SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                       ----------------------------------
                                   FORM 10-KSB
                Annual report pursuant to Section 13 or 15(d) of
                       The Securities Exchange Act of 1934

                   For the Fiscal Year ended February 29, 2000

                         Commission file number 0-20277

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

                                 (514) 876-9222
                         (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 past 12  months,  and (2) has been
subject to such filing requirements for the past 90 days.
YES [  ]    NO [X]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
registrant's  best  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.

The issuer had no revenues for its most recent fiscal year.

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
Registrant:

                  Indeterminate - No existing market

As of February 29, 2000,  the  Registrant  had  23,351,027  shares of its Common
Stock outstanding.

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<PAGE>

ITEM 1.           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  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 has not been  involved  with any
bankruptcy,  receivership  or similar  proceedings.  The Company has not had any
material  reclassification,  merger,  consolidation,  or  purchase  or sale of a
significant amount of assets that is not in the ordinary course of business.

(b) Business of Issuer

The Company

         The Company was formed to sell  international  long distance  telephone
services using the new technology, Voice over Internet Protocol ("VoIP").

         The  Company's  revenues are expected to be derived from two  distinct,
yet complementary 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.  Competitive rates
         are to be achieved by using  low-cost  Internet  Protocol  gateways and
         taking advantage of the efficacy of VoIP technology.

         Currently  the Company  owns three IP  telephony  gateway  centers,  in
Montreal,  Canada,  Moscow, and St. Petersburg (Russia). The three centers 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.
The St. Petersburg center is currently  undergoing testing and is expected to be
ready for commercial traffic in September 2000.

         The  Company  will  initially  be  servicing  two  different  groups of
customers, and both groups will access the Company's technological platform in a
different manner.

         For the first customer group, wholesale customers, the Company receives
long  distance  traffic  in bulk at its  center in  Montreal  to be  routed  and
terminated, mostly in Russia (Moscow and St. Petersburg).  Additionally, through
contracts  with tier one carriers,  the Company has the  capability to terminate
bulk traffic in other parts of the world.  There is relatively  little  overhead
cost to the Company for this type of service, and the Company basically receives
a price differential as its fee for providing the service.

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<PAGE>

         The second  group of  customers  will be retail.  In the first phase of
operations  to address this  marketplace  the Company has  established  business
operations in Russia,  and is focusing on outbound  long  distance  traffic from
Russia, primarily originating in Moscow and St. Petersburg.

         Customers  in Russia can be  characterized  into three  subgroups.  The
first customer 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 the  Company's
equipment  and then inputs his card number and  personal  identification  number
("PIN").  The Company's equipment will validate the card number and PIN and then
give the caller a second dial tone allowing him to make the long distance call.

         For all types of customers, the Company's 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  the  Company's  system.  The  process for a call to
Moscow  originating in North America over the Company's system operates the same
way with the  customer  calling an "800"  number to access the  Company's  North
American platform in the same manner as if he were using a conventional  calling
card.

         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,  St.  Petersburg  and  Moscow,  the  Company  is  using a
configuration  and equipment  designed by Ericsson  Inc. For the  trans-Atlantic
fiber optic E-1 lines,  the Company has signed a lease with Metrocom (of Russia)
to provide the requisite dedicated fibre-optic circuits between these two cities
and Montreal. The lease is for one year and currently costs US$429,600 per year.
By September 2000, the Company  anticipates leasing additional E-1 lines between
St. Peterburg and Montreal and St. Petersburg and Moscow. The Company expects at
that time that each  international  line will cost  US$32,000  per month and the
Russian domestic line to cost US$6,000 per month.

         The  Company  operates  through  a  wholly  owned  Canadian  subsidiary
corporation,  V.I.  Internet  Telecommunications  Inc. ("V.I.  Internet").  V.I.
Internet  owns and  operates the Canadian  switching  center,  and owns 80% of a
Russian subsidiary,  Intertel XXI, established to manage the Company's center in
Moscow. In Moscow,  the remaining 20% of the Russian  subsidiary is owned by the
"Special  Technique and  Communication  Services  Institute",  a division of the
Ministry of Interior of Russia. The strategy of teaming with a prominent Russian
government  agency in Moscow should give V.I.  Internet  access to as many local
lines as  becomes  necessary  in  Russia,  and  their  assistance  in  obtaining
contracts  for outbound  traffic from most, if not all,  government  and related
agencies  within  the  Russian  Federation.  The  St.  Petersburg  operation  is
currently wholly owned, but the Company is looking for a local  shareholder that
could deliver business.

         The  Company,  through  V.I.  Internet,  has  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.  The  Company  has begun 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  1,500,000  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.

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<PAGE>

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
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.

         To avoid the  congestion  problems on the Net, the Company's  telephone
traffic does not in fact use the Net. The Company  provides its calling services
through dedicated secured international private lines,  expandable as necessary,
assuring a controlled  circuit,  and giving a high quality of service (QOS) both
in clarity and reliability of transmission.  Unlike the Internet, the routing of
calls through the Company's  network travel over minimal routes to arrive at the
final destination and is not hindered by volume of traffic over the Net.

Competition

         To  date,  large  companies  have not  become  involved  with  Internet
Telephony  in Russia.  However,  there are several  small  companies  (Global M,
Maxima, Mos-Teleinternet) which serve several localities within Downtown Moscow.
The Company  believes  that all of these small  companies  work on a "call back"
principle  which is illegal under Russian law. The main problem these  companies
face  is  the   necessity  to  get  special   licenses   from  the  Ministry  of
Communications.  They do not currently  have these  licenses and we believe they
are unlikely to receive them in the near future as no law has been introduced in
that  regard.  Accordingly,  competitors  will  not be able to  legally  operate
without great  difficulty in the Russian market prior to  approximately at least
the year 2002 when the market may first start to become officially  deregulated.
Meanwhile, we have an agreement with the Ministry of Interior, which has its own
telephone system independent of the Ministry of Communications.

Background on the Industry in Russia

         Ninety   (90%)   percent  of  Russian   telecommunication   systems  is
concentrated  in the hands of the  Ministry  of  Communication  of  Russia.  The
current Minister is Mr. M. Reyman. The previous minister, Mr. Bulgak, introduced
the bulk of the current rules and regulations  regulating the  telecommunication
industry.   Mr.  Bulgak  also  was  the  former  deputy  Prime   Minister.   All

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<PAGE>

telecommunication  activity  in Russia is based on  licensing.  "Rostelecom",  a
state company with some private  capital  participation,  has the major license.
This  license  allows  "Rostelecom",   through  its  municipal  affiliates,   to
concentrate telephone  communication on in-country land line networks and on the
use  of  satellites  in  cooperation  with  the  major  transnational  networks.
Internet-telephony,    specifically   Voice   over   Internet   Protocol   based
communications, however, had not been subjected to licensing until year 1999. In
his meeting with Dr. Ilya Gerol on February 21, 1998,  Mr.  Bulgak  repeated his
previous  stated  positions  that  voice-over-internet-protocol  did not require
licensing  because the policy was aimed at encouraging  the  development of this
advanced type of  telecommunications.  However,  in 1999,  Mr.  Reyman,  the new
Minister of Communications, changed this policy and internet-telephony companies
operating in the Russian market are to be licensed.  At that time, he signed the
first and,  to date,  the only such  license  with  Intertel  XXI,  our  Russian
subsidiary.

