successor is found. Mr. Richer is currently receiving $7,500. per month.

h) Report on repricing of options/SARs

          None

Item 11.  Security Ownership of Certain Beneficial Owners and Management

         The  following  table sets  forth the  information  as of May 31,  2001
regarding the  beneficial  ownership of the Company's  Common Stock,  $.0001 par
value,  as of the date hereof and after the Offering by (i) each person known by
the  Company  to own  beneficially  more  than  five  percent  of the  Company's
outstanding  shares of Common Stock, (ii) each director and executive officer of
the Company who owns shares and (iii) all directors  and  executive  officers of
the Company as a group. Unless otherwise  indicated,  all shares of Common Stock
are owned by the  individual  named as sole  record  and  beneficial  owner with
exclusive  power to vote and dispose of such shares.  None of the people  listed
below owns any other securities of the Company.  There are no arrangements which
may result in a change in control of the Company.

<TABLE>
<S>                      <C>                                <C>                         <C>

Title of                 Name and Address                   Amount and Nature            Percent
Class                    of Beneficial Owner                of Beneficial Owner          of Class
-------------------------------------------------------------------------------------------------------

Common Stock             Ilya Gerol (1)                           2,508,266                9.96

Common Stock             Viatscheslav Makarov (1)                 2,508,266                9.96

Common Stock             Christian Richer (1)                       200,000                0.80

Common Stock             Derek Labell (1)                         2,809,266               11.16

Common Stock             Nais Corp.                               1,297,701                5.15
                         94 Washington Ave.
                         Lawrence, NY  11559

Common Stock             Howard Salamon                           1,872,701                7.44
                         20 Margaret Ave.
                         Lawrence, NY  11559

Executives Officers and Directors as a Group
(3 persons)

</TABLE>

                                       12

<PAGE>

---------------------------------
(1) Uses Company's address

Item 12.  Certain Relationships and Related Transactions

         By way of an assignment from VI  Interservice  Inc., an entity owned by
V.  Makarov,  the Company has entered  into an office  lease  agreement  for its
Montreal  office on September 15, 2000.  The lease expires on November 30, 2002.
Monthly  rent  amounts,  which  include  taxes,  are  $1,705.  Mr.  Makarov is a
shareholder,  director and officer of Internet VIP, Inc.  Prior to September 15,
2000 the Company  rented  office  space from VI  Interservice  Inc. at an annual
rental of $24,000 USD. The Company believes the rate was at fair market value.

         During the fiscal period ending February 28, 2001, the Company received
investment  relations  services from NP  Investments,  an entity owned by Howard
Salamon (a 5% shareholder). Fees for such services which totaled $38,105 for the
year ended  February 28, 2001 and were settled by the issuance of 146,315 shares
of common stock.

         During the fiscal period ending  February 29, 2000,  the Company issued
437,500  shares  to  Howard  Salamon  (a  5%  shareholder)   for  business  plan
preparation and financial and cash flow analysis.

         In December  1998,  the  Company  entered  into a four year  consulting
agreement  with Nais Corp.,  a  shareholder,  pursuant to which Nais Corp.  will
provide financial and business public relations consulting services.  Nais Corp.
claims  that it is owed US$ 138,000 as of  February  28,  2001  pursuant to this
agreement.  While the Company  acknowledges  the validity of the agreement,  the
Company  disputes that any funds are currently  due under this  agreement.  Both
parties  agree that the Company is not  obligated  to make any cash  payments to
Nais Corp.  until it has revenues of $1 million.  The dispute centers on whether
payments accrue until the revenue milestone is met.

         Bridgepoint  is  owned  by  Artel   Communications   Inc.,  a  minority
shareholder of the Company.  The Company paid  Bridgepoint  $8,000 per month for
consulting services and for warehousing of equipment.  This agreement terminated
in May 2000.  A new  agreement  was entered into in May 2000 whereby the Company
will only warehouse its equipment at Bridgepoint's location for a monthly fee of
$1,679. The Company believes these charges to be a fair price.

                                     PART IV

Item 13.  Exhibits, Lists and Reports on Form 8-K

(a) List of Exhibits

           None

(b) Reports on Form 8-K

          No reports were filed during the last quarter of the period covered by
this report.

                                       13
<PAGE>

                                Mark Cohen C.P.A.
                           1772 East Trafalgar Circle
                               Hollywood, Fl 33020
                                (954) 922 - 6042
--------------------------------------------------------------------------------


                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors and Stockholders of
Internet VIP, Inc.

