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 December 31, 2000     Commission File Number 333-12979

                                 VOICENET, INC.
                                 --------------
          (Name of small business issuer as specified in its charter)

                DELAWARE                                 13-3896031
                --------                                 ----------
     (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                 Identification Number

            400 5th AVENUE
            WALTHAM, MASS                                   02451
            -------------                                   -----
(Address of principal executive offices)                  (Zip Code)

          Issuer's telephone number, including area code: 781- 890-6798

       Securities registered under Section 12(b) of the Exchange Act: None

       Securities registered under Section 12(g) of the Exchange Act: None

                          Common Stock, $.01 par value

Check  whether  the Issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the Exchange  Act during the  preceding 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days.

                                   YES  X   NO
                                      -----   -----

Check if 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 registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB [X].

State Issuer's revenues for its most recent fiscal year: $43,169

As of December 31, 2000:  (a) 9,903,022  Common Shares,  $.01 par value,  of the
registrant were outstanding; (b) approximately 2,804,300 Common Shares were held
by non-affiliates;  and (c) the aggregate market value of the Common Shares held
by non-affiliates  was $2,019,096 based on the last sale price of $.72 per share
at April 11, 2001 as reported on the American Stock Exchange, Inc..

DOCUMENTS  INCORPORATED BY REFERENCE:  Portions of the Company's Proxy Statement
for the 2001 Annual Meeting of  Shareholders  are  incorporated  by reference in
Part  III.  With the  exception  of those  portions  which are  incorporated  by
reference in this Form 10 KSB Annual  Report,  the Proxy  Statement for the 2001
Annual Meeting of Stockholders is not deemed to be filed as part of this Report.


<PAGE>


                                     PART I

          This Annual Report on Form 10-KSB contains forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,  or
Section 21 E of the Securities  Exchange Act of 1934, as amended,  or subsequent
expansions or replacements of such sections,  including information with respect
to the  Company's  plans and strategy for its business.  For this  purpose,  any
statements  contained  herein that are not statements of historical  fact may be
deemed to be  forward-looking  statements.  Without limiting the foregoing,  the
words "believes,"  "anticipates,"  "plans,"  "estimates," "feels," "expects" and
similar expressions are intended to identify forward-looking  statements.  There
are a number  of  important  factors  that  could  cause  actual  events  or the
Company's  actual  results to differ  materially  from those  indicated  by such
forward-looking statements. These factors include, without limitation, those set
forth below under the caption "Factors That May Affect Future Results"  included
under  "Management's  Discussion and Analysis of Financial Condition and Results
of Operations" in Part II of this Annual Report on Form 10-KSB.

ITEM 1.  DESCRIPTION OF BUSINESS

General
-------

          Voicenet, Inc. (the "Company" or "Voicenet"),  a Delaware corporation,
was   established  on  April  2,  1996.  The  Company   develops   software  and
voice-enabled  systems  and  applications  that enable  users to  interact  with
computers using their voice. The  technologies and applications  marketed by the
Company are the result of research and development conducted by Voicenet (Aust),
Ltd ("VNA"),  which is a  publicly-owned  Australian  corporation  listed on the
Australian Stock Exchange, that owns approximately 72% of the outstanding shares
of common stock of the Company.

          The  Company  acquired  from VNA  pursuant  to a  Technology  Transfer
Agreement dated as of August 1, 1996 (the "Technology  Transfer  Agreement") the
exclusive  rights  for the  North,  Central  and  South  American  markets  (the
"Territory") to the latest versions of the technology  developed by VNA relating
to the voice  products and Voice  Systems,  as defined  below,  including  VNA's
current and future digital voice-to-text audio products developed to exploit the
markets  for   continuous,   speech   recognition   and   related   technologies
(collectively, the "Technology").

          Pursuant  to the  terms  of the  Technology  Transfer  Agreement,  VNA
transferred  the  Technology  and related rights to the Company for the purchase
price of  $4,500,000.  The  Company  paid the  purchase  price  by  issuing  its
Promissory  Note in the amount of  $4,500,000.  Pursuant to an  amendment to the
Promissory  Note dated  September 25, 1997,  the Company and VNA agreed that the
Promissory  Note  may  be  converted  into  Common  Stock  of the  Company  at a
conversion  price of $4.00 per share.  VNA elected to exercise  that  conversion
option and was consequently  issued 1,125,000  registered shares of common stock
of the Company.  In 1999, VNA invested an additional $3 million into the Company
in the form of Series A Convertible  Preferred Stock. All of the Preferred Stock
had been converted into common stock by December 31, 1999. VNA therefore,  holds
a controlling  interest in the Company. One of the directors of the Company is a
member of the VNA board of directors.

          The  Technology  and  products  acquired  by  the  Company  under  the
Technology Transfer Agreement embrace two main voice  technologies:  (i) digital
voice compression, storage and retrieval, and (ii) speech recognition.

          Developed out of the experience gained from five years in research and
development  in the voice  recognition  field and building on our  technology in
digital  compression,  we believe  that our voice  recognition  technology  is a
cost-effective front-end platform, which is both service and engine independent.
It offers a high degree of interoperability  allowing for adaptation to suit any
type of

                                       2
<PAGE>


recognition  engine  and is  capable of  providing  a  platform  for any type of
communications   service,   such  as   wireless,   GSM,   landline  or  intra-or
inter-enterprise    and    incorporating    natural   language    understanding,
speech-to-text,  text-to-speech and voice verification  functions  (collectively
"Voice Systems").

          Voicenet's  speech  provision  is an  enabling  technology  and system
architecture  which  we  believe  allows  for the  rapid  development  of  voice
recognition  applications  across  a  broad  range  of  hardware  platforms  and
applications  and is  functionally  capable of  supporting  a range of  services
ultimately providing a complete unified messaging system. It will allow wireless
telephone  access to data and  internet  networks  by voice in natural  language
without the necessity for training.

          The telecommunications  industry is the focus for the marketing of our
SPEECH(ASP)  platform  for  commercial  application.  We  believe  that  service
providers in the telecommunications industry have an urgent need for value-added
services in their telecommunications  networks where the value of voice and data
transmission  "airtime",  and the price  paid by  customers  for such  time,  is
rapidly  diminishing  as  competition  intensifies.  The Company is currently in
discussion  with several  telecommunication  service  providers in regard to the
incorporation of our speech technologies in their commercial appliaction.

          The Company's  objective is to become a leader in the marketing of the
Voice  Systems.  The  Company's  strategy is (i) to obtain  strategic  marketing
partners and  licensees for the sales and  distribution  of its Voice Systems to
telecommunication  applications  and fields of use;  and (ii) where  appropriate
value-added  synergies  can  be  created,  acquire   telecommunication   service
providers  or enter  into  strategic  joint  venture  relationships  with  other
telecommunication  service  providers  that can  leverage  and exploit our Voice
System technologies.


Rimpex Sales, Licensing and Marketing Agreement
-----------------------------------------------

          On April 26,  2000,  the  Company  entered  into a  definitive  Sales,
Licensing and Marketing Agreement with RimpexChile, S.A. ("Rimpex"). Rimpex is a
wholly-owned  subsidiary of VNA. Pursuant to the Agreement,  Rimpex is granted a
20-year  non-exclusive  license from Voicenet to market, sell and distribute the
Voicenet Products  described below and all derivatives and components thereof in
the geographic  area of South America and Central  America (the  "Territory") to
providers of wireless or land-based telephone service and their end-users.

          The  licensed  Voicenet  products  include  without  limitation:   (i)
"Voicenet Speechware",  an integrated collection of automatic speech recognition
("ASR") tools; (ii) "Voicenet Voice Operating System", a system architecture and
platform for creating and  accessing  e-mails,  facsimiles  and other  digitally
stored  textual  material  by  wireless  and  land-based  telephone;  and  (iii)
"Voicenet Internet Commander" provides a speech command and control mechanism to
access the Internet and dictate URLs for user desired Web site  destinations  by
wireless and land-based telephone.

The royalty  payable to Voicenet  under the Agreement is twenty (20%) percent of
all gross revenues of the Products in the Territory, which amounts shall be paid
in United States dollars on a quarter-annual basis.

          The Company is in the development stage and its operations are subject
to  all  the  problems,  expenses,  delays  and  other  risks  inherent  in  the
establishment of a new business enterprise,  as well as the problems inherent in
developing and marketing a new  product/service  and in  establishing a name and
business  reputation.  The likelihood of the success of the Company must also be
considered in connection  with the rapidly and continually  changing  technology
and the competitive  environment in which the Company will operate. There can be
no assurance that the Company's operations will


                                       3
<PAGE>


result in its becoming or remaining economically viable.  Shareholders should be
aware of the problems,  delays,  expenses and  difficulties  encountered  by any
company  in a  development  stage,  many of which  may be beyond  the  Company's
control.  These  include,  but are not  limited to,  organization  and hiring of
sales,  administrative and management personnel,  lack of customer acceptance of
the Company's  products,  sales and  marketing  problems,  intense  competition,
product quality control, and inadequate financial resources. The Company has had
limited  revenues from  operations to date and,  because it is just beginning to
enter the  commercial  stage,  it may  likely  sustain  operating  losses for an
indeterminate time period.  During the year ended December 31, 2000, the Company
generated a net loss from  operations of $2,034,708 and has a total  accumulated
deficit of $5,821,865

          The Company had limited  revenues from  continuing  operations in 2000
and 1999 in the  amounts of $43,169 and  $3,400,  respectively.  The Company has
incurred net losses since its inception in 1996. The Company's  losses  incurred
since  inception have resulted  principally  from legal,  accounting,  printing,
marketing  and travel  expenditures  incurred  in pursuing  its capital  raising
activities,  amortization of  intangibles,  stock-based  compensation,  and to a
lesser extent early stage product  marketing  expenses.  The Company  expects to
incur operating costs and possible losses  therefrom over the next several years
due primarily to sales and marketing  efforts,  the staffing of such office with
marketing,  administrative  and  management  personnel,  and travel and  related
business  entertainment  expenses  incurred by the sales  personnel as they seek
potential  customers  for the Company's  products.  There can be no assurance of
when and whether the Company will  generate  revenues or become  profitable on a
sustained basis, if at all.  Although the Company  anticipates sales to increase
in 2001, the Company's results of operations may vary significantly from quarter
to  quarter  due to timing of  payments  and other  factors.  The  timing of the
Company's  revenues,  if any,  may not match the  timing of  associated  product
development of other expenses.