         Mr. Reyman's letter also announced that the licensing is the first step
to the deregulation of the internet-telephony activities scheduled to take place
in  the  year  2002.  When  asked  by  Dr.  Gerol,  Mr.  Reyman  explained  that
deregulation  was necessary to bring about a more competitive  market.  However,
the position of the Minister is that  initially the license  should be issued on
an  exclusive  basis to permit  this  technology  (internet-telephony)  to prove
itself in the marketplace. This second meeting took place on October 21, 1999 in
Moscow.

         The   Ministry  of  Interior   operates   its  own   telephone   system
independently of the Ministry of Communication due to the specific nature of the
activities of the Ministry.  The Ministry's primary functions are focused on law
and order issues and on that basis, historically, in the USSR and now in Russia,
the Ministry had been authorized to run its own communication system independent
of the general  public  network,  subject to different  industrial and political
terms. The Ministry of Interior has also been  authorized,  and continues to be,
to run the network directly serving the government and presidential  office. For
that  purposes the Ministry had  purchased  the Israel made system  Tediran.  By
virtue of having access to this self-contained  network,  any agreements made by
the  Company  with the  Ministry  of Interior  and its wholly  owned  enterprise
"Special  Technique  and  Communication  Services  Institute"  can  be  approved
directly by the government  and need not require  specific  permission  from the
Ministry of Communication. However, it was decided that since "foreign" entities
are part owners of Intertel XXI,  obtaining  specific approval from the Ministry
of  Communications  would be  judicious.  Thus,  with the active  support of our
partners,  the Ministry of Interior,  Intertel XXI did in fact,  obtain from the
Ministry  of  Communications  the  first  and  only  license  for  the  specific
internet-telephony activities provided by the Company.

         As a result,  any  agreements  made by the Company with the Ministry of
Interior and its wholly owned enterprise  "Special  Technique and  Communication
Services Institute" have been immediately approved by the government and did not
require  specific  permission from the Ministry of  Communication.  In fact, the
license for internet-telephony  activities provided by the Company was signed by
the  Ministry  of  Communications  upon our first  requesting  support  from our
partners, the Ministry of Interior.

Russian Market Today

         Three segments of the market are targeted by our project: governmental,
commercial (foreign and joint venture enterprises, Russian companies and Russian
branches of non-Russian companies) and private individuals who will buy pre-paid
calling cards.  Estimates of the volume of Russian international  communications
market  is  placed  at  900  million   minutes  for  the  year  1997,   (Source:
Telegeography).  Over the  next 2 1/2  years we hope to  capture  10-15%  of our
targeted markets in Moscow.

Terms of Payment and Currency

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         Russian  currency today is the ruble.  The current  conversion  rate is
approximately 28.5 rubles a dollar. Despite such a rate the ruble is more stable
than it was after the August 17, 1998  crisis and is  expected by many  currency
traders  to  continue  to  exchange  between  25 and 32 rubles a dollar  for the
foreseeable future. During most of 1999, the conversion rate was between 23-28.5
rubles a dollar.

         The ruble is a convertible  currency and can be freely  exchanged  into
any hard  currency.  Money may be  transferred  to foreign  countries as part of
joint ventures without any obstacles.

         All  payments  for  our  services  will  be  based  on the  pre-payment
principle as exists today  throughout  the Soviet  Federation.  Payments will be
automatically  transferred  from the Central Bank in Moscow on a daily basis, as
per instructions.

         Our Moscow  shareholder  is the  Special  Technical  and  Communication
Services  Institute of the Ministry of Interior of Russia.  The Russian Ministry
of the Interior is the strongest and most stable organization within the Russian
structure with its own telephone lines and  communication  services that include
governmental, presidential and other segments.

         Our Moscow shareholder contributes the following:

             *The premises where the equipment is housed with complete security;

             *Proper  distribution system through already existing channels
              within  the   Ministry's   telephone   network   covering  the
              governmental segment;

             *Unlimited fiber optic access to the Moscow telephone network: and

             *A level of credibility  that is very important for commercial
              success.

         The  leading  executives  of the  Russian  shareholder  of  our  Moscow
subsidiary are Major-General V. Khimitchev,  V. Martinov and R. Mananov,  all of
whom hold PhD  degrees  and have done post  graduate  studies  in the US and are
specialists  in  Russia  in the  field of  communications.  Messrs.  Khimitchev,
Martynov and Mannanov are the senior  executives of the Russian state enterprise
"Technique and Communications" within the structure of the Ministry of Interior.
Mr.  Khimitchev is the Director  General of this enterprise as well as being the
Senior Communication Executive of the Ministry of Interior. Messrs. Martynov and
Mannanov are his deputies.  This enterprise is the owner of 20% of Intertel XXI,
the Company's Russian subsidiary.

         The activities of our subsidiary have been negotiated  according to the
Russian  Law  of  Joint  Ventures  and  Law  of  Investments.  According  to the
evaluation of IMF  (statement of M. Comdecu,  the president of IMF on January 17
in the interview to the Russian news agency, Interfax Agency) these laws are the
most liberal laws of that kind in Europe.  However, while problems may exist for
many foreign  enterprises  involved  with Russian  companies,  in our case,  the
Russian  shareholder  of our  subsidiary  is the  Ministry of Interior  which is
reputable and is much better  organized  than the average  Russian  entity.  The
Russian Law of Joint Ventures of March 1995 sets the basic  regulations on which
corporations  involving  foreign companies and Russian companies are to operate.
The law does not limit a Russian  company with regard to the presence of Russian
or foreign capital. The law also does not limit the foreigners' participation on
Executive Boards or other executive functions. The law states, however, that the
economic and  financial  activities  of joint  ventures are  generally  based on
Russian law, by-laws and  regulations,  provided that they do not contradict the
basic principals of international law.

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<PAGE>

         Intertel  XXI,  the  name  of  our  Russian  subsidiary,   has  80%  of
North-American  capital and 20% of the Russian participation and,  consequently,
is run by the Executive Board consisting of North-American  members. This entity
does not violate the Russian laws of joint ventures.