We have audited the accompanying  balance sheet of Internet VIP, Inc. (a company
in the development  stage) and its  subsidiaries as of February 28, 2001 and the
related  statements of operations,  shareholders'  equity  (deficiency) and cash
flows for the year ended.  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial  statements based on our audits. The financial  statements of Internet
VIP, Inc. and its  subsidiaries  as of February 29, 2000,  were audited by other
auditors whose report dated June 23, 2000,  expressed an unqualified  opinion on
those statements.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Internet  VIP, Inc. and its
subsidiaries  at February 28, 2001,  and the results of its  operations  and its
cash  flows for the year then  ended,  in  conformity  with  generally  accepted
accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 7 to the
financial  statements,  the  Company  has  experienced  an  operating  loss  and
management has determined  that it will require  additional  capital to continue
funding  operations and meet its obligations as they come due. These  conditions
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  The  financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.





/s/Mark Cohen, C.P.A.
Mark Cohen C.P.A.
A Sole Proprietor Firm


Hollywood, Florida
May 2, 2001

<PAGE>

                      INTERNET VIP, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                                 BALANCE SHEET

<TABLE>
<S>                                                                                      <C>                  <C>




                                                                                          February 28,          February 29,
                                                                                              2001                  2000
                                                                                          -------------          ------------
                                     Assets

Current assets
     Cash and cash equivalents                                                                 $ 27,480            $ 24,673
     Accounts receivable, net                                                                   177,934                   -
     Other receivables                                                                          176,957                   -
     Other current assets                                                                         4,197              12,802
                                                                                              -----------        ------------
       Total current assets                                                                     386,568              37,475
Property and equipment, net                                                                     381,177             379,660
Other assets                                                                                     14,674                   -
                                                                                              -----------        ------------
       Total assets                                                                             782,419             417,135
                                                                                              ===========        ============
                      Liabilities and Shareholders' Equity

Current Liabilities
     Accounts payable and accrued liabilities                                                 1,659,496             239,174
     Short term borrowings (principally related parties)                                        179,321              55,000
     Deferred revenue                                                                           216,025                   -
     Other current liabilities                                                                    9,623                   -
                                                                                             -------------        ------------
       Total current liabilities                                                              2,064,465             294,174

Long Term Debt                                                                                  200,100                   -
Other Liabilities                                                                                 2,735                   -
                                                                                             -------------        ------------
       Total Liabilities                                                                      2,267,300             294,174

Shareholders' Equity
     Common Stock, $.0001 par value; authorized 50,000,000 shares;                                2,510               2,335
          issued and outstanding - 25,178,232 and 23,351,027 respectively
     Paid in Capital                                                                          2,905,921           1,790,911
     Deferred Compensation                                                                      (16,666)                  -
     Deficit accumulated during the development stage                                        (4,376,646)         (1,670,285)
                                                                                             -------------       ------------
       Total Shareholder's Equity                                                            (1,484,880)            122,961

        Total liabilities and shareholder's equity                                            $ 782,419           $ 417,135
                                                                                             =============       ============
</TABLE>

              Read the accompanying accounting notes to financial
       statements, which are an integral part of this financial statement

<PAGE>

                      INTERNET VIP, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                            STATEMENT OF OPERATIONS
            FROM INCEPTION (NOVEMBER 13, 1998) TO FEBRUARY 28, 2001
      FOR THE TWELVE MONTHS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000

<TABLE>
<S>                                                                   <C>                         <C>                 <C>


                                                                            Inception                   Twelve months ended
                                                                        (November 13, 1998)       February 28,       February 29,
                                                                            through               ----------------------------------
                                                                          February 28, 2001             2001               2000
                                                                      -------------------------   ---------------    ---------------
Revenues                                                                       $ 970,171              $ 970,171            $ -

Cost of Sales                                                                  2,276,358              2,012,437            255,921
                                                                      -------------------------    ---------------    --------------

Gross Profit                                                                  (1,306,187)            (1,042,266)          (255,921)

Operating expenses:
       Marketing                                                                 541,164                390,334            145,600
       Salaries and payroll related                                              531,437                419,230             97,540
       Professional Fees                                                         849,136                258,427            514,373
       Travel                                                                    312,783                 97,596            119,740
       Amortization of deferred compensation                                     100,000                    -              100,000
       Rent                                                                      137,293                 54,008             79,235
       Selling, general and administrative expenses                              472,782                374,469             83,033
                                                                      -------------------------    ---------------    --------------
          Total operating expenses                                             2,944,595              1,594,064          1,139,521