          The  Company's  ability to achieve  sales and  increase  its levels of
revenue will depend upon its ability to secure capital financing and to sell the
Company's  products.  The Company's ability to generate  significant revenue and
become profitable is dependent on its commercializing the Company's products.

          There can be no  assurance  that the  operations  of the Company  will
generate significant revenue or will ever be profitable.

Business Strategy
-----------------

          The Company's  objective is to become a leader in the marketing of the
Voice  Systems.  Implementing  the Company's  strategies  involves the following
activities:

o    Pursue Selected Strategic Acquisitions.

          We intend to pursue selected investments in or acquisitions of:

          -    telecommunications  carriers  where  our  Voice  System  can be a
               value-added revenue enhancement, and

          -    entities whose  businesses  complement  our existing  product and
               service offerings.

o    Pursue  Revenue  Through  Licensing,   Marketing  Partner  And  Distributor
     Relationships.


                                       4
<PAGE>


          The Company intends to market some of its products,  such as the Voice
Systems,  within the Territory by entering into licenses and strategic marketing
and  distribution  agreements.  The Company  believes  that  systems  like those
developed  by  the  Company  have  not  been   previously   available  to  users
distributors may reach.

o    Further Develop Strategic Alliances.

          The Company will support most of its internal product  development and
marketing efforts with strategic alliances. To date, the Company has established
significant  product  development  relationships  with VNA. The Company believes
that its  collaborative  relationships  will expand the breadth of opportunities
for the  Company's  technology.  The Company  intends to continue to enhance the
established  strategic  alliances and it believes the relationships will further
enhance the Company's product development and marketing efforts.


Recent Acquisitions and Developments
------------------------------------


We have recently taken the following actions:

Unveil Technologies, Inc.
-------------------------

On March 7, 2001, the Company  completed the acquisition of 2,500,000  shares of
Series A Convertible Preferred Stock of Unveil Technologies,  Inc. ("Unveil"), a
voice recognition software company based in Massachusetts,  for an investment of
$1,562,500.  Upon conversion,  the Company's  interest in Unveil  represented an
interest  equivalent to 25% of the voting shares of Unveil.  This transaction is
treated as an equity investment for accounting purposes.

          On April 11,  2001,  the  Company's  Board of  Directors  approved the
acquisition  of an  additional  15%  interest in Unveil,  subject to certain due
diligence  considerations for an additional  investment of $3,000,000 consisting
of staged  payments  of cash and the  issuance of  1,600,000  shares of Voicenet
common stock valued at $1.25 per share

  Unveil  Technologies  was  founded  by a  proven  group of  entrepreneurs  and
scientists from leading universities,  government sponsored research centers and
successful  technology  companies.  Its  vision is to provide  advanced  natural
language processing  software and services to global  organizations that need to
make their digital content more easily  accessible and  effectively  utilized by
their customers,  employees,  investors,  suppliers,  and/or  partners,  thereby
enabling these  organizations  to achieve  significant and measurable  benefits.
Based  on over  20  years  of  research,  Unveil's  proprietary  technology  was
developed  and   implemented  at  Russia's   Academy  of  Sciences  and  Harvard
University's School of Medicine. The technology,  known as Concept Mapping is an
advanced natural language  processing  technology for intelligently  interacting
with information based on the meaning,  or semantic context,  of the information
rather than on the literal wording.


ESS Communications
------------------

          During the last quarter of 2000,  our Board of Directors (the "Board")
and  members of our  management  began  searching  for a  strategic  acquisition
candidates which who could utilize and market our voice portal  services,  while
simultaneously  diversify  the company from a research and  development  company
that licenses  technology  to third party users to a broader  telecommunications
operating business platform.


                                       5
<PAGE>


          In the first  quarter of 2001, we were  approached by ESS.com,  LLC, a
Florida  limited  liability  company  ("ESS"),  which is a provider  of operator
assisted  calling  services  throughout the United States,  who was aware of our
search for a strategic transaction.  On April 12, 2001, we executed a definitive
Agreement  and Plan of Merger  (the  "Merger  Agreement")  whereby  we agreed to
acquire  all of  outstanding  capital  stock  from the four  corporate  entities
("Target Companies") from the unaffiliated shareholders thereof (the "Exchanging
Shareholders")  that own 100% of the  membership  interests  in ESS ("ESS Common
Stock") in exchange for shares of our common stock  ("Voicenet  Common  Stock").
The Target Companies will merge into ESS Holdings,  Inc., a newly formed Florida
corporation  which is a wholly-owned  subsidiary of Voicenet ("Merger Sub"). The
Merger  Agreement  also called for Voicenet to infuse  $500,000 in the form of a
secured bridge loan upon execution of the Merger Agreement.

          At the Board  meeting  on April 11,  2001,  the Board  considered  our
current financial condition,  the increased competition in the voice recognition
sector,  and the significant  decline in public market  capitalization  value of
companies that get a significant part of their revenue from development and sale
or licensing of voice recognition  software to third parties for a licensing fee
or royalty, such as Nuance Communications,  Inc., Speechworks, Inc., and Lernout
and Hauspie  Speech  Products,  Inc.  The Board also  considered  the  potential
benefits  of the  diversification,  the  merger,  including  relevant  business,
financial, legal and market factors. After due deliberation, the Board concluded
that  the  proposed  transaction  was in  our  best  interest  and  that  of our
stockholders for, among other things, the following reasons:

o  The combination would  potentially  reduce on dependency on capital intensive
   research and development.

o  The combination  would provide a revenue producing  telecommunications  which
   can  exploit  our  Voice  Systems   technology   as  a  value-added   revenue
   enhancement.

o  The combination would  potentially  reduce our reliance on licensing fees and
   royalties as a revenue source, and provide a broader source of revenue from a
   related communications operating business.

o  The combined company would have an enhanced and more  diversified  geographic
   and product market position;

o  The combination would provide us with significant cost savings and synergies;
   and

o  The combined management team would enhance our capabilities.


          Based on the  foregoing,  at the Board meeting held on April 11, 2001,
the Board voted to approve the definitive  Merger Agreement  between us, ESS and
ESS Holdings,  Inc., a newly formed Florida corporation which is a subsidiary of
Voicenet.  Pursuant to the Merger  Agreement the Target Companies will be merged
with and into our Merger Sub (the "Merger") and all outstanding shares of Target
Company common stock will be converted into the right to receive an aggregate of
2,000,000  shares of Voicenet  Common Stock and 1,000,000 of our preferred stock
designated as "Senior  Convertible  Preferred Stock" ("Senior Preferred Stock"),
The Common Stock is being issued to the Exchanging  Shareholders at the publicly
traded common stock market price of $.72 per share as quoted on the AMEX and the
Senior Preferred Stock is being issued at the stated  liquidation value of $7.20
per share.  The Senior  Preferred Stock has voting rights on a 10 vote per share
basis. The Senior Preferred Stock shall  automatically  and mandatory  converted
into  10,000,000  shares of Common  Stock upon the  approval of such  conversion
privilege by a vote of Voicenet's shareholders.


                                       6
<PAGE>


          The  transaction  value is  estimated  to be valued  at  approximately
$8,640,000  million  and is  subject  to certain  conditions  subsequent  to the
execution of the Merger  Agreement.  Twenty-five  (25%)  percent of the Voicenet
shares to be delivered to the ESS Shareholders  will be subject to a performance
and  indemnification  escrow ("Escrow Shares") whereby,  Voicenet shall have the
right to a return of he Escrow Shares back from the Exchanging  Shareholders  in
the event that ESS does not generate  revenues on a cash basis of $12 million or
greater for the year ended December 31, 2001 and be  "break-even" or better from
on an income and cash flow basis for the three fiscal  quarters  ending December
31, 2001. To the extent that ESS is  break-even  and has revenues of at least $9
million the  Exchanging  Shareholders  shall be entitled to retain the  Voicenet
shares prorata for each $1,000 of revenue above $9 million to $12 million.

          The  Company  expects  that its  acquisition  of ESS will  result in a
combined company that will be a provider of operator assisted telecommunications
services,  increasing  stockholder  value through  significant  cost savings and
synergies.  Although  we  anticipated  that our  Voice  Portal  Services  can be
utilized and offered to ESS  customers,  thereby  creating an  additional  value
added revenue  source,  there can be no assurance  that our  operations  will be
successfully  integrated  into ESS's  operations or that our  stockholders  will
ultimately realize any of the anticipated benefits of the Merger. There also can
be no assurance that any of the expected results will be accomplished as rapidly
as  currently  expected or at all or that any savings or  synergies  will not be
offset by increases in other expenses or operating  losses incurred by ESS based
on the occurrence of events or actions taken by ESS that are out of our control.
In  addition,  the  Merger  is  subject  to a number  of  conditions  subsequent
including, without limitation, certain regulatory approvals.  Accordingly, there
can be no assurance  that we will obtain the necessary  regulatory  approvals or
that the  acquisition  will be  consummated.  In the event  that the  conditions
subsequent to the Merger  Agreement are not satisfied,  it could have a material
adverse impact on our combined business, financial condition and operations.

Voicenet (Aust) Ltd. and Development of the Voice System Technology
-------------------------------------------------------------------

          VNA is a research and development  and marketing  company that focuses
on voice recognition systems and applications and digital audio applications. In
1989,  VNA developed one of the world's first digital audio mass storage  system
("DAMS(TM)) for the broadcasting industry.  The system permitted,  for the first
time,   the  facility  for  radio   broadcasters   to   digitally   store,   and
instantaneously  access  from a  simple  in-studio  system  control  panel,  all
broadcast material from archives which could be saved on hard disk or CD Rom.

          In 1992, VNA was commissioned by a division of the Australian  Federal
Attorney  General's  department  to  develop a  digital  system  for  recording,
reporting and archiving court proceedings. The result of that commission was the
development  of a system code named  COURTSCRIPT.  VNA continued to research and
develop the  application,  and with the  assistance  of the Los  Angeles  County
Superior Court Division, which permitted the use of four of its courts as a test
site for a twelve  month  period,  completed  an  earlier  version  of the Court
Reporting System of digital audio recording and transcription.