         The law of foreign investments provides, in theory, a proper protection
for  investments  and  investors  similar  to the  investment  laws of  European
countries such as France, Italy or Poland. In practice, however, the problems in
the  implementation  of the law  could at times be  complicated  by the huge and
often  corrupt  bureaucratic  apparatus of Russia.  However,  in the case of our
subsidiary  Intertel XXI, the problem has been minimized  because the members of
the Russian entity that is the local  shareholder are the leading  communication
team in Russia  and are senior  officers  in the  Ministry  of  Interior  of the
Russian  Federation,  whose primary  responsibility is to fight corruption.  The
above notwithstanding,  no assurance can be given that the Company will actually
benefit from this body of law.

         At present,  a marketing plan for the Company's  Russian  operations is
being  developed  in  Moscow  by Iskra  Service,  a  prominent  advertising  and
marketing  company in Moscow.  The plan is to capture  Industrial  usage of long
distance  needs;  and  commence  the  introduction  of  an  economical  pre-paid
telephone card to the general public.

         Our  Russian  shareholder  will  assist in  promoting  and  selling the
pre-paid card to all government agencies,  through billboards,  television media
and print media.

         An extremely  important  feature of the Company's  anticipated  revenue
stream is that, after an initial  introductory period, all sales will be prepaid
by the customers on a monthly basis and customers will be required to sign Usage
Commitment Contracts.

         The Company is 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.

         On the North  American side, the Company has entered into a Maintenance
and Operating  Agreement with Bridgepoint  Enterprises Inc., a Montreal,  Quebec
corporation.  Pursuant  to  the  Agreement,  after  the  Company  purchases  the
necessary  equipment to establish a switching center,  Bridgeport will build and
install the  Company's  center in its facility and will  continue to operate and
maintain  the center for a monthly fee of  US$8,000.  In April 1999,  Bridgeport
completed  the  installation  of the  Company's  equipment and the center became
operational.

         In June 1999, the Company  entered into a one year  renewable  contract
with Metrocom,  a closed joint stock company, to provide a Trans-Atlantic  Fiber
Optic E-1 Line for  dedicated  circuits  at an annual  cost of  US$429,600.  The
contract  provides  for the  fee to be  reduced  if  international  tariffs  for
Trans-Atlantic Lines decline. The Company currently  anticipates that rates will
decline  by the  spring of 2000 due to  world-wide  market  conditions.  If this
occurs,  it should lower the Company's  expenses and ease the burden of its cash
flow requirements.

         The founders and  principals of the Company  believe that they have put
together a team having the experience  and the extensive  network of contacts to
build and operate a premier  long  distance  service  between the former  Soviet
Union countries,  North America and Europe. Their proven  entrepreneurial record
and  motivated  energy  will  hopefully  establish  the  Company as a  prominent
telecommunications  company,  especially in the former  Soviet Union  countries,
resulting in a commercially successful enterprise.

         The Company, including its Russian subsidiary, currently has three full
time employees and eight part time employees. The Company anticipates hiring ten
additional  employees  over the next six months.  The Company does not expect to
incur any material costs in complying with environmental laws.

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<PAGE>

ITEM 2.  PROPERTIES

         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 US $24,000,  including all utilities and applicable  taxes. The
property is subleased by a two year lease expiring  January 31, 2001. The sublet
may be terminated by the Company at the end of any year without penalty.

         The Montreal  property is leased from an entity controlled by Dr. Gerol
and Mr. Makarov, directors of the Company, at a rate the Company believes is the
going rate for similar space.

         Our Moscow  facility is comprised of  approximately  160 square  meters
(approximately 1,750 sq.ft.) and is located at 19-7  Starovagankovski  Perealok,
Moscow, Russia where we pay US$3,100 per month under a three year lease.

ITEM 3.  LEGAL PROCEEDINGS

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

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

         Not applicable.

                                     PART II


ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         (a) Market Information

         There  is  currently  no  public   trading  market  for  the  Company's
securities.

         As of February 29, 2000, the  Registrant  had 23,351,027  shares of its
Common Stock  outstanding and 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 US$1.50, subject to adjustment, until December 31,
2002. The shares  underlying  the Warrants have no  registration  rights.  As of
February  29,  2000,  the  Company  also  had  US$55,000  in  short  term  loans
outstanding which are convertible,  at the lender's option, into an aggregate of
170,000 shares of Common Stock.

         Of the 23,351,027  shares of common stock  outstanding,  21,689,728 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.

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<PAGE>

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 29, 2000,  there were 132 holders of the  Company's  common
stock, and one holder of the Company's Class A Warrants.

(c) Dividends

         The Company has had no earnings 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
declared any cash dividends since inception.

ITEM 6.  PLAN OF OPERATIONS

         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 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.

         The following  selected financial data for the year ending February 29,
2000 is  derived  from  the  Company's  audited  financial  statements  included
elsewhere  herein.  The following  data should be read in  conjunction  with the
financial  statements of the Company.  All dollar figures in this section are in
US denominations.

Statement of Operations Data

                                    Year Ended
                                    February 29, 2000

Net Revenues                                  -0-
Operating Expenses                   $(1,395,442)
General and Administrative
         Expenses                        (83,033)
Income Taxes                                  -0-
Net Loss                              (1,451,275)
Loss Per Share                            $(0.07)

Balance Sheet Data

                                    February 29, 2000

Working Deficit                           $(256,699)
Total Assets                                417,135
Total Liabilities                           294,174
Stockholders' Equity                      $ 122,961

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<PAGE>

         Whereas this report is for the year ending  February 29, 2000,  and was
due June 1, 2000,  it is first  being filed on or about July 25,  2000.  You are
directed  to the  Company's  filing on May 26, 2000 of  Amendment  No. 3 to Form
10-SB for more  information  about the Company.  Accordingly,  this section will
primarily  discuss the  Company's  position as of the filing date, as opposed to
the due date.

         Internet VIP, Inc.  (hereafter,  the "Company" or "IVIP") was formed in
November, 1998, to sell long distance international telephone services using the
new 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, and vice versa.

         The Company  during the year was still a development  stage company and
as yet had no revenues. Revenues, on a small scale, commenced during April 2000.
At this stage in the Company's  development,  IVIP is still mostly  dependent on
external financing.

         IVIP established its business presence in Montreal, with the opening of
an office at 1155  University  Avenue Suite 602 in February,  1999. The Montreal
office  has  become  the  Company's  worldwide  headquarters  and the hub of its
telecommunications network.

         During the year ending  February  29,  2000,  the  Company  incurred an
operating loss of  $1,451,275,  for an  accumulated  deficit since  inception of
$1,670,285.

          During the period from  January,  1999 and until March 15,  2000,  the
Company   completed  private  offerings  for  gross  proceeds  of  approximately
$1,200,000. The bulk of the proceeds were used to purchase and install equipment
for its facilities in Moscow and Montreal,  Canada,  to finance trips to develop
the Company's business in Russia, and network leasing costs.

          Also during the year, the Company incurred short term loans.  $55,000,
that  included  $10,000 from an  affiliate,  remained  outstanding  at year end.
Interest on these loans is to be paid in common shares.