          Loss before other income (expense)                                  (4,250,783)            (2,636,331)        (1,395,442)

Other income (expense):
       Interest income                                                               176                    176                  -
       Interest expense                                                         (119,349)               (63,516)           (55,833)
       Foreign exchange gain (loss)                                               (6,691)                (6,691)                 -
                                                                      -------------------------    ---------------    --------------
          Total other income (expense)                                          (125,864)               (70,031)           (55,833)
                                                                      -------------------------    ---------------    --------------
Net Loss                                                                      (4,376,646)            (2,706,361)        (1,451,275)
                                                                      =========================    ===============    ==============
Basic weighted average common shares outstanding                                                     24,722,640         22,289,828
                                                                                                   ===============    ==============

Basic Loss per common share                                                                           $ (0.1095)         $ (0.0651)
                                                                                                   ===============    ==============

</TABLE>

              Read the accompanying accounting notes to financial
      statements, which are an integral part of this financial statement.

<PAGE>

                      INTERNET VIP, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                       STATEMENT OF STOCKHOLDERS' EQUITY
            FROM INCEPTION (NOVEMBER 13, 1998) TO FEBRUARY 28, 2001

<TABLE>
<S>                                                <C>             <C>              <C>               <C>



                                                                   Common Stock
                                                   --------------------------------  Paid-in             Deferred
                                                      Shares        Amount           Capital            Compensation
                                                   -------------  -----------      ------------       ----------------

Balance, inception (November 13, 1998)                        -          $ -               $ -                    $ -

Issuance of common stock to founders                 18,772,600        1,877
Issuance of common stock in a private                 1,184,000          118            59,082
placement ($0.05 per share)
Issuance of common stock in a private                   718,200           72           339,028
placement ($0.05 per share), net
Issuance of common stock for consulting                 200,000           20            99,980               (100,000)
services
Net loss year ended February 28, 1999

                                                   -------------  -----------      ------------       ----------------
Balance, February 28, 1999                           20,874,800        2,087           498,090               (100,000)

Issuance of common stock in a private                 1,672,727          167           831,195
placement ($0.05 per share), net
Issuance of common stock for consulting                 743,500           75           371,632
services
Issuance of common stock in lieu of                      60,000            6            59,994
interest
Issuance of warrants for purchase of                                                    30,000
equipment
Amortization of deferred compensation                                                                         100,000
Net loss year ended February 29, 2000

                                                   -------------  -----------      ------------       ----------------
Balance, February 29, 2000                           23,351,027        2,335         1,790,911                      -

Issuance of common stock in a private                    20,000            2             9,998
placement ($0.50 per share)
Issuance of common stock in a private                    30,400            3            23,397
placement ($0.77 per share)
Issuance of common stock in a private                   626,500           63           626,437
placement ($1.00 per share)
Issuance of common stock in lieu of                     179,840           18            43,548
interest
Issuance of common stock for marketing                  643,400           64           214,369
services
Issuance of common stock to executive                   100,000           10            99,990               (100,000)
per employment agreement
Amortization of deferred compensation                                                                          83,334
Issuance of common stock for other services             185,065           19            55,295
Issuance of common stock for conversion of               42,000            4            41,996
debt
Net loss year ended February 28, 2001

                                                   -------------  -----------      ------------       ----------------
                                                   -------------  -----------      ------------       ----------------
Balance, February 28, 2001                           25,178,232        2,510         2,905,921                (16,666)
                                                   =============  ===========      ============       ================
</TABLE>

<PAGE>

                      INTERNET VIP, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                       STATEMENT OF STOCKHOLDERS' EQUITY
            FROM INCEPTION (NOVEMBER 13, 1998) TO FEBRUARY 28, 2001 (CONT.)