Technology Transfer Agreement
-----------------------------

          The Company  acquired  from VNA  pursuant to the  Technology  Transfer
Agreement dated as of August 1, 1996 the exclusive rights for the North, Central
and South American  markets to the  Technology  developed by VNA relating to the
voice  products and the digital audio  reporting,  transcription,  archiving and
retrieval  systems,  including  the right to  manufacture  and market the latest
version of digital  audio  reporting,  transcription,  archiving  and  retrieval
systems for the court recording  industry;  high  vocabulary;  continuous  voice
recognition and digital voice-to-text


                                       7
<PAGE>


recording;  storage  and  retrieval  for the  medical  industry;  digital  audio
products and technologies for the broadcasting  industry;  and the digital audio
products  developed to exploit the markets for continuous speech recognition and
automatic  transcription  technology.  Pursuant  to the terms of the  Technology
Transfer  Agreement,  VNA  transferred the Technology and related rights for the
purchase  price  of  $4,500,000,  which  was  paid by the  Company  issuing  its
non-interest  bearing  Promissory  Note  in such  amount.  By  amendment  to the
Promissory  Note dated  September 25, 1997,  the Company and VNA agreed that the
Promissory  Note  may  be  converted  into  Common  Stock  of the  Company  at a
conversion price of $4.00 per share. That Promissory Note has been converted and
upon  conversion of the  promissory  Note and issuance of the  1,125,000  common
shares to the Selling  Stockholder,  VNA, the $4.5 million  obligation  has been
satisfied in full.


Intellectual Property
---------------------

          The Company does not own any  patents,  trademarks  or trade  secrets.
Under the  Technology  Transfer  Agreement  for the court  reporting  system and
related  technology,  the Company is granted the exclusive right to manufacture,
market,  sell and  distribute the latest version of the system and other digital
voice systems  developed by VNA in North,  Central and South America under VNA's
trademarks. VNA developed the systems, and has copyrighted the computer software
used in the  Court  Reporting  System  and it has  applied  for a patent  on the
hardware component that it developed. Pending the issuance of any patents, which
cannot be assured, VNA intends to rely on unpatented  proprietary technology and
technical know-how. Accordingly, because the Company will only receive under the
Technology Transfer Agreement such intellectual  property rights as may be owned
by VNA, the Company will similarly rely on unpatented proprietary technology and
technical know-how utilizing a "best of breed" approach in line with its ongoing
solutions delivery capability.

          No assurance can be given that others will not  independently  develop
substantially equivalent technology,  knowledge and techniques or otherwise gain
access to VNA's technology,  or use the components to make a similar product, or
that VNA or the Company can  meaningfully  protect its rights in such unpatented
proprietary technology or know-how, utilizing a "best of Breed" approach in line
with its ongoing solutions delivery capability.

Employees
---------

          As of December  31,  2000,  the Company had a total of two  employees,
with  considerble  use of service  providers  drawn from a range of disciplines.
None of the Company's  employees are  represented by a union and the Company has
not experienced any work stoppages.  The Company believes its relations with its
employees is good.

Recent Sales Of Unregistered Securities
---------------------------------------

          In the fourth quarter of 1999 the Company completed a private offering
of 100,000  shares of its  Series A  Convertible  Preferred  Stock at $30.00 per
share,  for gross  proceeds of $3 million  pursuant to Regulation D to VNA which
represented  that it is an  "accredited  investor"  as that term is  defined  in
Regulation  D. No  placement  agent was  utilized.  The  Company did not pay any
commissions in connection  with the sale of securities.  The preferred stock was
subsequently converted into 3,153,722 shares of the Company's common stock.

          The Company's  principal business address is 400 5th Avenue,  Waltham,
Massachusetts, 02451, and its telephone number is 781-890-6798.

ITEM 2.  DESCRIPTION OF PROPERTY


                                       8
<PAGE>


          The  Company   maintains  an  office  at  400  5th  Avenue,   Waltham,
Massachusetts, 02451, on a month-to-month basis.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not aware of any material  pending or  threatened  legal
proceedings against the Company or its officers and directors.

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

          There were no matters  submitted to a vote of the security  holders in
the fourth quarter of 2000.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

  (a)   Market Information

 The Company's Common Stock has been traded on the American Stock Exchange since
July 2000 under the symbol VTC.  Prior to said date the  Company's  Common Stock
was traded on the OTC Bulletin  Board under the symbol  "VNET" since  January 5,
1998.  The stock  register and transfer  agent for the Company is American Stock
Transfer & Trust Company, New York, New York. The table set forth below presents
the high and low bid prices of the common stock for the period  indicated.  Such
over-the-counter  market quotations reflect inter-dealer prices,  without retail
mark-up,  mark-down or  commissions  and may not  necessarily  represent  actual
transactions.

2000                                          High         Low
----------------------------------------------------------------

Quarter ended March 31, 2000 ..........      $  5.25    $  0.125

Quarter ended June 30, 2000 ...........      $ 17.25    $ 11.88

Quarter ended September 30, 2000 ......      $ 14.125   $  2.69

Quarter ended December 31, 2000 .......      $  3.25    $  0.37


  On April 11, 2001, last reported price of the common stock was $0.72.

1999
----

Quarter ended March 31, 1999 ..........      $  5.25    $  0.125

Quarter ended June 30, 1999 ...........      $  3.25    $  0.625

Quarter ended September 30, 1999 ......      $  2.06    $  0.625

Quarter ended December 31, 1999 .......      $ 22.00    $  1.25


                                       9
<PAGE>


  (b)    Holders of Common Stock

                                       APPROXIMATE NUMBER OF
TITLE OF CLASS                         RECORD HOLDERS AS OF DECEMBER 31, 2000
--------------                         --------------------------------------

Common Stock, $.01 par value             1,630

A number of shares are held by record by brokerage and other institutional firms
for their customers.

  (c)   Dividends

The Company has never declared or paid a cash dividend on its common stock,  and
it is anticipated  that the Company will continue to retain its earnings for use
in its business and not pay cash dividends. Declaration and payment of dividends
are within the discretion of the Company's Board of Directors, which will review
such dividend policy from time to time.

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The  following  discussion  should  be read in  conjunction  with our  financial
statements,  including the notes to those statements, included elsewhere in this
Annual Report on Form 10-KSB,  and the lead-in  immediately  preceding Part I of
this Annual  Report on Form  10-KSB.  As discussed in more detail in the lead-in
immediately  preceding  Part I of  this  Annual  Report  on  Form  10-KSB,  this
discussion   contains   forward-looking   statements  which  involve  risks  and
uncertainties.  Our  actual  results  may  differ  materially  from the  results
discussed  in the  forward-looking  statements.  Factors  that might cause those
differences  include,  but are not limited to, those  discussed in "Factors That
May Affect Future Results."

RESULTS OF OPERATIONS 2000 AS COMPARED TO 1999

          Net loss increased  from  $1,053,236 for the 1999 Period to $2,034,708
for the 2000  Period.  The  Company  had  revenue of $43,169  for the year ended
December  31,  2000 as  compared  to revenue of $3,400 in 1999.  The Company had
interest  income of $132,742 in 2000 as compared to $40,682 for the1999  Period.
The increase in interest was due to the  injection of capital as a result of the
preferred  stock purchase in 1999 by VNA. Total expenses were $2,125,790 for the
2000  Period in  comparison  to  $1,097,056  for the 1999  Period an increase of
$1,003,734. This increase was due primarily to a one time payment of $652,000 as
severance pay to the former Chief  Executive  Officer of the Company - Mr. Frank
Carr.   Additional   expenses  in  the  in  sales  and  administrative  area  of
approximately  $494,653 were incurred  primarily in legal and professional fees,
travel, and management fees.

          At December 31, 2000, the Company had total assets of $7,336,989,  and
at December 31, 1999, the Company had total assets of $6,834,422, an increase of
$482,547. At December 31, 2000, the Company had total liabilities of $2,406,128,
and at December  31, 1999 the Company had total  liabilities  of  $186,753.  The
increase in liabilities is primarily attributable to advances made by VNA to the
Company for its  investment  in Unveil  Technologies.  At December  31, 2000 the
Company had a total  stockholders  equity of $4,930,961in  comparison to a total
stockholders' equity of $6,647,669 at the comparable date in 1999.

          The Company had working  capital of $2,212,836 as of December 31, 2000
as compared to a working  capital of  $2,729,778  as of December 31,  1999.  The
Company had an accumulated deficit


                                       10
<PAGE>


of $3,787,157 as of December 31, 1999 in comparison to an accumulated deficit of
$5,821,865 as of December 31, 2000. The increase in the  accumulated  deficit is
primarily  related to continuing  operating costs without any operating  income.
For the 2000 Period the Company's cash requirements were satisfied from the cash
reserves in its operating and money market accounts.


RESULTS OF OPERATIONS 1999 AS COMPARED TO 1998

          Net losses decreased from $2,117,866 for the 1998 period to $1,053,236
for the 1999  Period.  The  Company  had  revenue  of $3,400  for the year ended
December  31, 1999 as  compared  to revenue of $45,500 in 1998.  The Company had
interest  income of $40,682 in 1998 as compared  to $7,235 for the 1998  Period.
The increase in interest was due to the  injection of capital as a result of the
preferred stock purchase.  Total expenses were $1,100,456 for the 1999 Period in
comparison  to  $2,170,601  for the 1998 Period a decrease of  $1,070,145.  This
decrease  was due  primarily to a decrease in stock based  compensation  expense
totaling  $1,223,600  relating to the issuance of 150,000 shares of common stock
and 260,000  stock  options at prices less than the fair market  value as of the
date of grant in 1998 and  decreases in selling and  administrative  expenses of
approximately $236,087 offset by an increase in amortization expense of $415,500
as a result of reducing the life of the technology rights to seven years.

          At December 31, 1999, the Company had total assets of $6,834,422,  and
at December 31, 1998, the Company had total assets of $4,586,196, an increase of
$2,248,266. At December 31, 1998, the Company had total liabilities of $217,249,
and at December  31, 1999 the  Company  had total  liabilities  of $186,753 as a
result of greater liquidity  available to pay current  obligations.  At December
31, 1999 the Company had a total stockholders equity of $6,647,669 in comparison
to a total stockholders' equity of $4,368,947 at the comparable date in 1998.

          The Company had working  capital of $2,765,232 as of December 31, 1999
as compared to a working capital deficit of $80,878 as of December 31, 1998. The
Company had an  accumulated  deficit of  $2,733,921  as of December  31, 1998 in
comparison to an  accumulated  deficit of  $3,787,157 at December 31, 1999.  The
increase in the accumulated deficit is primarily related to continuing operating
costs  without any  operating  income.  For the 1999 Period the  Company's  cash
requirements  were  satisfied  from  the  cash  reserves  in its  operating  and
investment accounts as well as the investment of $3,000,000 from VNA, the parent
company,  by  its  purchase  of  Series  A  Convertible   Preferred  Stock.  VNA
subsequently elected to convert all of the Preferred Stock into Common Stock.