          The Company has completed  installation of its equipment and built the
network required for the first phase of its business objectives. The Company has
begun the process of signing up long distance telephone users and revenues began
in April 2000, albeit on a small scale.

          During the year,  IVIP sales  personnel,  both  Canadian  and Russian,
continued  to  visit  with  potential  customers  in  Russia,  primarily  in the
government  and  industrial  sectors,  in ongoing  efforts to obtain  letters of
interest  or  letters  of  intent  in  anticipation  of  the  network   becoming
operational.

         The monthly financial  requirements for the Company,  not including the
cost of the leases for  fibre-optic  lines,  and not  including  management  and
senior  consultant  salaries and fees,  for both the Montreal and Moscow offices
are  estimated  to be $5,100.  The  Company at June 30,  2000 had  approximately
$97,000 in cash and cash equivalents.

         Commencing May 1, 2000  management and senior  consultant  salaries and
fees will be approximately $23,000 per month.

         Monthly  payments for network lines began upon successful  installation
of our equipment and operation of the initial two centers.  This occurred around
December 1, 1999.  From that time  onward IVIP is required to pay  approximately
$35,800 per month for dedicated line leases.  The commencement of utilization of
leased lines will  require  additional  capital,  which the Company will seek to
obtain through private  placements.  There is no assurance that IVIP will obtain
any of this financing.

                                       10

<PAGE>

         IVIP has no plans to conduct any research and development nor to expend
any  additional  funds on  plant  and  equipment  in the near  term,  except  as
indicated above.  The Company does not anticipate  realizing any income from the
sale of any plant or significant equipment.

          The Company has expanded its  operations  into St.  Petersburg and the
facility is expected to become fully  operational in September 2000. The current
budget calls for approximately  $40,000 to cover the final testing and the first
three months of operational expenses.

          Beginning  on March 16,  2000,  the  Company  commenced  a new private
placement of up to  $1,500,000.  As of June 30, 2000,  $643,900 had been raised.
The  bulk  of the  funds  were  used  to pay  down  debts  owed  to  Bridgepoint
Enterprises and Metrocom of Russia.  Total costs for each new facility including
equipment,  installation,  marketing and office personnel is currently estimated
at $300,000.  The balance of this funding,  if  successful  will be utilized for
advertising  and marketing to address the retail  prepaid phone card market.  To
date, the Company has not spent any funds on any additional facilities.

         The Company's  business plan  currently  calls for expansion into other
markets,  such as Mexico,  Cuba,  India and Vietnam,  if and when  opportunities
present  themselves and as funding permits.  During the next twelve months,  the
Company  intends to use the same formula for  financing  any  expansions,  i.e.,
external funding for startup costs and internal financing for operations.  Other
than as described,  the Company does not currently anticipate funding its growth
with additional public financings, except in the event an unexpected and unusual
opportunity is presented.

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

Not applicable.

                                    PART III

ITEM 9.  DIRECTORS,   EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
         COMPLIANCE  WITH  SECTION  16(a)  OF  THE EXCHANGE ACT

Name                                Age     Position

Dr. Ilya Gerol                      60      Chairman

Christian P. Richer                 51      President, CEO and Director

Derek Labell                        40      Vice-President, Sales
                                           (North America)

Michael MacInnis                    52      Chief Financial Officer and Director

                                       11

<PAGE>

Viatcheslav Makarov                 45      VP-Sales and Marketing (Russia) 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 vice president international, newsletter D.A. & G. Information and
Analysis  and  Editor-in-Chief.  Dr.  Gerol  has been on staff  and/or  visiting
professor  for  over  14  universities  throughout  the  world  including  State
University of Winnipeg, University of British Columbia, Moscow State University,
Hebrew University, and others.

Christian P. Richer, President, CEO and Director

         Mr. Christian Richer is the President and CEO of the Company, and is an
authority in the field of  telecommunications,  and a marketing  expert directed
towards 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. Derek 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 the North
American  telecommunications long distance telephone card market, including card
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 director of leasing for Tidan,  a privately held Montreal
Real Estate  company owning and managing more than fifty  properties  throughout
Eastern Canada and in the United States.

Michael MacInnis:  Chief Financial Officer

         Mr.  Michael  MacInnis is the Chief  Financial  Officer.  Mr.  MacInnis
received his Chartered  Accountant  designation in 1972 and started his own firm
in  1974  where  he  specialized  in  corporate  finance,  income  taxation  and
reorganizations. In addition, he has operated and consulted to many corporations
throughout Canada and has successfully  raised funding in excess of an aggregate
of $200 million for various commercial projects.  Also, he specializes in Public
Corporations  listed on the NASD Bulletin Board.  During the last five years Mr.
MacInnis has focused his efforts on developing a franchised  consulting  concept
and providing consulting services to various companies seeking financing.

Viatcheslav Makarov: Vice President - Sales and Marketing (Russia)

                                       12

<PAGE>

         Mr.  Viatcheslav is 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
became the chief  representative of Volvo  (automotive) in Russian and, as well,
worked as a member of Renault bureau in Moscow. Since 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 contacts and connections that he has cultivated in
the last ten years in both the Russian government and industry.

(b) Significant Employees

         Mr.  Christian  P. Richer is the  President  and CEO of the Company and
currently its only full time senior employee.

Indemnification of Directors and Officers

         Section  145 of the  Delaware  General  Corporation  Law,  as  amended,
authorizes  the  Company to  Indemnify  any  director or officer  under  certain
prescribed  circumstances  and subject to certain  limitations  against  certain
costs and expenses,  including  attorney's fees actually and reasonably incurred
in connection  with any action,  suit or proceeding,  whether  civil,  criminal,
administrative or investigative, to which a person is a party by reason of being
a director or officer of the Company if it is determined  that such person acted
in  accordance  with  the  applicable  standard  of  conduct  set  forth in such
statutory  provisions.  The  Company's  Certificate  of  Incorporation  contains
provisions  relating to the  indemnification  of director  and  officers and the
Company's  By-Laws  extends  such  indemnities  to the full extent  permitted by
Delaware law.

         The Company may also purchase and maintain insurance for the benefit of
any director or officer  which may cover claims for which the Company  could not
indemnify such persons.

Compensation of Directors

         No Director receives any compensation for his service as a Director.

ITEM 10.          EXECUTIVE COMPENSATION

(a) General

         Commencing  May 1, 2000,  Mr.  Richer's  salary is US$90,000 per annum.
Commencing  May 1, 2000,  the  Company  has agreed to pay each of Dr.  Gerol and
Messrs. MacInnis and Makarov an annual salary of US$48,000.

         Except for Mr. Richer,  none of the Company's other executive  officers
provide services on a full-time  basis. No executive  officer or employee of the
Company is paid more than US$100,000 per year in salary and benefits. Except for
Mr. Richer, the Company does not currently provide any benefits to its executive
officers.  A car and cellular  telephone  allowance  amounting to  approximately
US$600 a month is provided for in Mr. Richer's employment contract.