<TABLE>
<S>                                                <C>                     <C>

                                                   Accumulated               Total
                                                   Deficit during          Stockholders'
                                                   Development               Equity
                                                   Stage
                                                   --------------          --------------

Balance, inception (November 13, 1998)             $      -                $        -

Issuance of common stock to founders                                              1,877
Issuance of common stock in a private                                            59,200
placement ($0.05 per share)
Issuance of common stock in a private                                           339,100
placement ($0.05 per share), net
Issuance of common stock for consulting                                               -
services
Net loss year ended February 28, 1999                 (219,010)                (219,010)
                                                   --------------          --------------
Balance, February 28, 1999                            (219,010)                 181,167

Issuance of common stock in a private                                           831,362
placement ($0.05 per share), net
Issuance of common stock for consulting                                         371,707
services
Issuance of common stock in lieu of                                              60,000
interest
Issuance of warrants for purchase of                                             30,000
equipment
Amortization of deferred compensation                                           100,000
Net loss year ended February 29, 2000                                        (1,451,275)
                                                   --------------          --------------
Balance, February 29, 2000                          (1,670,285)                 122,961

Issuance of common stock in a private                                            10,000
placement ($0.50 per share)
Issuance of common stock in a private                                            23,400
placement ($0.77 per share)
Issuance of common stock in a private                                           626,500
placement ($1.00 per share)
Issuance of common stock in lieu of                                              43,566
interest
Issuance of common stock for marketing                                          214,433
services
Issuance of common stock to executive                                                 -
per employment agreement
Amortization of deferred compensation                                            83,334
Issuance of common stock for other services                                      55,314
Issuance of common stock for conversion of                                       42,000
debt
Net loss year ended February 28, 2001              (2,706,361)               (2,706,361)
                                                  -------------            --------------
Balance, February 28, 2001                         (4,376,646)               (1,484,880)
                                                  =============            ==============
</TABLE>

<PAGE>

                      INTERNET VIP, INC. AND SUBSIDIARIES
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                            STATEMENT OF CASH FLOWS
          FROM INCEPTION (NOVEMBER 13, 1998) THROUGH FEBRUARY 28, 2001
      FOR THE TWELVE MONTHS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000

<TABLE>
<S>                                                                  <C>                      <C>                <C>



                                                                          Inception                 Twelve months ended
                                                                     (November 13, 1998)      February 28,       February 29,
                                                                           through            ---------------------------------
                                                                      February 28, 2001            2001              2000
                                                                   ------------------------   ---------------    --------------

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income (Loss)                                                             $ (4,376,646)     $ (2,706,361)      $(1,451,275)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
             Depreciation                                                          128,659           128,659                 -
             Amortization of employee stock based compensation                      83,334            83,334
             Stock issued for compensation                                         100,000                             100,000
             Stock issued for marketing services                                   214,433           214,433
             Stock issued for consulting services                                  427,021            55,314           371,707
             Stock issued for interest                                             103,538            47,705            55,833

Changes in Operating assets and liabilities:
             Receivables and other current assets                                 (373,762)         (365,127)           (7,834)
             Accounts payable and other liabilities                              1,887,879         1,648,705           170,916
                                                                   ------------------------   ---------------    --------------

Net cash provided by/(used in) operating activities                             (1,805,544)         (893,338)         (760,653)


CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of Property and equipment                                                (479,836)         (130,176)         (324,660)
                                                                   ------------------------   ---------------    --------------

Net cash provided by/(used in) investing activities                               (479,836)         (130,176)         (324,660)


CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from:
  Stockholder's capital contribution, net                                        1,891,439           659,900           831,362
  Convertible debentures                                                           200,100           200,100                 -
  Short-term borrowing, net                                                        221,321           166,321            55,000
                                                                   ------------------------   ---------------    --------------

Net cash provided by/(used in) financing activities                              2,312,860         1,026,321           886,362
                                                                   ------------------------   ---------------    --------------


Net increase (decrease) in cash and cash equivalents                                27,480             2,807          (198,951)
Cash and cash equivalents, beginning of period                                           -            24,673           223,624
                                                                   ------------------------   ---------------    --------------

Cash and cash equivalents, end of period                                          $ 27,480          $ 27,480          $ 24,673
                                                                   ========================   ===============    ==============


Supplemental Schedule of noncash investing and financing activities:

Common stock issued for noncash consideration                                      100,000
Warrants issued for non-cash equipment purchase                                     30,000                              30,000
Shares issued to extinguish short term borrowings                                   42,000            42,000
Common stock issued pursuant to employment agreement                               100,000           100,000

</TABLE>

              Read the accompanying accounting notes to financial
       statement, which are an integral part of this financial statement.
<PAGE>

                               INTERNET VIP, INC.
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001



NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Internet VIP, Inc. (the "Company") was  incorporated in the State of Delaware on
November 13, 1998.  The Company was formed to sell long  distance  international
telephone services using the technology,  Voice over Internet Protocol ("VoIP").
The  Company  also  operates   through  a  wholly  owned   Canadian   subsidiary
corporation, IVIP Telcom Canada Inc..