LIQUIDITY AND CAPITAL RESOURCES

          The Company does not currently  possess a bank source of financing and
has had only revenues of  approximately  $43,169  during the year ended December
31, 2000.  The Company  believes  that its existing  $2,294,215 of cash and cash
equivalents  and  any  potential  cash  flow  from  operating  revenue  will  be
sufficient to meet its operating expenses and capital expenditures  requirements
for at least the next 12 months.  The  Company's  future  capital  requirements,
however,  will depend on numerous  factors,  including (i) the  effectiveness of
product  commercialization  activities and marketing  activities,  including the
creation and progress of its sales and marketing operations,  (ii) the effect of
competing  technological  and market  developments,  from  competitors that have
greater  resources  than the  Company.  The  Company's  ability to  continue  in
business  as a going  concern  depends  upon its  ability to sell  products,  to
generate  fees from the sale of its services,  to conserve  liquidity by getting
marketing and other priorities and reducing  expenditures,  to obtain additional
funds through offering of its securities.  The Company's ability to obtain funds
through an offering of its debt securities is limited by its lack of revenue. In
any event,


                                       11
<PAGE>


there is no  assurance  that any  expenditure  reductions,  financings  or other
measures  that the  Company  may be able to  effect  will  enable it to meet its
working capital requirements. Accordingly, if operating expenses are higher than
expected or if cash flow from operations is lower than anticipated, there can be
no assurance that the Company will have sufficient  capital resources to be able
to continue as a going concern.


                     FACTORS THAT MAY AFFECT FUTURE RESULTS

          Statements  included in this "Management's  Discussion and Analysis of
Financial  Condition and Results of  Operations"  Section,  in other sections of
this Annual Report on Form 10-KSB including, without limitation the "Description
of Business"  Section in Part I, and in prior and future  filings by the Company
with the Securities and Exchange Commission, in the Company's press releases and
in oral statements  made with the approval of an authorized  executive which are
not historical or current facts are  "forward-looking  statements" made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and are subject to certain risks and uncertainties  that could cause actual
results to differ materially from those presently anticipated or projected. Such
statements can be identified by the use of  forward-looking  terminology such as
"may," "will," "expect," "believe," "intend," "anticipate,"  "estimate," "hope,"
"content,"   "continue"  or  similar  words.  These  statements  discuss  future
expectations, estimate the happening of future events or our financial condition
or state other  "forward-looking"  information.  GIVEN THESE  UNCERTAINTES,  THE
STOCKHOLDERS  OF THE COMPANY ARE CAUTIONED  NOT TO PLACE UNDUE  RELIANCE ON SUCH
FORWARD-LOOKING  STATEMENTS.  The following important factors,  among others, in
some cases have  affected and in the future could  affect the  Company's  actual
results and could cause the Company's actual financial and operating performance
to differ materially from that expressed in any expressed in any forward-looking
statement:

Limited Operating History
-------------------------

         Voicenet, Inc. is a development stage company, incorporated on April 2,
1996 in the State of Delaware.  Its proposed  operations  are subject to all the
problems,  expenses,  delays and other risks inherent in the  establishment of a
new business  enterprise without an operating  history,  as well as the problems
inherent in developing and marketing a new product/service and in establishing a
name and business reputation.  The likelihood of the success of the Company must
also be  considered  in  connection  with the rapidly and  continually  changing
technology  and the  competitive  environment in which the Company will operate.
There can be no  assurance  that the  Company's  operations  will  result in its
becoming or remaining  economically viable. The Company may experience problems,
delays,  expenses and  difficulties  typically  encountered  by any company in a
developmental  stage, many of which may be beyond the Company's  control.  These
include, but are not limited to, unanticipated regulatory compliance,  marketing
problems and intense competition that may exceed current estimates.  The Company
has had  minimal  revenues  to date  and has  incurred  losses  since  inception
including for the year ended  December 31, 2000.  As a result of the  developing
nature of the  Company's  business and the fact that it has limited  operations,
the Company  will likely  sustain  operating  losses for an  indeterminate  time
period.  Unless the  Company is able to generate  revenues  or obtain  financing
through  some means in the near  future,  the  operations  of the Company in its
development  phase may raise  doubt about the ability of the Company to continue
as a going  concern  after such twelve month  period.  There can be no assurance
that the operations of the Company will ever be competitive or profitable.

Possible Need For Additional Financing
--------------------------------------


                                       12
<PAGE>


    The Company anticipates that its existing capital resources will be adequate
to satisfy its current capital  requirement for at least the next twelve months.
Thereafter,  the  Company  may in  the  future  determine,  depending  upon  the
opportunities  available to it, to seek additional  debt or equity  financing to
fund the cost of continuing  expansion.  To the extent that the Company  obtains
equity  financing or finances an acquisition  with equity  securities,  any such
issuance of equity  securities  could result in dilution to the interests of the
Company's  stockholders.  Additionally,  to the extent that the  Company  incurs
additional  indebtedness  or  issues  debt  securities  in  connection  with  an
acquisition,  the Company  will be subject to risks  associated  with  incurring
substantial additional indebtedness including the possibility that cash flow may
be  insufficient to pay principal and interest on any such  indebtedness.  There
can be no assurance that  additional  financing will be available to the Company
on acceptable terms, or at all.

Early Stage Of Market Development
---------------------------------

          The  speech  technology  market  is at a  relatively  early  stage  of
development.  To date, the speech technology  products that will be manufactured
and  marketed  by the  Company  have  only  been  incorporated  in  commercially
available  products on a limited basis.  Acceptance of these  technologies  on a
commercial basis will be dependent upon the development of the speech technology
markets,  the  performance  and price of the  Company's  products  and  customer
reaction to these products. There can be no assurance that the speech technology
market will develop  further or that the Company's  products will achieve any or
significant market acceptance.

Dependence On Acceptance By Court Administrators
------------------------------------------------

          Sales of the Company's Court Reporting System products on a commercial
basis will be substantially  dependent on acceptance by the court community.  It
is anticipated  that court  reporters which are generally  unionized  government
employees will resist the  introduction and  implementation  of electronic court
reporting  systems such as  COURTSCRIPT(TM).  There can be no assurance that the
Company's proposed Court Reporting System products will be accepted in the court
community,  and the  Company is unable to  estimate  the length of time it would
take to gain such acceptance.

Uncertainty Of Market Acceptance - Lack Of Marketing Arrangements
-----------------------------------------------------------------

          The  Company  has  only  recently  commenced   marketing   activities.
Achieving market acceptance for the Company's products will require  substantial
marketing  efforts  and  the  expenditure  of  significant  funds.  There  is no
assurance  that  the  Company  will be able to  create  a  successful  marketing
program, or that the Company's products can be sold in a manner that will permit
the Company to achieve long range profitability, if ever.

Possible Product Obsolescence
-----------------------------

          The Company expects technological  developments to continue at a rapid
pace in the  computer  and  telecommunications  industries,  and there can be no
assurance  that   technological   developments  will  not  cause  the  Company's
Technology  and Voice  Systems to be rendered  obsolete.  The  Company's  future
success,  if any, will be dependent upon its ability to remain  competitive with
others  involved  in the  development,  manufacture  and  marketing  of  similar
products  and  technologies  through  its  continued  capability  to design high
quality products in a cost efficient and timely manner, of which there can be no
assurance.
No  Assurance  As  To  Protection  Of  Intellectual   Property;   Dependence  On
--------------------------------------------------------------------------------
Intellectual Property
---------------------

                                       13
<PAGE>


          Patents  have  been  applied  for  by  VNA in  relation  to the  court
reporting  system and its  components.  No patents  have,  as yet,  been issued.
However,  the Company's ability to compete effectively with other companies will
depend,  in part,  on its  ability to  maintain  the  proprietary  nature of its
technologies.  The  Company  also  intends  to  rely on  unpatented  proprietary
information  and  know-how,  and there can be no assurance  that others will not
develop such  information and know-how  independently or otherwise obtain access
to the Company's technology.  Also, no assurance can be given that the Company's
products will not infringe upon the patents of others, licenses to which may not
be  available  to the  Company.  The  computer  software  source codes which are
essential elements of the Company's  products,  are proprietary trade secrets of
the Company. The Company has attempted to protect the proprietary nature of this
technology by reliance upon copyright laws, patents applied for, and contractual
arrangements  with its  employees  and  customers,  although it is  questionable
whether  computer  software and technology  can be adequately  protected by such
means.  In the event of any  misappropriation,  the  Company  may be  without an
effective legal remedy. There can be no assurance that the Company's competitors
will not  independently  develop  comparable  or superior  technologies.  In the
future,  third parties may assert that the Company's or its licensor's  products
infringe their  proprietary  rights.  Should litigation with respect to any such
claims commence, such litigation could be extremely expensive and time consuming
and could  materially and adversely  affect the Company's  results of operations
regardless of the outcome of the litigation.  There can be no assurance that VNA
will defend,  or will be in a financial  position to defend  against third party
infringements on their proprietary rights.

Dependence Upon Key Personnel And Possible Conflict Of Interest
---------------------------------------------------------------

          The success of the Company is  substantially  dependent  upon existing
management,  engaged on both a full and part time basis.  These  individuals may
have  conflicts  between  their  responsibilities  to the  Company  and to other
entities  with which they are  affiliated.  The  directors or  affiliates of the
Company may in the future seek to exploit opportunities which the Company is not
able to  undertake  because of  limited  capital.  Mr.  Alan  Dawson,  the Chief
Executive Officer will a majority of his time to the Company as set forth in the
Agreement under which he is retained. The loss of the services of Mr. Dawson, as
well as other key  personnel,  or any inability to attract and retain  qualified
personnel, may adversely affect the Company's business. The is in the process of
obtaining key man life insurance on the life of its key  executives.  Because of
the nature of its  business,  the Company will be dependent  upon its ability to
attract and retain  qualified  personnel,  including  competition from companies
with  substantially  greater  resources than the Company.  There is no assurance
that the Company will successfully  recruit or retain personnel of the requisite
technical caliber or in adequate numbers to enable it to conduct its business as
proposed.