(b) Summary Compensation Table

                           SUMMARY COMPENSATION TABLE

                                       13

<PAGE>

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


Name and                                                           Other            Long-term
Principal Position         Year(1)         Salary      Bonus       Compensation     Compensation:Options
------------------         ------          ------      -----       ------------     --------------------

Dr. Ilya Gerol               2000          $12,000      0               0                   0
Chairman & Chief
Executive Officer

Michael McInnis              2000          $12,000      0               0                   0
Chief Financial Officer
& Director

Viatcheslav Makarov          2000          $12,000      0               0                   0
VP-Sales and
Marketing (Russia)
& Director

Derek Labell                 2000         $  6,000      0               0                   0
Vice-President Sales
and Marketing
(North America)

</TABLE>

(1)      Covers the period from March 1, 1999  to the fiscal year end on
         February 29, 2000.

(c) Options/SAR Grants Table

         None.

(d) Aggregated Option/SAR Exercises and Fiscal Year End Option/SAR Value Table

         None.

(e) Long Term Incentive Plan ("LTIP") Awards Table

         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

         As at February 29, 2000,  the Company had no employment  contracts with
any of its  executive  officers.  Subsequent  to the year end Mr.  Christian  P.
Richer  was  engaged  as  President  and CEO of the  Company  and an  employment
contract was signed on April 28, 2000.

(h) Report on Repricings of Options/SARs

         None.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

                                       14

<PAGE>

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's officers and directors, and persons who own more than ten percent of a
registered  class  of the  Company's  equity  securities,  to  file  reports  of
ownership and changes in ownership with the Securities and Exchange  Commission.
Officers,  directors and  greater-than-ten-percent  shareholders 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 29, 2000,  all the directors
and officers filed the requisite Forms 3, albeit late.

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                           MANAGEMENT

The following  table sets forth  information  as of June 30, 2000  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>


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

                                                  Shares Owned Beneficially         Percentage
------------------------------------------------- -------------------------------- ----------------------------------
------------------------------------------------- -------------------------------- ----------------------------------

Ilya Gerol (1)                                               2,508,266                 10.08%
------------------------------------------------- -------------------------------- ----------------------------------
------------------------------------------------- -------------------------------- ----------------------------------
Christian P. Richer (1)                                        100,000                  0.40%
------------------------------------------------- -------------------------------- ----------------------------------
------------------------------------------------- -------------------------------- ----------------------------------

Viatscheslav Makarov (1)                                     2,508,266                 10.08%
------------------------------------------------- -------------------------------- ----------------------------------
------------------------------------------------- -------------------------------- ----------------------------------

Derek Labell (1)                                             2,808,266                 11.29%
------------------------------------------------- -------------------------------- ----------------------------------
------------------------------------------------- -------------------------------- ----------------------------------

Michael MacInnis (1)                                         1,144,169                  4.60%
------------------------------------------------- -------------------------------- ----------------------------------
------------------------------------------------- -------------------------------- ----------------------------------

Natalia Maloshina (1)                                        2,000,000                  8.04%
------------------------------------------------- -------------------------------- ----------------------------------
------------------------------------------------- -------------------------------- ----------------------------------

Nais Corp.                                                   1,297,401                  5.22%
94 Washington Ave.
Lawrence, NY 11559
------------------------------------------------- -------------------------------- ----------------------------------
------------------------------------------------- -------------------------------- ----------------------------------

Howard Salamon                                               1,767,401                  7.10%
20 Margaret Ave.
Lawrence, NY 11559
------------------------------------------------- -------------------------------- ----------------------------------
------------------------------------------------- -------------------------------- ----------------------------------

All Executive Officers and Directors as a Group              9,068,967                 36.96%
------------------------------------------------- -------------------------------- ----------------------------------

</TABLE>

1        Uses Company's address.


ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Company  rents space in Montreal from  Interservice  Group which is
owned by two of the Company's directors, Dr. Gerol and Mr. Makarov. The lease is
for two (2) years at an annual  rental of US$ 24,000.  The Company  believes the
rate is at fair market value.

                                       15

<PAGE>

         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$96,000 as of June 30, 2000 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.

         The Company issued 437,500 shares to Howard Salamon,  for business plan
preparation and financial and cash flow analyses.

                                     PART IV

ITEM 13.          EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a)      The  financial   statements  appear below and are filed as part of this
annual report.

         List of Exhibits
         ----------------

         Exhibit 27 - Financial Data Schedule.

(b)      Reports on Form 8-K

         None.

<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

CONSOLIDATED FINANCIAL STATEMENTS
AS OF FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
TOGETHER WITH AUDITORS' REPORT

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of
Internet VIP, Inc.:

We have audited the  accompanying  consolidated  balance sheets of Internet VIP,
Inc. (a Delaware  corporation  in the  development  stage) and  subsidiary as of
February 29, 2000 and February 28, 1999, and the related consolidated statements
of  operations,  changes in  stockholders'  equity and cash flows for the period
from  inception  (November 13, 1998) to February 29, 2000, for the twelve months
ended February 29, 2000 and for the period from inception (November 13, 1998) to
February 28, 1999.  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.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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
subsidiary  as of February 29, 2000 and  February  28, 1999,  and the results of
their  operations and their cash flows for the period from  inception  (November
13, 1998) to February 29, 2000,  for the twelve  months ended  February 29, 2000
and for the period from  inception  (November 13, 1998) to February 28, 1999, in
conformity with accounting principles generally accepted in the United States.

As discussed in Note 1 to the consolidated financial statements,  the Company is
in the development  stage and its continued  existence is dependent on obtaining
additional financing for its operations. The Company's plans in regards to these
matters are also described in Note 1. In addition,  the Company faces risks as a
development stage company. The success of the Company's operations is influenced
by  these  risks  as  more  fully  described  in  Note 1.  These  matters  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The accompanying financial statements do not include any adjustments relating to
the  recoverability  and classification of recorded asset amounts or the amounts
and  classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.


/s/Arthur Anderson LLP

New York, New York
June 23, 2000


<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(in U.S. dollars)

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



                                         ASSETS                                                 2000            1999

CURRENT ASSETS:
    Cash and cash equivalents                                                              $       24,673  $      223,624
    Other current assets                                                                           12,802             801
                                                                                           --------------  --------------
                 Total current assets                                                              37,475         224,425

PROPERTY AND EQUIPMENT                                                                            379,660          25,000
                                                                                           --------------  --------------
                 Total assets                                                              $      417,135  $      249,425
                                                                                           ==============  ==============

                          LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accrued expenses                                                                       $      239,174  $       68,258
    Loans payable                                                                                  55,000              -
                                                                                           --------------  -------------
                 Total current liabilities                                                        294,174          68,258
                                                                                           --------------  --------------

STOCKHOLDERS' EQUITY:
    Common stock,  $0.0001 par value;  50,000,000 shares authorized;  23,351,027
       shares and  20,874,800  shares issued and  outstanding as of February 29,
       2000 and February 28,
       1999, respectively                                                                           2,335           2,087
    Additional paid-in capital                                                                  1,790,911         498,090
    Deferred compensation                                                                              -         (100,000)
    Deficit accumulated in the development stage                                               (1,670,285)       (219,010)
                                                                                           --------------  --------------
                 Total stockholders' equity                                                       122,961         181,167
                                                                                           --------------  --------------
                 Total liabilities and stockholders' equity                                $      417,135  $      249,425
                                                                                           ==============  ==============

</TABLE>

The  accompanying  notes  are an  integral  part of these  consolidated  balance
sheets.