Internet VIP, Inc. prepares its consolidated  financial statements in accordance
with generally accepted accounting principles. This basis of accounting involves
the  application  of accrual  accounting;  consequently,  revenues and gains are
recognized  when earned,  and expenses and losses are recognized  when incurred.
Financial   statement  items  are  recorded  at  historical  cost  and  may  not
necessarily represent current values.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:
    The consolidated financial statements include the accounts of Internet VIP,
    Inc. and its subsidiaries. All material intercompany accounts and
    transactions have been eliminated in consolidation.

Use of Estimates:
    The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect the reported amounts of assets and liabilities,
    disclosure of contingent assets and liabilities at the date of the financial
    statements, and the reported amounts of revenues and expenses during the
    reporting period. Certain amounts included in the financial statements are
    estimated based on currently available information and management's judgment
    as to the outcome of future conditions and circumstances. Changes in the
    status of certain facts or circumstances could result in material changes to
    the estimates used in the preparation of financial statements and actual
    results could differ from the estimates and assumptions. Every effort is
    made to ensure the integrity of such estimates.

Fair value of financial instruments:
    The carrying amounts of cash and equivalents, accounts receivable, accounts
    payable and accrued liabilities approximate their fair values because of the
    short duration of these instruments.

Impairment of long-lived assets:
    Long-lived assets held and used by the Company are reviewed for possible
    impairment whenever events or changes in circumstances indicate the carrying
    amount of an asset may not be recoverable. Recoverability of assets to be
    held and used is measured by a comparison of the carrying amount of the
    assets to the future net cash flows expected to be generated by the asset.
    If such assets are considered to be impaired, the impairment to be
    recognized is measured by the amount by which the carrying amount of the
    assets exceeds the fair value of the assets.

Cash and cash equivalents:
    The Company considers all highly liquid investments with original maturities
    of ninety days or less to be cash and cash equivalents. Such investments are
    valued at quoted market prices.

Receivables:
    The Company believes that the carrying amount of receivables at February 28,
    2001 approximates the fair value at such date.

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Property, equipment and depreciation:
    Property and equipment are stated at cost less accumulated depreciation.
    Depreciation is computed using the straight line method over the estimated
    useful lives as follows when the property and equipment is placed in
    service:

                                                       Estimate Useful Life
                                                              (In Years)

                  Office Furniture                                10
                  Computer Equipment                               3
                  Software                                         3

     Repairs  and  maintenance  are  charged  to  operations  as  incurred,  and
     expenditures  for significant  improvements  are  capitalized.  The cost of
     property  and  equipment  retired  or  sold,   together  with  the  related
     accumulated  depreciation,  are  removed  from the  appropriate  asset  and
     depreciation  accounts,  and the  resulting  gain or  loss is  included  in
     operations.

Revenue Recognition:
     The  company  sources of  revenues  are in the form of sales  from  prepaid
     calling cards, dedicated line rentals, sales from telephone line usage on a
     time basis.  Revenues from prepaid  calling cards are  recognized  when the
     calling  cards are used,  any unused time is considered  deferred  revenue.
     Revenues from line rentals are recognized over the contractual  life of the
     line rental  agreement.  Revenues from sales from  telephone line usage are
     recognized when the line is used.

     In December 1999, the  Securities  and Exchange  Commission  ("SEC") issued
     Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition," which
     provides  guidance  on the  recognition,  presentation  and  disclosure  of
     revenue in  financial  statements  filed with the SEC. SAB 101 outlines the
     basic criteria that must be met to recognize  revenue and provide  guidance
     for  disclosures  related  to  revenue  recognition  policies.   Management
     believes that Internet VIP,  Inc.'s  revenue  recognition  practices are in
     conformity with the guidelines of SAB 101.

Earnings (Loss) per share calculation:
     Earnings  (Loss) per common share are  calculated  under the  provisions of
     SFAS No.  128,  "Earnings  per  Share,"  which  establishes  standards  for
     computing  and  presenting  earnings  per share.  SFAS No. 128 requires the
     Company to report both basic earnings  (loss) per share,  which is based on
     the weighted-average number of common shares outstanding during the period,
     and   diluted   earnings   (loss)  per   share,   which  is  based  on  the
     weighted-average  number of common  shares  outstanding  plus all potential
     dilutive common shares outstanding. Options and warrants are not considered
     in calculating  diluted  earnings (loss) per share since  considering  such
     items would have an anti-dilutive effect.