Initial Reliance On Sole Manufacturer And Supplier
--------------------------------------------------

          The Company does not own or operate any  manufacturing  or  production
facilities.  VNA, an  Australian  company  which owns  approximately  72% of the
outstanding  shares of Common Stock of the  Company,  causes or provides for the
manufacturing  of various  components  required  for the  operation of the Voice
Systems,  including the Court Reporting Systems and Medical Systems.  Should VNA
terminate its relationship with the Company,  there can be no assurance that the
Company could obtain a satisfactory arrangement with another manufacturer on the
same terms, i.e., price and credit terms.

No Feasibility And Marketing Studies
------------------------------------

          The Company's  operations are being undertaken  primarily on the basis
of management's evaluation of market potential regarding its proposed operations
in North, Central and South America.

Product Development And Integration
-----------------------------------


                                       14
<PAGE>



          The  development  of the  Company's  technology  for its customers has
required, and will continue to require, significant technical innovations.  Once
the Company has products such as the Voice Systems,  the Company must adapt that
product to meet the specific  requirements of the customer  hardware or software
in which it is to be integrated. There can be no assurance that the Company will
be  successful in developing  new products or enhancing the  performance  of its
existing  products for customer  use on a timely basis or within  budget,  if at
all.  Any such failure  could  materially  and  adversely  affect the  Company's
technology and its business and prospects.

Products Reliability
--------------------

          Most applications  incorporating the Company's  technologies are being
developed or have only  recently been  introduced to the market.  As a result of
the limited  period of use and the  controlled  environment in which most of the
Company's  technologies  have  been  tested  and used to date,  there  can be no
assurance  that  they  will  meet  their  performance  specifications  under all
conditions or for all applications. If any of the Company's technologies fail to
meet such  expectations,  the Company may be required to enhance or improve that
technology,  and there can be no assurance  that the Company would be able to do
so on a timely basis, if at all. Any significant reliability problems could have
material adverse effect on the Company's business and prospects.

Rapid Technological Change
--------------------------

          The market for speech  technology  products has been  characterized by
rapid technological change, frequent product introductions and evolving industry
requirements.  The Company  believes  that these trends will  continue  into the
foreseeable future. The Company's success will depend,  among the other matters,
upon its ability to enhance its existing products being acquired pursuant to the
Technology Transfer Agreement and to successfully develop new products that meet
increasing  customer  requirements and gain market  acceptance.  Achieving these
goals will require  continued  substantial  investment by the Company in product
development and marketing.  There can be no assurance that the Company will have
sufficient  resources  to make  these  investments,  that  the  Company  will be
successful in developing product enhancements or new products on a timely basis,
if at all,  or that  the  Company  will be  able to  successfully  market  these
enhancements and new products once developed. Further, there can be no assurance
that the  Company's  products  will not be  rendered  obsolete  by new  industry
standards or changing technology.

Products Liability And Other Claims
-----------------------------------

          The Company may be subject to substantial  products liability costs if
claims arise out of problems associated with the Company's products. The Company
will seek to maintain products liability coverage for the benefit of the Company
to protect the Company against such  liabilities,  but there can be no assurance
that such  arrangements  can be made, or if made,  will be effective to insulate
the assets of the company from such claims. The Company will attempt to maintain
insurance against such  contingencies,  in scope and amount which it believes to
be  adequate;  prior to selling  its first  products.  However,  there can be no
assurance  that  such  product  liability  insurance  will be  available,  or if
available, that it will adequately insure against such claim.

Competition
-----------

          Competition in the voice recognition systems, digital audio technology
and  telecommunications  market is intense.  The Company faces  competition from
many  companies  in the United  States and  abroad,  including a number of large
companies and firms  specialized in the  development  and production of systems.
Most of the Company's competitors have substantially


                                       15
<PAGE>


greater   resources,   greater  operating   experience,   greater  research  and
development and marketing capabilities and greater production  capabilities than
those of the Company.  There can be no assurance that the Company's  competitors
will not develop  voice  recognition  technologies  and  products  that are more
effective  or less  expensive  than the  Company's  or which  would  render  the
Company's technology and products obsolete and noncompetitive.  Accordingly,  it
is possible that new competitors or alliances  among  competitors may emerge and
rapidly acquire significant market share. There is no assurance that the Company
will be able to compete successfully.

Management Of Growth
--------------------

          We cannot be  certain  that our  personnel,  systems,  procedures  and
controls  will be  adequate  to support  our future  operations.  As part of our
significant  revenue growth,  we have expanded,  and plan to continue to expand,
the number of our employees and the geographic  scope of our  operations.  These
factors create increased responsibilities for our management personnel and place
increased  demands upon our operating and financial  systems,  which may lead to
unanticipated  costs and  divert  our  management's  attention  from  day-to-day
operations.  We may also need to  attract,  train and retain  additional  highly
qualified  management,  technical,  sales and  marketing  and  customer  support
personnel. The process of locating such personnel with the combination of skills
and attributes  necessary to implement our strategy is often lengthy.  We expect
that our expansion into foreign  countries will lead to increased  financial and
administrative demands, such as:

o  Increased operational complexity associated with expanded network facilities;

o  Administrative  burdens  associated  with  managing an  increasing  number of
   foreign subsidiaries and relationships with foreign partners; and

o  Expanded treasury functions to manage foreign currency risks.


Government Regulations
----------------------

          Through our new  acquisition  ESS,  our business is subject to various
U.S. and foreign laws, regulations,  agency actions and court decisions. The FCC
regulates  our  U.S.   telecommunications   service  offerings.  The  FCC  could
determine,  by its own actions or in response to a third  party's  filing,  that
some of our services, termination arrangements, transit or refile arrangement or
reports do not or did not comply with FCC policies and rules.  As a result,  the
FCC could order us to terminate noncompliant arrangements, fine us or revoke our
authorizations. Any of these actions could have a material adverse effect on our
business, operating results and financial condition. Generally, the FCC requires
international  carriers  to  obtain  authorizations  under  Section  214  of the
Communications Act, prior to acquiring  international  facilities by purchase or
lease, or providing  international  service to the public. Prior FCC approval is
also  required  to  transfer  control of a  certificated  carrier.  We must file
reports and contracts with the FCC and pay regulatory fees, which are subject to
change. The FCC policies and rules discussed below also regulate our operations.
Future FCC action may also negatively affect our operations by:


o  Intensifying the competition that we face;

o  Increasing our operating costs;

o  Disrupting our transmission arrangements; or


                                       16
<PAGE>


o  Otherwise requiring us to modify our operations.

          The FCC is encouraging  new market  entrants by  implementing  the WTO
Agreement and through other actions.  The FCC may approve  pending mergers which
could produce more  effective  competitors  in our market.  The FCC may increase
regulatory fees by eliminating the exemption for carrier revenues  obtained from
other carriers for certain fees or through other  actions,  which could increase
our costs of service.

          Various  state  laws  and  regulations  impose  prior   certification,
notification,  registration,  tariff and/or other requirements on our intrastate
long  distance  telecommunications  operations  and our  subsidiaries.  The vast
majority of states require that we and our subsidiaries  apply for certification
to provide intrastate  telecommunications  services.  In most jurisdictions,  we
also must file and obtain prior  regulatory  approval of tariffs for  intrastate
services. State regulatory authorities can generally condition, modify or revoke
certificates  of authority or impose  fines and other  penalties  for failure to
comply with state laws and regulations.

Customers
---------

          The loss of a major customer  could have a material  adverse effect on
our business.  ESS's five largest  customers  accounted for approximately 80% of
its revenues in 2000. A  significant  customer  could be lost for many  reasons,
including:

o  The entrance into the market of significant new competitors  with lower rates
   than us;

o  Transmission quality problems;

o  Changes in U.S. or foreign regulations; or

o  Unexpected  cost  increases as a result of expenses  related to  installing a
   network or otherwise.

Failure  To  Integrate  Our ESS  Acquisition  Successfully  May  Prevent Us From
--------------------------------------------------------------------------------
Realizing   Planned   Operating  Gains  And   Efficiencies  And  Otherwise  From
--------------------------------------------------------------------------------
Implementing Our Business Strategy
----------------------------------

Our  ability to operate  successfully  is  dependent  in part on our  ability to
integrate the  operations  of ESS and manage the growth  expected to result from
the combination of those businesses.  Our success will depend on our ability to,
among other things:

-  retain  and  assimilate  qualified  managerial,  professional  and  technical
   personnel from the acquired business,

-  centralize  general  and  administrative  support  services  and  information
   technology platforms, and coordinate and integrate operational, financial and
   management  processes,  systems and controls,  including the  development  of
   effective  systems  relating  to  ordering,   provisioning  and  billing  for
   telecommunication services,

-  successfully  market all of our service and product offerings under a unified
   ESS brand name, while raising brand awareness among our customers,

-  adopt and maintain uniform standards, control procedures and policies,


                                       17
<PAGE>


-  manage growth in our service and product offerings, while avoiding disruption
   of our existing business, and

-  preserve good relationships with ESS's suppliers, employees and customers.

The expansion of our operations  also will depend on our ability to, among other
things,  assess  markets,  forecast  regulatory  trends,  identify,  finance and
complete suitable  acquisitions and continue to expand,  all in a timely manner,
at  reasonable  cost  and on  satisfactory  terms  and  conditions.  Failure  to
successfully  integrate  our recent ESS  acquisition  or any  businesses  we may
acquire  in  the  future  could  adversely  impact  our  business  strategy  and
materially adversely effect our results of operations.

General Economic Conditions
---------------------------

          The  operations  of  the  Company  are  subject  to  general  economic
conditions,  particularly  relating to  government  agency  spending and payment
practices.  The risks would include  governmental  appropriations and budgeting,
any  potential  restrictions  imposed by  governmental  authorities,  changes in
federal,  state,  or local tax laws  applicable to the Company,  availability of
skilled labor,  availability of capital for future needs,  purchasing habits and
trends, etc. The Company may not have sufficient  capitalization to survive lack
of market acceptance and economic exigencies in general.

Control By Single Majority Shareholder
--------------------------------------

          VNA,  has  been  the  controlling  shareholder  of the  Company  since
inception and currently  owns  approximately  72% of the  outstanding  shares of
Common Stock of the Company.  As a result,  VNA is able to determine the outcome
of all actions that require shareholder  approval,  including without limitation
electing all of the directors of the company,  controlling changes in management
and controlling mergers or other business combinations.