<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

CONSOLIDATED  STATEMENTS OF OPERATIONS FOR THE PERIOD FROM  INCEPTION  (NOVEMBER
13, 1998) TO FEBRUARY 29, 2000,  FOR THE TWELVE  MONTHS ENDED  FEBRUARY 29, 2000
AND FOR THE PERIOD FROM  INCEPTION  (NOVEMBER 13, 1998) TO FEBRUARY 28, 1999 (in
U.S. dollars)

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

                                                                  Cumulative
                                                                 Amounts from       For the Twelve       For the Period
                                                                 Inception to        Months ended      from Inception to
                                                              February 29, 2000    February 29, 2000   February 28, 1999

OPERATING EXPENSES:
    Office rent expenses                                        $        83,285     $        79,235      $         4,050
    Amortization of deferred compensation                               100,000             100,000                   -
    Management salaries and related expenses                            112,207              97,540               14,667
    Marketing and advertising expenses                                  150,830             145,600                5,230
    Line rental and maintenance fees                                    263,921             255,921                8,000
    Travel expenses                                                     215,187             119,740               95,447
    Professional fees                                                   590,709             514,373               76,336
    Other general and administrative expenses                            98,313              83,033               15,280
                                                              -----------------   -----------------    -----------------
                 Total operating expenses                            (1,614,452)         (1,395,442)            (219,010)
    Interest expenses                                                    55,833              55,833                   -
                                                              -----------------   -----------------    ----------------
                 Net loss                                       $    (1,670,285)    $    (1,451,275)     $      (219,010)
                                                                ===============     ===============      ===============

BASIC AND DILUTED NET LOSS PER SHARE                                                $        (0.07)      $        (0.01)
                                                                                    ==============       ==============

WEIGHTED AVERAGE COMMON STOCK OUTSTANDING:
       Basic and diluted                                                                 22,289,828           20,143,332
                                                                                  =================    =================


</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE TWELVE MONTHS
ENDED FEBRUARY 29, 2000 AND FOR THE PERIOD FROM INCEPTION (NOVEMBER 13, 1998) TO
FEBRUARY 28, 1999 (in U.S. dollars)

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




                                                                                              Deficit
                                        Common Stock                                       Accumulated in
                                                             Additional                        the              Total
                                   Number of                  Paid-in        Deferred       Development    Stockholders'
                                    Shares       Amount       Capital      Compensation        Stage           Equity

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

    Issuance of common stock to
      founders                     18,772,600      1,877             -              -                -            1,877

    Issuance of common stock in
      a private placement
      ($0.05 per share)             1,184,000        118         59,082             -                -           59,200

    Issuance of common stock in
      a private placement
      ($0.50 per share), net          718,200         72        339,028             -                -          339,100

    Issuance of common stock
      for consulting services         200,000         20         99,980       (100,000)              -               -

    Net loss                               -          -              -              -          (219,010)       (219,010)
                                  -----------  ---------    -----------   ------------     ------------    ------------

BALANCE, February 28, 1999         20,874,800      2,087        498,090       (100,000)        (219,010)        181,167

  Issuance of common stock in a
    private placement ($0.50
    per share), net                 1,672,727        167        831,195             -                -          831,362

  Issuance of common stock for
    consulting services               743,500         75        371,632             -                -          371,707

  Issuance of common stock in
    lieu of interest                   60,000          6         59,994             -                -           60,000

  Issuance of warrants for
    purchase of equipment                  -          -          30,000             -                -           30,000

  Amortization of deferred
    compensation                           -          -              -         100,000               -          100,000

    Net loss                               -          -              -              -        (1,451,275)     (1,451,275)
                                  -----------  ---------    -----------   ------------     ------------    ------------

BALANCE, February 29, 2000         23,351,027  $   2,335    $ 1,790,911     $       -       $(1,670,285)     $  122,961
                                  ===========  =========    ===========     ==========      ===========      ==========

</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

CONSOLIDATED  STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM  INCEPTION  (NOVEMBER
12, 1998) TO FEBRUARY 29, 2000,  FOR THE TWELVE  MONTHS ENDED  FEBRUARY 29, 2000
AND FOR THE PERIOD FROM  INCEPTION  (NOVEMBER 13, 1998) TO FEBRUARY 28, 1999 (in
U.S. dollars)

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



                                                             Cumulative Amounts     For the Twelve     For the Period from
                                                              from Inception to      Months Ended          Inception to
                                                              February 29, 2000    February 29, 2000    February 28, 1999

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                   $    (1,670,285)     $    (1,451,275)     $      (219,010)
    Adjustments to reconcile net loss to net cash used in
       operating activities-
          Amortization of deferred compensation                        100,000              100,000                   -
          Noncash consulting fees                                      371,707              371,707                   -
          Noncash interest                                              55,833               55,833                   -
    Changes in operating assets and liabilities-
       Other current assets                                             (8,635)              (7,834)                (801)
       Accrued expenses                                                239,174              170,916               68,258
                                                             -----------------    -----------------    -----------------
                 Net cash used in operating activities                (912,206)            (760,653)            (151,553)
                                                             -----------------    -----------------    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisition of property and equipment                             (349,660)            (324,660)             (25,000)
                                                             -----------------    -----------------    -----------------
                 Net cash used in investing activities                (349,660)            (324,660)             (25,000)
                                                             -----------------    -----------------    -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Stockholders' capital contribution                               1,231,539              831,362              400,177
    Short-term borrowing                                                55,000               55,000                   -
                                                             -----------------    -----------------    ----------------
                 Net cash provided by financing activities           1,286,539              886,362              400,177
                                                             -----------------    -----------------    -----------------
                 Net increase (decrease) in cash and cash
                    equivalents                                         24,673             (198,951)             223,624

CASH AND CASH EQUIVALENTS,
    beginning of period                                                     -               223,624                   -
                                                             -----------------    -----------------    ----------------

CASH AND CASH EQUIVALENTS,
    end of period                                              $        24,673      $        24,673      $       223,624
                                                               ===============      ===============      ===============

NONCASH FINANCING ACTIVITIES:
    Common stock issued for noncash consideration              $       531,707      $       431,707      $       100,000
    Warrant issued for noncash equipment purchases
                                                             -------------------             30,000
                                                                        30,000                                        -


</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(in U.S. dollars)

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(in U.S. dollars)

1.       ORGANIZATION

Internet  VIP,  Inc. was  incorporated  in the state of Delaware on November 13,
1998.  Internet  VIP,  Inc.  and its  wholly  owned  subsidiary,  V.I.  Internet
Telecommunications,  Inc., a Canadian corporation (together, the "Company") were
formed to sell long  distance  international  telephone  services  using the new
technology,  VIP-Voice  over Internet  Protocol.  From its  switching  center in
Montreal, Canada, calls can be routed from anywhere in North America to anywhere
in the world using the  Company's  Internet  Protocol  based network as the main
carrier.  The first phase of operations  will encompass calls from North America
to Moscow and vice versa.