Stock based compensation:
     In October 1995, the Financial  Accounting Standards Board issued Statement
     of  Financial  Accounting  Standards  ("SFAS")  No.  123,  "Accounting  for
     Stock-Based   Compensation".   The   Company   accounts   for  stock  based
     compensation  granted to non employees in accordance with SFAS No. 123. The
     Company  has  determined  that it will  continue  to account  for  employee
     stock-based compensation under Accounting Principles Board No. 25 and elect
     the disclosure-only alternative under SFAS No. 123.

<PAGE>

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Recent Accounting Pronouncements:
     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
     Statement  of  Financial   Accounting   Standards  Board  (SFAS)  No.  133,
     "Accounting for Derivative Instruments and Hedging Activities",  amended by
     Statements  of  Financial   Accounting  Standards  Board  (SFAS)  No.  137,
     "Accounting for Derivati .ve Instruments and Hedging  Activities - Deferral
     of the  Effective  Date of FASB  Statement  No. 133 - an  amendment of FASB
     Statement 133" and Statement of Financial Accounting Standards Board (SFAS)
     No. 138, "Accounting for Derivative Instruments and Hedging Activities - an
     amendment of FASB Statement 133." These new standards establish  accounting
     and  reporting  standards for  derivative  instruments,  including  certain
     derivative  instruments  embedded  in  other  contracts,  and  for  hedging
     activities.  It requires that entities  recognize all derivatives as either
     assets or liabilities in the  consolidated  balance sheet and measure those
     instruments  at fair value.  This  Statement  is  effective  for all fiscal
     quarters of all fiscal years beginning after June 15, 2000. The adoption of
     this  statement  by the  Company  did not  have a  material  impact  on its
     financial condition or results of operations.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following:

                                            February 28,          February 29,
                                               2000                    1999
                                            ----------------    ----------------
Office Furniture                             $ 4,505               $    -
Computer Equipment                           403,312                 349,660
Software                                     102,019                  30,000
                                            ----------------    ----------------
                                             509,836                 379,660
Less:  Accumulated depreciation              128,659                       -
                                            ----------------    ----------------
                                            $381,177               $ 379,660

NOTE 4 - SHORT TERM BORROWINGS

The Company has received loans from an affiliated  company (an entity owned by a
shareholder).  These  loans  bear 10%  interest  per  annum  on the  outstanding
balance. At February 28, 2001 the balance due, including interest was $17,921.

On February 1, 2000,  the Company  entered into a $30,000 loan  agreement with a
nonaffiliated  party for an initial period of six months which has been extended
indefinitely.  The loan bears interest of 5% per month, payable in cash or 6,000
common shares of the Company,  at the Company's option.  The loan is convertible
at any time,  at the lender's  option,  in whole or in part, to common shares of
the  Company at a  conversion  rate of $0.25 per  share.  The  interest  expense
resulting  from  the  beneficial  conversion  feature  has been  charged  to the
statement of operations  for the years ended  February 28, 2001 and February 29,
2000.  Substantially  all of the  Company's  assets are pledged to guarantee the
repayment of the loan. The balance of the loan at February 28, 2001 was $30,000.

<PAGE>

NOTE 4 - SHORT TERM BORROWINGS (CONTINUED):

On March 14, 2000,  the Company  entered into a $25,000  loan  agreement  with a
nonaffiliated  party  for an  initial  period  of three  months  which  has been
extended indefinitely. The loan bears interest of 15% per annum, payable in cash
or common shares of the Company,  at the Company's  option, at a conversion rate
of 1 share for $0.0625 of interest.  The loan is convertible at any time, at the
lender's  option,  in whole or in part,  to common  shares of the  Company  at a
conversion  rate of $0.25 per share.  The interest  expense  resulting  from the
beneficial  conversion  feature has been charged to the  statement of operations
for the year ended February 28, 2001.  Substantially all of the Company's assets
are pledged to guarantee the repayment of the loan.  During the year,  $5,000 of
the  principal  was repaid.  The  balance of the loan at  February  28, 2001 was
$20,000.