Potential Issuance Of Additional Shares
---------------------------------------

          The  Company  is  currently  authorized  to  issue  up to a  total  of
50,000,000  shares of Common Stock and 1,000,000  shares of preferred  stock. At
December 31, 2000, there were 9,903,022 shares of Common Stock outstanding.  The
Company's  Board of Directors is authorized to issue  preferred  stock in one or
more series and to fix the voting powers and the  designations,  preferences and
relative,  participating,  optional or other  rights and  restrictions  thereof.
Accordingly,  the Company may further  issue a series of preferred  stock in the
future  that will have  preference  over the Common  Stock  with  respect to the
payment of dividends and proceeds from the Company's liquidation, dissolution or
winding up or having voting or conversion  rights which could  adversely  affect
the voting power and  percentage  ownership of the holders of the Common  Stock.
Also,  rights  granted to future  holders of  preferred  stock  could be used to
restrict  the  Company's  ability to merge with,  or sell its assets to, a third
party,  and the ability of the Board of Directors to issue preferred stock could
discourage,  delay or  prevent a takeover  of the  Company,  thereby  preserving
control of the  Company by the  current  shareholders.  In  connection  with the
acquisition of ESS, the Company has agreed to issue  2,000,000  shares of Common
Stock and 1,000,000 shares of Senior Preferred Stock. The Senior Preferred Stock
has a  designated  liquidation  value of $7.20 per  share,  ranks  senior to the
Common Stock,  and has voting rights which allow the holders  thereof to vote on
the basis of 10 votes per share. The Senior Preferred Stock shall  automatically
and mandatory converted into 10,000,000 shares of Common Stock upon the approval
of such conversion privilege by the shareholders.

Shares Eligible For Future Sale
-------------------------------


                                       18
<PAGE>


          There are  approximately  7,098,722 shares of Common Stock outstanding
that are held by affiliates  and are  "restricted  securities,"  as that term is
defined under Rule 144 promulgated  under the Securities Act of 1933, as amended
(the  "Securities  Act").  All of such shares are eligible for resale under Rule
144. In general,  under Rule 144,  subject to the  satisfaction of certain other
conditions,  a person (or persons whose shares are aggregated under the terms of
Rule 144),  including  an affiliate  of the  Company,  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 the
greater of 1% of the total number of  outstanding  shares of the same class,  or
the average  weekly  trading volume of the Common Stock during the four calendar
weeks  preceding the sale, as reported by all national  securities  exchanges on
which the Common  Stock is traded  and/or the  automated  quotation  system of a
registered  securities  association,  or an  approved  consolidated  transaction
reporting  system.  A person who has not been an affiliate of the Company 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 the volume limitations  described above.
No  prediction  can be made as to the  effect,  if any,  that sales of shares of
Common  Stock or the  availability  of shares  for sale will have on the  market
prices prevailing from time to time. The possibility that substantial amounts of
Common Stock may be sold in the public market in the future may cause the market
prices for the Common Stock to decline and could impair the Company's ability to
raise capital through the sale of its equity securities.

Anti-Takeover Provisions
------------------------

          Certain  provisions of Delaware law, the Certificate of  Incorporation
and the Company's By-laws, as amended (the "By-laws"),  could have the effect of
making it more  difficult  for a third party to acquire,  or of  discouraging  a
third party from attempting to acquire, control of the Company. These provisions
and the prohibition against certain business  combinations could have the effect
of  delaying,  deferring  or  preventing  a change in control or the  removal of
existing management of the Company.

Service Of Process In Foreign Countries
---------------------------------------

          Certain of the Company's  officers and all of the Company's  directors
are residents of countries other than the United States,  and VNA , the majority
shareholder of the Company and the transferor of the Technology, is incorporated
and  has  its  principal   place  of  business  under  the  laws  of  Australia.
Consequently,  it might be  difficult  for  investors  or the  Company to effect
service of process  within the United  States upon such  persons,  or to enforce
against them  judgments  obtained in United  States courts  predicated  upon the
civil  liability  provisions  of the  Securities  Act,  or  any  other  U.S.  or
individual  state's  laws or  regulations.  There  is also  substantially  doubt
whether  an action  could be  brought  in such  foreign  countries  in the first
instance on the basis of liability predicated upon such law.

The Price Of Our Common Stock May Be Subject To Wide Fluctuations
-----------------------------------------------------------------

Fluctuations  in the price of our common  stock may result from  factors such as
the following, some of which are beyond our control:

-  quarterly variations in our operating results,

-  operating results that vary from the expectations of securities  analysts and
   investors,

-  changes in expectations  as to our future  financial  performance,  including
   financial estimates by securities analysts and investors,


                                       19
<PAGE>



-  announcements   by  us  or  our   competitors   of   significant   contracts,
   acquisitions, strategic partnerships, joint ventures or capital commitments,

-  changes  in the status of our  intellectual  property  and other  proprietary
   rights,

-  announcements by third parties of significant  claims or proceedings  against
   us,

-  changes in law and regulation,

-  future sales of common stock and

-  stock market price and volume fluctuations.

In addition,  the stock market in recent years , particularly  since March 2000,
has  experienced  extreme  price and  volume  fluctuations  that often have been
unrelated or  disproportionate  to the operating  performance  of companies.  In
particular,  software  companies in the voice  recognition  area,  including the
Company,  have seen a significant decline in the market  capitalization value of
their  publicly  traded common  stock.  As a result of these  fluctuations,  our
common stock may continue to experience volatility in price.

Absence Of Dividends
--------------------

          The Company has never  declared or paid cash  dividends  on its Common
Stock and does not anticipate  paying cash dividends in the foreseeable  future.
The Company  currently  intends to retain future  earnings,  if any, to fund the
development and growth of its business.

ITEM 7.  FINANCIAL STATEMENTS

    The Company's  financial  statements for the fiscal years ended December 31,
2000, and 1999 are included herein and consist of:

    Index to Financial Statements                             F-1
    Independent Auditors' Report                              F-2
    Balance Sheet                                             F-3
    Statements of Operations and Deficit                      F-4
    Consolidated Statement of Stockholders' Equity            F-5-6
    Statements of Cash Flows                                  F-7
    Notes to Financial Statements                             F-8-17

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

    There were no reported  disagreements  with the accountants on any matter of
accounting principles, practices or financial statement disclosure.


                                    PART III


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


                                       20
<PAGE>


The information  required herein regarding  directors is incorporated  herein by
reference  from the  definitive  Proxy  Statement  for  Voicenet's  2001  Annual
Meeting,  which is  scheduled  to be filed on or before May 1,  2001,  under the
caption  "Election of Directors".  The  information  required  herein  regarding
executive  officers  required  is set forth in Part I hereof  under the  heading
"Executive Officers of the Registrant", which information is incorporated herein
by reference.  The information  required by this item regarding  compliance with
Section 16(a) of the Securities and Exchange Act of 1934 by Voicenet's directors
and  executive  officers,  and holders of ten percent of a  registered  class of
Voicenet's  equity  securities  is  incorporated  herein by  reference  from the
definitive Proxy Statement for Voicenet's 2001 Annual Meeting which is scheduled
to  be  filed  on  or   before   May  1,   2001,   under  the   caption   "Other
Information-Section 16(a) Beneficial Ownership Reporting Compliance".

ITEM 10.   EXECUTIVE COMPENSATION

The  information  required  by this item  regarding  compensation  of  executive
officers and directors is  incorporated  herein by reference from the definitive
Proxy  Statement for Voicenet's  2001 Annual  Meeting,  which is scheduled to be
filed on or before May 1, 2001, under the captions  "Director  Compensation" and
"Executive Compensation".

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information  required by this item is incorporated  herein by reference from
the definitive  Proxy  Statement for Voicenet's  2001 Annual  Meeting,  which is
scheduled  to be filed on or before May 1,  2001,  under the  caption  "Voicenet
Common Stock Ownership".

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  required by this item is incorporated  herein by reference from
the definitive  Proxy  Statement for Voicenet's  2001 Annual  Meeting,  which is
scheduled  to be filed on or before May 1, 2001,  under the  caption  "Executive
Compensation - Certain Relationships and Related Transactions."


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

The exhibits listed below are filed with this Annual Report on Form 10-KSB.

1.1       Placement Agreement (1)

1.2       Form of International Advisory Agreement (2)

1.3       Form of Selected Dealer Agreement (2)

3.1       Certificate  of  Incorporation  of the Voicenet,  Inc.  dated April 2,
          1996.

3.2       Certificate of Amendment to Certificate of  Incorporation of Voicenet,
          Inc. dated September 16, 1996.

3.3       Bylaws of the Company(1)

3.4       Certificate of Amendment to Certificate of  Incorporation of Voicenet,
          Inc. dated March 2, 2000.

3.5       Certificate  of Correction to  Certificate of Amendment to Certificate
          of Incorporation of Voicenet, Inc dated April 13, 2001.

4.1       Form of Common Stock Certificate (1)

4.2       Form of Representatives' Warrant Agreement(1)

4.3       Form of Representatives' Warrant (included in Exhibit 4.2)

4.5       Form of Subscription Agreement (2).

5.1       Opinion of Epstein, Becker & Green, P.C.(2)

5.2       Technology Evaluation of Gorey & Sinclair (2)

10.1      Form of Escrow Agreement for proceeds from sale of Shares.(1)

10.2      Form of Technology Transfer Agreement (1)

10.3      Form of Note and Security Agreement (1)

10.4      Amendment to Technology Transfer Agreement and Security Agreement.(2)

10.5      Employment Agreement between the Company and Frank Carr.(2)

10.6      Management Agreement between the Company and James Sim.(2)

10.7      Advisory   Agreement   between  the  Company   and   Ridgewood   Group
          International.(2)

10.8      Second  Amendment  to  Technology   Transfer  Agreement  and  Security
          Agreement.(2)

10.9      Series A Preferred Stock Purchase  Agreement dated as of March 7, 2001
          between Unveil Technologies, Inc. and Voicenet, Inc. (3)

10.10     Agreement  and Plan of Merger  dated as of April 12, 2001 by and among
          Voicenet,  Inc.,  ESS  Holdings,  Inc.,  ESS.Com,  LLC,  Finger  Lakes
          Technologies,  Inc., 5CD+1, Inc.,  Telecom Holdings of Andover,  Inc.,
          Saka  International,  Inc., Douglas Brough,  Shae Spencer  Management,
          LLC,  Peter  Capriotti,  Steven  Muoio and Mark  Kiley (to be filed by
          amemdment to this Form 10-KSB).