Initially  Internet  VIP Inc.  will operate  through its wholly  owned  Canadian
subsidiary corporation, V.I. Internet Telecommunications Inc. ("V.I. Internet").
V.I. Internet will own and operate the Canadian switching center.  Additionally,
V.I.  Internet will own 80% of a Russian  subsidiary,  which was  established to
manage  the  Company's  center  in  Moscow.  The  remaining  20% of the  Russian
subsidiary is owned by a Division of the Ministry of Interior of Russia.

The Company is in the  development  stage.  It is not currently  generating  any
revenues  from  operations  and is therefore  dependent on external  sources for
financing  its  operations.   Management   expects  the  proceeds  from  private
placements  and debt issuance  together  with its estimated  revenues in for the
year  ended  February  28,  2001  to be  sufficient  to  finance  the  Company's
operations  through February 28, 2001.  However,  there can be no assurance that
the Company will  succeed in  executing  its plan and  obtaining  the  financing
necessary for its operations.

The Company faces risks as a development  stage  company.  These risks  include,
among others,  uncertainty of product acceptance,  competition,  risk of errors,
and  quality  and  price  of  its  services  compared  to  alternative  service.
Additionally,  other  factors  such as loss of key  personnel  could  impact the
future results of operations or financial condition of the Company.

All of the  aforementioned  matters raise  substantial doubt about the Company's
ability to continue as a going concern. The accompanying financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and  classification  of  liabilities  that
might be necessary should the Company be unable to continue as a going concern.

2.  SUMMARY OF SIGNIFICANT
    ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Internet VIP, Inc.
and  its  wholly  owned  subsidiaries.   Material   intercompany   balances  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 assumptions that affect the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses  during the  reporting  period.  Actual  results  could
differ from those estimates.

<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(in U.S. dollars)

Foreign Currency

The Company  accounts  for foreign  currency in  accordance  with  Statement  of
Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency  Translation,"
for operating  subsidiaries.  The  functional  currency of the Company's  wholly
owned subsidiary is the U.S. dollar.

Stock-Based Compensation

The Company accounts for stock options granted to consultants in accordance with
SFAS No. 123, "Stock-Based Compensation."

Per Share Data

SFAS No. 128,  "Earnings  per Share,"  establishes  standards  for computing and
presenting  earnings per share (EPS). The standard  requires the presentation of
basic EPS and diluted EPS. Basic EPS is calculated by dividing income  available
to common  shareholders by the weighted average number of shares of common stock
outstanding  during the period.  Diluted EPS is  calculated  by dividing  income
available to common shareholders by the weighted average number of common shares
outstanding adjusted to reflect potentially dilutive securities.

Cash and Cash Equivalents

The Company considers all highly liquid  investments  purchased with an original
maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments

The carrying  amounts of the Company's  financial  instruments  approximate fair
value due to their short-term nature.

Fixed Assets

Fixed assets are stated at cost. Fixed assets contain mainly  telecommunications
equipment.  As of  February  29,  2000,  no  depreciation  was  recorded  as the
Company's telecommunications equipment is not yet operational.

Organizational and Development Costs

Organizational and development costs are expensed as incurred.

Nonmonetary Transactions

The Company accounts for nonmonetary  transactions in accordance with Accounting
Principles   Board  ("APB")   Opinion  No.  29,   `Accounting   for  Nonmonetary
Transactions." The nonmonetary  transactions are based on the fair values of the
assets (or services)  involved  which is the same basis as that used in monetary
transactions.

<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(in U.S. dollars)

Income Taxes

The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
"Accounting for Income Taxes." Under the asset and liability  method of SFAS No.
109,  deferred  tax assets and  liabilities  are  recognized  for the future tax
consequences attributable to differences between the financial statement and tax
bases of assets  and  liabilities.  Deferred  tax  assets  and  liabilities  are
measured  using tax rates  expected  to apply to taxable  income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS No.  109,  the effect of a change in tax rates on  deferred  tax assets and
liabilities  is  recognized in income in the period in which the tax rate change
takes place.

Recently Issued Accounting Standards

In June 1998, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
133,  "Accounting for Derivative  Instruments and Hedging  Activities." SFAS No.
133  establishes   accounting  and  reporting  standards  requiring  that  every
derivative  instrument  be recorded  in the balance  sheet as either an asset or
liability  measured at its 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.  SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. The Company has concluded that this SFAS will not
have a material impact on its financial statements, when adopted.

In December 1999, the SEC issued SAB No. 101, "Revenue  Recognition in Financial
Statements."  It  expresses  the  views of the SEC staff in  applying  generally
accepted  accounting  principles  to certain  revenue  recognition  issues.  The
Company  has  concluded  that  this SAB does not have a  material  impact on its
financial statements.

In April 2000, the FASB issued FASB interpretation NO. (FIN) 44, "Accounting for
Certain  Transactions  Involving Stock  Compensation:  an  Interpretation of APB
Opinion NO. 25." The Company has  concluded  that this  interpretation  does not
have a material impact on its financial statements.

3.  PROPERTY AND EQUIPMENT
    ----------------------

In December,  1999,  the Company  purchased  $30,000  computer  equipment from a
nonaffiliated  party.  The  Company  issued  warrants  to purchase up to 600,000
shares of common stock in consideration  of the purchase of such equipment.  The
warrants  are  exercisable  any time for the  price of $1.50  per  share,  until
December 31, 2002.

4.  ACCRUED EXPENSES
    ----------------

Accrued  expenses  consist of the following as of February 29, 2000 and February
28,1999:

                                                       2000             1999

          Accrued professional fees                $ 81,000         $ 47,037
          Accrued equipment purchases                61,000                -
          Accrued technical fees                     48,035                -
          Accrued line rental fees                   42,960                -
          Accrued expenses - others                   6,179           21,221
                                              -------------     -------------
                                                  $ 239,174         $ 68,258
                                              =============     =============
<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

NOTES TO CONSLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(in U.S. dollars)

5.  LOANS PAYABLE
    -------------

The Company received a $10,000 loan from an affiliated  company (an entity owned
by a  shareholder).  The loan is  payable  on August  31,  2000 and  bears  10%,
interest per annum.