On June 15, 2000, the Company entered into an agreement to borrow up to $150,000
from a nonaffiliated party. The repayment of the total amount borrowed is due on
February 28, 2001 which has been extended indefinitely.  The loan bears interest
of 10% per annum,  payable in common shares of the Company at a conversion  rate
of 20 shares per $1,000 of the average  monthly  outstanding  loan balance.  The
interest  expense  resulting  from the  beneficial  conversion  feature has been
charged to the  statement of  operations  for the year ended  February 28, 2001.
Substantially all of the Company's assets are pledged to guarantee the repayment
of the loan. During the year, $5,000 of the principal was repaid. The balance of
the loan at February 28, 2001 was $111,400.

NOTE 5 - CONVERTIBLE DEBENTURE

On September 22, 2000 the Company entered into a convertible debenture agreement
with a  nonaffiliated  party.  The  amount of the  debenture  was  $300,000  CAD
($200,100  USD).  The debenture  bears  interest of 10% per annum and expires on
September 30, 2002.  The  debenture can be converted , at the  discretion of the
holder, at any time up to the expiring date into common shares of the Company at
a rate of 1 share per $1.00 USD of the balance outstanding.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Lease agreements

     By way of an assignment  from an  affiliated  company (an entity owned by a
     shareholder, director and officer) , the Company has entered into an office
     lease  agreement for its Montreal  office on September 15, 2000.  The lease
     expires on November 30, 2002.  Monthly rent amounts,  which include  taxes,
     are $2,555 CAD.

     On June 26,  2000,  the  company  entered  into a six  month  office  lease
     agreement  for its Moscow  office which started on July 1, 2000 and expired
     on December 31, 2000.  Monthly rent amounts,  which included all applicable
     taxes, were equivalent to $3,050 USD. Starting January 1, 2001, the Company
     continued to maintain its office at this location on a month to month basis
     with the same monthly rent amount.

     The  following  is a schedule by years of future  minimum  rental  payments
     required   under   operating   leases  that  have   initial  or   remaining
     noncancelable  lease terms in excess of one year as of February  28,  2001:

     Year ending February 28,

         2002 -   $ 30,660
         2003 -     22,995
                  ---------
                  $ 53,655

<PAGE>

NOTE 6 - COMMITMENTS AND CONTINGENCIES (CONTINUED):

Facilities Management:
     On October 01, 2000 the Company entered into a one-year agreement with RACO
     Remote Access  Company where RACO will provide the Company with  facilities
     for its equipment for a monthly  charge of $650 CAD as well as  maintenance
     and   technical   support  for  such   equipment   for   variable   monthly
     considerations.

Telecommunication Service Agreement:
     On April 19, 2000 the Company  entered  into a  three-year  agreement  with
     Primelink Inc. in which Primelink will provide  telecommunication  services
     to the Company for variable monthly considerations.

Employment Contract:
     On April 28, 2000 the Company entered into a one-year employment agreement,
     automatically  renewable each year ,with its Chief Executive  Officer.  The
     agreement is effective May 1, 2000 and ends on April 30, 2001.  The Company
     agreed to an annual  salary of $90,000 USD,  issuance of 100,000  shares of
     common  stock at par  value,  100,000  options  (See  Note 10)  exercisable
     annually  at $0.05 as long as the  employment  contract  is in effect and a
     monthly car  allowance  of $500 CAD.  The  company  also agreed to purchase
     billing software from the CEO in the amount of $35,000 USD. At February 28,
     2001 approximately $47,795 USD of salaries was unpaid.

NOTE 7 - GOING CONCERN

The accompanying  financial  statements have been prepared  assuming the Company
will continue as a going concern.  The Company reported net losses of $2,706,361
and  $1,451,275  for the twelve months ended  February 28, 2001 and February 29,
2000  respectively  as well as reporting net losses of $4,376,646 from inception
(November  13, 1998) to February 28, 2001.  As reported on the statement of cash
flows,  the Company  incurred  negative cash flows from operating  activities of
$893,338 and $760,653 for twelve months  February 28, 2001 and February 29, 2000
respectively and has reported deficient cash flows from operating  activities of
$1,805,544 from inception  (November 13, 1998).  To date,  these losses and cash
flow  deficiencies  have been  financed  principally  through the sale of common
stock  ($1,891,439)  Additional  capital and/or  borrowings will be necessary in
order for the Company to continue in existence  until  attaining and  sustaining
profitable operations.

NOTE 8 - RELATED PARTIES

The Company received  investment  relations  services from an affiliated company
(an entity owned by a shareholder). Fees for such services which totaled $38,105
for the year ended February 28, 2001 and were settled by the issuance of 146,315
shares of common stock.