23.1      Consent of Tanton & Company (1)

23.2      Consent of Epstein Becker & Green, P.C. (2)

24        Power of Attorney (Included at page II-7)(1)


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

(1)  Incorporated  by reference to the  Registrant's  Registration  Statement on
     Form SB-1 filed September 27, 1996 (File No. 333-12979)

(2)  Incorporated  by  reference  to  the   Registrant's   Amendment  No.  1  to
     Registration  Statement  on Form  SB-1  filed  March  12,  1997  (File  No.
     333-12979)

(3)  Filed Herewith.


(b)   Reports on Form 8-K


                                       21
<PAGE>



         The Company  filed one report on Form 8-K for the last  quarter of year
ending  December  31,  2000  announcing  the  resignation  of Mr.  Frank Carr as
Chairman and Chief  Executive  Officer and the appointment of Mr. Alan Dawson to
the position of Chairman and Chief Executive Officer.


                                       22
<PAGE>


                                 VOICENET, INC.
                          (a development stage company)


                          INDEX TO FINANCIAL STATEMENTS



                                                                          Page
                                                                        --------

 ndependent Auditors' Report                                                 F-2

Balance sheets as of December 31, 2000 and 1999                              F-3

Statements of operations for the years ended December 31,
   2000 and 1999                                                             F-4

Statements of stockholders' equity for the years ended
   December 31, 2000 and 1999                                          F-5 - F-6

Statements of cash flows for the years ended December 31,
   2000 and 1999                                                             F-7

Notes to financial statements                                         F-8 - F-17




                                       23
<PAGE>




                          INDEPENDENT AUDITORS' REPORT




To the Board of Directors
Voicenet, Inc.
Waltham, Massachusetts


We have audited the accompanying balance sheet of Voicenet,  Inc. (a development
stage  company)  as  of  December  31,  2000,  and  the  related  statements  of
operations,  stockholders'  equity and cash flows for the year then 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  audit.  The  financial  statements  of  Voicenet,  Inc.  for the year ended
December 31, 1998 and the period April 2, 1996 (inception)  through December 31,
1998, were audited by other auditors whose report dated April 7, 1999, expressed
an unqualified opinion on those statements and included an explanatory paragraph
regarding a going concern uncertainty.

We conducted our audit 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 audit provides 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 Voicenet,  Inc. at December 31,
2000,  and the  results of its  operations  and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.



                                                       HORTON & COMPANY, L.LC.




Wayne, New Jersey
March 16, 2001, except for Note 11
   as to which the date is April 16, 2001




                                       F-2
<PAGE>


<TABLE>
                                 VOICENET, INC.
                          (a development stage company)

                                 BALANCE SHEETS

                                     ASSETS

<CAPTION>
                                                                                  December 31,
                                                                         ------------------------------
                                                                              2000             1999
                                                                         ------------      ------------
<S>                                                                      <C>               <C>
Current assets:
   Cash and equivalents ............................................     $  2,294,215      $  2,916,531
   Licensing fees receivable .......................................           43,169              --
   Note receivable .................................................          149,355              --
   Prepaid expense .................................................           27,450              --
                                                                         ------------      ------------

               Total current assets ................................        2,514,189         2,916,531
                                                                         ------------      ------------

Other assets:
   Technology rights, net ..........................................        3,210,800         3,905,000
   Convertible note receivable .....................................        1,612,000              --
   Security deposits and other .....................................             --              12,891
                                                                         ------------      ------------

               Total other assets ..................................        4,822,800         3,917,891
                                                                         ------------      ------------

               Total assets ........................................     $  7,336,989      $  6,834,422
                                                                         ============      ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable ................................................     $     79,413      $    186,753
   Accrued expenses ................................................          221,940              --
                                                                         ------------      ------------

               Total current liabilities ...........................          301,353           186,753
                                                                         ------------      ------------

Long-term debt .....................................................        2,104,675              --
                                                                         ------------      ------------

Stockholders' equity:
   Common stock, $.01 par value
      50,000,000 shares authorized
      10,343,022 shares issued, 9,903,022 shares outstanding in 2000
      9,831,022 shares issued, 9,391,022 shares outstanding in 1999           103,430            98,310
   Additional paid-in capital ......................................       10,664,096        10,338,716
   Accumulated deficit .............................................       (5,821,865)       (3,787,157)
   Treasury stock, 440,000 shares, at cost .........................           (2,200)           (2,200)
   Subscription receivable .........................................          (12,500)             --
                                                                         ------------      ------------

               Total stockholders' equity ..........................        4,930,961         6,647,669
                                                                         ------------      ------------

               Total liabilities and stockholders' equity ..........     $  7,336,989      $  6,834,422
                                                                         ============      ============
</TABLE>

                        See notes to financial statements


                                       F-3

<PAGE>


<TABLE>
                                 VOICENET, INC.
                          (a development stage company)

                            STATEMENTS OF OPERATIONS




<CAPTION>
                                                                         April 2, 1996
                                                                          (inception)
                                                                            through
                                           Year ended December 31,        December 31,
                                            2000             1999            2000
                                        -----------      -----------      -----------

<S>                                     <C>              <C>              <C>
Revenue ...........................     $    43,169      $     3,400      $    92,069
                                        -----------      -----------      -----------

Costs and expenses:
   Cost of sales ..................            --               --             25,958
   Selling and administrative .....         822,759          328,106        2,368,891
   Stock-based compensation .......            --            266,450        1,756,500
   Amortization ...................         694,200          505,900        1,291,200
   Severance expense ..............         652,000             --            652,000
                                        -----------      -----------      -----------

                                          2,168,959        1,100,456        6,094,549
                                        -----------      -----------      -----------

Operating loss ....................      (2,125,790)      (1,097,056)      (6,002,480)
                                        -----------      -----------      -----------

Other income:
   Interest .......................         132,742           40,682          219,137
   Gain on sale of securities .....            --              3,138            3,138
   Interest expense ...............         (41,660)            --            (41,660)
                                        -----------      -----------      -----------

                                             91,082           43,820          180,615
                                        -----------      -----------      -----------

Net loss ..........................     $(2,034,708)     $(1,053,236)     $(5,821,865)
                                        ===========      ===========      ===========


Loss per share ....................     $     (0.21)     $     (0.14)
                                        ===========      ===========

Weighted average shares outstanding       9,789,085        7,290,575
                                        ===========      ===========
</TABLE>


                        See notes to financial statements

                                       F-4


<PAGE>


<TABLE>
                                 VOICENET, INC.
                          (a development stage company)

                       STATEMENTS OF STOCKHOLDERS' EQUITY

                   Years ended December 31, 2000 and 1999 and
       for the period April 2, 1996 (inception) through December 31, 2000

<CAPTION>
                                                                                                           Accumulated
                                                                                                              other
                                    Common Stock        Additional                   Treasury                 compre-
                                  -----------------       paid-in    Accumulated   ------------- Subscription hensive  Comprehensive
                                    Shares    Amount      capital      deficit     Shares Amount  receivable  loss         loss
                                  ----------  ------    ----------   -----------   ------ ------  ----------  ----     ------------

<S>                               <C>         <C>       <C>          <C>           <C>     <C>      <C>     <C>         <C>
Initial issuance of shares,
   as retroactively restated
   for subsequent stock splits .  5,000,000   $50,000   $  (24,980)  $      --       --    $ --     $ --    $   --      $      --

Net loss for the period April
   2, 1996 (inception)
   through December 31, 1996 ...       --        --           --            (725)    --      --       --        --             (725)
                                  ---------   -------   ----------   -----------   ------  ------   ------  --------    -----------

Balance, December 31, 1996 .....  5,000,000    50,000      (24,980)         (725)    --      --       --        --      $      (725)
                                                                                                                        ===========

Issuance of shares in
   connection with the
   initial public offering,
   net of offering costs .......    376,500     3,765      970,102          --       --      --       --        --      $      --

Issuance of shares on
   December 30, 1997 ...........     21,600       216       86,184          --       --      --       --        --             --

Conversion of debt to
   common shares ...............  1,125,000    11,250    4,488,750          --       --      --       --        --             --

Net loss for the year ended
   December 31, 1997 ...........       --        --           --        (615,330)    --      --       --        --         (615,330)
                                  ---------   -------   ----------   -----------   ------  ------   ------  --------    -----------

Balance, December 31, 1997 .....  6,523,100    65,231    5,520,056      (616,055)    --      --       --        --      $  (615,330)
                                                                                                                        ===========

Shares issued during 1998 ......      4,200        42       16,758          --       --      --       --        --      $      --

Issuance of shares for
  consulting services ..........    150,000     1,500      598,500          --       --      --       --        --             --

Stock options issued ...........       --        --        916,500          --       --      --       --        --             --

Unrealized loss on securities ..       --        --           --            --       --      --       --     (15,719)       (15,719)

Net loss for the year ended
December 31, 1998 ..............       --        --           --      (2,117,866)    --      --       --        --       (2,117,866)
                                  ---------   -------   ----------   -----------   ------  ------   ------  --------    -----------

Balance, December 31, 1998
(forward)                         6,677,300   $66,773   $7,051,814   $(2,733,921)    --    $ --     $ --    $(15,719)   $(2,133,585)
                                  ---------   -------   ----------   -----------   ------  ------   ------  --------    ===========
</TABLE>

                        See notes to financial statements


                                       F-5
<PAGE>



<TABLE>
                                 VOICENET, INC.
                          (a development stage company)

                       STATEMENTS OF STOCKHOLDERS' EQUITY

                   Years ended December 31, 2000 and 1999 and
       for the period April 2, 1996 (inception) through December 31, 2000

<CAPTION>
                                                                                                           Accumulated
                                                                                                              other
                             Common stock        Additional                   Treasury                       compre-
                         --------------------     paid-in   Accumulated  -------------------   Subscription  hensive   Comprehensive
                          Shares     Amount       capital     deficit     Shares     Amount     receivable     loss        loss
                         ---------  ---------   ----------  -----------  ---------  --------   ------------  --------  -------------

<S>                      <C>        <C>       <C>          <C>             <C>       <C>        <C>         <C>         <C>
Balance,
  December 31,
  1998 (forward) .....   6,677,300  $ 66,773  $ 7,051,814  $(2,733,921)      --      $  --      $   --      $(15,719)   $      --