On October 1, 1999,  the Company  entered into a $25,000 loan  agreement  with a
nonaffiliated party for a period of six months.  Pursuant to the agreement,  the
Company issued the lender 50,000 shares of common stock in lieu of interest. The
fair value of these  shares of $25,000  was  recorded  as prepaid  interest  and
amortized  over the term of the loan.  As of February 29,  2000,  $15,000 of the
loan is outstanding.

On February 1, 2000,  the Company  entered into a $30,000 loan  agreement with a
nonaffiliated  party for a period of six months.  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 year ended
February  29, 2000.  Substantially  all of the  Company's  assets are pledged to
guarantee that repayment of the loan.

6.  INCOME TAXES

As of February  29,  2000,  the Company has net  operating  losses  available to
offset future income for book and tax purposes of approximately $1.5 million.

Approximately  $200,000  and  $1,300,000  of such loss  carryforwards  expire in
February  2019 and 2020,  respectively.  The  annual  utilization  of these loss
carryforwards  will  be  substantially  limited  if  there  are  changes  in the
Company's ownership.

Company  has  provided  a  valuation  allowance  for the full  amount of the tax
benefit   associated  with  the  loss   carryforwards  due  to  the  uncertainty
surrounding their realization.

7.  COMMITMENTS AND CONTINGENCIES
    -----------------------------

Lease Commitment

The Company  leases  office  space in Montreal  from an  affiliated  company (an
entity owned by several shareholders of the Company),  and in Moscow for various
periods ending March 2003, under operating  leases.  Future minimum annual lease
payments are as follows:

                  For the fiscal year ending
                      2001                                     $      60,400
                      2002                                            37,200
                      2003                                            37,200
                      2004                                             3,100
                                                               -------------
                                                               $     137,900

Rent expense for the period from  inception  (November 13, 1998) to February 28,
1999 and for the year  ended  February  29,  2000 was  approximately  $4,000 and
$79,000, respectively.

<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(in U.S. dollars)

Consulting Agreements

In December 1998, the Company entered into a four-year consulting agreement with
Nais  Corp.,  a  shareholder,  according  to which Nais Corp.  will  provide the
Company with  financial and business  public  relations  consulting  services in
consideration  for $6,000 per month.  In accordance to the agreement  commitment
will start when the Company reaches certain amount of revenues as defined in the
agreement.  Nais  Corp.  claims  that it is  owed  approximately  $70,000  as of
February 29, 2000. Management,  believes, based on the agreement, this claim has
no merit.

Consulting  fees for the period from  inception  (November 13, 1998) to February
28, 1999 and for the year ended February 29, 2000 were approximately $15,000 and
$0, respectively.

In February 1999, the Company entered into a one-year consulting  agreement with
Global Asset Management Group, Inc. ("Global Asset"),  a shareholder.  According
to the contract, Global Asset will provide the Company with financial consulting
and venture capital  financing  consulting  services in consideration of 200,000
shares  of the  Company's  common  stock,  the fair  market  value of which  was
$100,000 at the date of the contract.  The Company  recorded the consulting fees
as deferred  compensation,  which was  amortized  over the contract  period (one
year). As at February 29, 2000, the amount is fully amortized.

Facilities Management Agreement

In  February  1999,  the  Company  entered  into  a  five-year   agreement  with
Bridgepoint Enterprises ("Bridgepoint"),  an affiliated company (an entity owned
by a shareholder),  according to which Bridgepoint will provide the Company with
facilities  for its equipment as well as maintenance  and technical  support for
such equipment for variable  monthly  consideration.  Future  estimated  minimum
annual fees are as follows:

                  For the fiscal year ending
                      2001                                     $     96,000
                      2002                                           96,000
                      2003                                           96,000
                      2004                                           88,000
                                                               ------------
                                                               $    376,000

Maintenance  fees for the period from inception  (November 13, 1998) to February
28, 1999 and for the year ended February 29, 2000 were approximately  $8,000 and
$96,000, respectively.

Telecommunication Service Agreement

In June 1999,  the  Company  entered  into a  one-year  service  agreement  with
Metrocom,   a  Russian  company,   according  to  which  Metrocom  will  provide
telecommunication  services to the Company for a monthly charge of approximately
$40,000.

Telecommunication  cost for the period from  inception  (November  13,  1998) to
February 28, 1999 and for the year ended February 29, 2000 was  approximately $0
and $160,000, respectively.

<PAGE>

INTERNET VIP, INC. AND SUBSIDIARY
(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(in U.S. dollars)

8.  RELATED PARTIES
    ---------------

The Company received  consulting services from several  shareholders.  Fees paid
for such services in the period from  inception  (November 13, 1998) to February
28, 1999 and for the year ended  February  29, 2000 were  $14,000 and  $218,750,
respectively.

9.  SUBSEQUENT EVENTS
    -----------------

Subsequent to February 29, 2000, the Company issued  additional  debt of $75,000
to various individual investors.

The Company  entered  into a one-year  employment  agreement  with its CEO.  The
Agreement  provided for an annual  salary of $90,000.  In addition,  the Company
issued the CEO stock options to purchase up to 100,000 shares of common stock at
an exercise price of $0.0001 per share and an additional 100,000 shares at $0.05
per share.

In March,  2000,  the Company  offered to sell,  in a private  placement,  up to
750,000 units at a price of $2.00 per unit.  Each unit consists of two shares of
common stock and one warrant to purchase common stock. Each warrant entitles the
holder to purchase one share of common stock at a price of $1.50 per share until
March 31, 2003.  Subsequent  to February 29,  2000,  643,900  shares and 321,950
warrants were issued in connection with this offering.

In May 2000,  the  Company  issued  643,400  shares of common  stock for noncash
consideration  to  Reichtel   International   Corp.  of  Geneva  Switzerland  in
consideration of consulting services provided.

Subsequent to February 29, 2000, the Company issued additional 218,250 shares of
common  stocks for  noncash  consideration  in lieu of  interest  repayment  and
services provided by nonaffiliate parties.

Subsequent  to February 29, 2000,  the Company  entered an  equipment,  software
purchase  and  one-year  service  agreement  with  Foreigners  Telecommunication
Services Inc. ("Fortel"),  a Montreal corporation,  to purchase billing software
and platform in the amount of approximately $54,000. According to the agreement,
Fortel will provide technical  consulting  services to the Company for a monthly
charge of approximately $10,000.

<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: August 15, 2000



/s/
Christian Richer           President, CEO and
                           Director                  Date: August 15, 2000
                          (Chief Executive Officer)

/s/
Michael MacInnis           CFO and Director          Date: August 15, 2000
                          (Chief Financial Officer)


/s/
Viatscheslav Makarov       Director, VP -
                           Sales & Marketing         Date: August 15, 2000