NOTE 9 - INCOME TAXES

The Company did not provide any current or deferred United States federal, state
or foreign income tax provision or benefit for the period  presented  because it
has experienced  operating  losses since  inception.  The Company has provided a
full valuation allowance on the deferred tax asset,  consisting primarily of net
operating   loss   carryforwards,   because   of   uncertainty   regarding   its
realizability.

<PAGE>

NOTE 10 - EMPLOYEE STOCK BASED COMPENSATION

In April 2000 the Company  entered into an employment  agreement  with its Chief
Executive  Officer in which 100,000 options were granted at an exercise price of
$0.05 and expire on March 31, 2001.

The  Company  has  determined  that it will  continue  to account  for  employee
stock-based  compensation under Accounting Principles Board No. 25 and elect the
disclosure-only alternative under SFAS No. 123.

FAS 123 "Accounting for stock based compensation"
                                                          Year  ended
                                                  February 28,      February 29,
Paragraph 47 (a)                                     2001               2000
                                                    -----               ----

1.     Beginning of year - outstanding
        i.    number of options                       0                   0
       ii.    weighted average exercise price         0                   0
2.     End of year - outstanding
       i.     number of options                 100,000                   0
       ii.    weighted average exercise price       .05                   0
2.     End of year - exercisable
       i.     number of options                       0                   0
       ii.    weighted average exercise price         0                   0
3.     During the year - Granted
       i.     number of options                 100,000                   0
       ii.    weighted average exercise price       .05                   0
4.     During the year - Exercised
       i.     number of options                       0                   0
       ii.    weighted average exercise price         0                   0

5.     During the year - Forfeited
       i.     number of options                       0                   0
       ii.    weighted average exercise price         0                   0
6.     During the year - Expired
       i.     number of options                       0                   0
       ii.    weighted average exercise price         0                   0

Paragraph 47 (b) Weighted-average grant-date fair value of options granted
during the year:

         1. Equals market price                     0.00               0.00
         2. Exceeds market price                    0.00               0.00
         3. Less than market price                  0.00               0.00

Paragraph 47(C)Equity instruments other
than options                                        none               none

<PAGE>

NOTE 10 - EMPLOYEE STOCK BASED COMPENSATION (CONTINUED):

Paragraph 47(d) Description of the method and significant assumptions used
during the year to estimate the fair value of options:

The Black Scholes option pricing model is the method used to calculate The fair
value of options.

<TABLE>
<S>                                                    <C>                <C>

                                                                 Year  ended
                                                       February 28,       February 29,
                                                          2001                 2000
                                                          -----                ----

1.       Weighted average risk-free interest rate         6.00%                0.00%
2.       Weighted average expected life (in months)      12.00                 0.00
3.       Weighted average expected volatility             0.00%                0.00%
4.       Weighted average expected dividends              0.00                 0.00

Paragraph 47(e) Total compensation cost recognized in       0                    0
income for stock-based employee compensation awards.

</TABLE>

Paragraph 47(f) The terms of significant none none modifications of outstanding
awards.

Paragraph 48 - Options outstanding at the date of the latest statement of
financial position presented:
1.    (a) Range of exercise prices                       $0.05           $ 0.00
      (b) Weighted-average exercise price                  .95             0.00
2.    Weighted-average remaining contractual             12.00             0.00
        life (in months)

<TABLE>
<S>                                              <C>                  <C>                 <C>

                                                                                            Inception
                                                                                           Nov. 13, 1998
                                                     Year ended        Year  ended           Through
After proforma effect                               Feb. 28, 2001       Feb 29, 2000      February 28, 2001
                                                 -----------------   ----------------      ---------------
Net Income                                             (2,801,361)      (1,451,275)          (4,471,646)
Earnings per share                                      $ (0.1095)       $ (0.0651)

</TABLE>

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934, the Registrant caused this  registration  Statement to be signed on
its behalf by the undersigned, thereunto duly authorized.



/s/Dr. Ilya Gerol          Chairman                     Date:  June 14, 2001
Dr. Ilya Gerol



________________________   Interim President            Date:  June ___, 2001
Christian P. Richer        (Acting CEO)



/s/Viatscheslav Makarov    Directors, Secretary         Date:  June 14, 2001
Viatscheslav Makarov       and Treasurer
                           (Acting CFO)

                                       14