Shares issued
  during 1999 ........   3,153,722    31,537    2,968,463         --         --         --          --          --             --

Capital
  contribution .......        --        --         78,439         --         --         --          --          --             --

Stock options
  issued .............        --        --        240,000         --         --         --          --          --             --

Treasury stock
  purchased ..........        --        --           --           --      440,000     (2,200)       --          --             --

Reclassification
  adjustment for
  gains included in
  net loss ...........        --        --           --           --         --         --          --        15,719           --

Net loss for the
   year ended December
   31, 1999 ..........        --        --           --     (1,053,236)      --         --          --          --       (1,053,236)
                        ----------  --------  -----------  -----------   --------    -------    --------    --------    -----------

Balance, December
  31, 1999 ...........   9,831,022    98,310   10,338,716   (3,787,157)   440,000     (2,200)       --          --      $(1,053,236)
                                                                                                                        ===========

Shares issued
  during 2000 ........     512,000     5,120      325,380         --         --         --       (12,500)       --      $      --

Net loss .............        --        --           --     (2,034,708)      --         --          --          --        2,034,708
                        ----------  --------  -----------  -----------   --------    -------    --------    --------    -----------

Balance at
  December 31,
  2000                  10,343,022  $103,430  $10,664,096  $(5,821,865)  (440,000)   $(2,200)   $(12,500)   $   --      $ 2,034,708
                        ==========  ========  ===========  ===========   ========    =======    ========    ========    ===========
</TABLE>

                        See notes to financial statements

                                       F-6
<PAGE>


<TABLE>
                                 VOICENET, INC.
                          (a development stage company)

                            STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                                     April 2,1996
                                                                                                     (inception)
                                                                                                       through
                                                                     Years ended December 31,        December 31,
                                                                      2000              1999             2000
                                                                   -----------      -----------      -----------

<S>                                                                <C>              <C>              <C>
Net loss .....................................................     $(2,034,708)     $(1,053,236)     $(5,821,865)
                                                                   -----------      -----------      -----------

Adjustments to reconcile net loss to net cash
  used in operating activities:
      Amortization ...........................................         694,200          505,900        1,291,200
      Stock issued for consulting services ...................            --               --            600,000
      Stock-based compensation costs .........................            --            240,000        1,156,500
      Gain on sale of marketable securities ..................            --             (3,138)          (3,138)
      Changes in assets and liabilities:
         (Increase) decrease in licensing fee receivable .....         (43,169)            --            (43,169)
         (Increase) decrease in accounts receivable ..........            --             39,700           (2,200)
         (Increase) decrease in other receivables ............            --              2,600             --
         (Increase) decrease in prepaid expenses .............         (27,450)            --            (27,450)
         (Increase) decrease in security deposits ............          12,891             (416)            --
         (Increase) decrease in deferred compensation expense             --             26,450             --
         Increase (decrease) in accounts payable .............        (107,340)         (30,497)          79,413
         Increase (decrease) in accrued expenses .............         221,940             --            221,940
                                                                   -----------      -----------      -----------

               Total adjustments .............................         751,072          780,599        3,273,096
                                                                   -----------      -----------      -----------

               Net cash used in operating activities .........      (1,283,636)        (272,637)      (2,548,769)
                                                                   -----------      -----------      -----------

Cash flows from investing activities:
   Payments for organization costs ...........................            --               --             (2,000)
   Purchases of investment ...................................            --               --            (27,965)
   Proceeds from sale of investment ..........................            --             31,103           31,103
   Loans advanced ............................................      (1,761,355)            --         (1,761,355)
                                                                   -----------      -----------      -----------

               Net cash provided by (used in) investing ......      (1,761,355)          31,103       (1,760,217)
                                                                   -----------      -----------      -----------
activities

Cash flows from financing activities:
   Proceeds from issuance of stock ...........................         318,000        3,078,440        4,611,181
   Advances from Voicenet (Aust) Ltd. ........................       2,104,675           45,015        2,104,674
   Payments of offering costs ................................            --               --           (112,654)
                                                                                    -----------      -----------

               Net cash provided by financing activities .....       2,422,675        3,123,455        6,603,201
                                                                   -----------      -----------      -----------

               Net increase (decrease) in cash and equivalents        (622,316)       2,881,921        2,294,215

               Cash and equivalents at beginning of period ...       2,916,531           34,610             --
                                                                   -----------      -----------      -----------

               Cash and equivalents at end of period .........     $ 2,294,215      $ 2,916,531      $ 2,294,215
                                                                   ===========      ===========      ===========
</TABLE>

                        See notes to financial statements


                                       F-7
<PAGE>


                                 VOICENET, INC.
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 2000 and 1999


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     This summary of  significant  accounting  policies of Voicenet,  Inc.  (the
     "Company")   is  presented  to  assist  in   understanding   the  financial
     statements.  The financial  statements and notes are representations of the
     management of Voicenet,  Inc. which is responsible  for their integrity and
     objectivity.  These  accounting  policies  conform  to  generally  accepted
     accounting principles and have been consistently applied in the preparation
     of the financial statements.

          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 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.

          History and business activity
          -----------------------------

     Voicenet,  Inc. (the Company), a Delaware corporation,  was incorporated on
     April  2,  1996.  The  Company  was   established  for  the  marketing  and
     distribution  of  continuous  speech and voice  recognition  systems and of
     digital audio reporting, transcription,  archiving and retrieval systems in
     North America,  Central America and South America. As of December 31, 2000,
     the Company  had  commenced  operations  but has not  realized  significant
     revenue  from such  operations.  Therefore,  the  Company is  considered  a
     development  stage  company  in  accordance  with  Statement  of  Financial
     Accounting  Standard No. 7. The Company is majority-owned,  (72%) and (80%)
     as of December 31, 2000 and 1999,  respectively,  by Voicenet  (Aust) Ltd.,
     ("VNA") an Australian company.

     Successful  operations  are  subject  to  certain  risks and  uncertainties
     including,  amount  others,  the Company's  proposed  operations  which are
     subject to all the problems,  expenses,  delays and other risks inherent in
     developing  and  marketing  a new  product/service,  actual  and  potential
     competition by entities with greater  financial  resources,  experience and
     market presence than the Company. Further risks and uncertainties relate to
     technological  advancements,  the regulatory environment and the ability of
     the  Company  to  generate  sufficient  revenue  and obtain  financing  and
     additional equity.


                                       F-8
<PAGE>


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          Net loss per share
          ------------------

     Net loss per share is  computed  based on the  weighted  average  number of
     shares of common stock  outstanding  for the years ended  December 31, 2000
     and 1999.  Pursuant  to the  Securities  and  Exchange  Commission's  Staff
     Accounting  Bulletins,  common stock issued at prices below the anticipated
     public offering price during the twelve-month  period prior to the Offering
     have been included in the  calculation as if they were  outstanding for the
     entire period presented.

     In February 1997, the Financial  Accounting Standards Board ("FASB") issued
     Statement of Financial  Accounting  Standards No. 128, "Earnings Per Share"
     ("SFAS  128"),  which  eliminates  the  presentation  of primary  and fully
     diluted  earnings per share ("EPS") and requires the  presentation of basic
     and diluted EPS. The Company  adopted SFAS 128 for the year ended  December
     31, 1998. Diluted loss per share amounts are not presented because they are
     anti-dilutive.

          Cash equivalents
          ----------------

     For purposes of the  statement  of cash flows,  the Company  considers  all
     highly liquid investments purchased with a maturity of three months or less
     to be cash equivalents.

          Stock options
          -------------

     In October 1995, the Financial  Accounting Standards Board issued Statement
     of Financial  Accounting  Standards No. 123,  "Accounting  for  Stock-Based
     Compensation"  ("SFAS  123").  SFAS  requires  compensation  expense  to be
     recorded (i) using the fair value method or (ii) using existing  accounting
     rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting
     or Stock Issued to Employees" ("APB 25") and related  interpretations  with
     pro forma  disclosure  of what net income and earnings per share would have
     been had the Company adopted the fair value method. The Company selected to
     continually use APB 25 and adopted the  disclosure-only  provisions of SFAS
     123 for employee options and adopted SFAS 123 for non-employee options.

          Comprehensive income
          --------------------

     During the year ended December 31, 1998, the Company adopted FASB Statement
     No. 130, "Reporting  Comprehensive  Income" ("SFAS 130"). SFAS 130 requires
     the  reporting  of other  non-owner  changes in equity in  addition  to net
     income from operations.  Comprehensive income is a more inclusive financial
     reporting   methodology  that  includes  disclosure  of  certain  financial
     information that historically has not been recognized in the calculation of
     net income.


                                       F-9
<PAGE>


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          Concentration of credit risk
          ----------------------------

     Financial   instruments,   which   potentially   subject   the  Company  to
     concentration of credit risk, consist  principally of cash and equivalents,
     licensing fees receivable, note receivable and investment.  During 2000 and
     1999, the Company routinely maintained cash balances with one New York bank
     in excess  of  $100,000  limit  which is  insured  by the  Federal  Deposit
     Insurance  Corporation (FDIC). At December 31, 2000 and 1999, the Company's
     balance was  approximately  $2,000,000  and  $2,800,000,  respectively,  in
     excess of the FDIC  insured  limit.  The  Company has not  experienced  any
     losses in such  accounts and believes it is not exposed to any  significant
     credit risk.

     Licensing fees receivable  represent an unsecured  obligation from a single
     customer  located  in Chile  (Note 10).  Note  receivable  is an  unsecured
     advance  receivable  from a company  in England  (Note 3).  The  investment
     consists  of a 25%  ownership  interest  in the common  stock of a software
     company in Massachusetts (Note 4).

          Fair value of financial instruments
          -----------------------------------

     The  Company's   financial   instruments   include  cash,   licensing  fees
     receivable,  note  receivable and accounts  payable.  Due to the short-term
     nature  of  these   instruments,   the  fair  value  of  these  instruments
     approximate  their recorded value.  The Company has long-term debt which it
     believes is stated at estimated fair market value.

2.   TECHNOLOGY RIGHTS

     On August 1, 1996 the Company entered into a Technology  Sales and Purchase
     Agreement (the "Technology Agreement") with Voicenet (Aust) Ltd. to acquire
     certain  exclusive  rights and ownership  with respect to the  development,
     use,  marketing,  sales and  distribution  of a continuous  computer  based
     digital voice compression,  recognition and recording technology.  The term
     of the agreement is for the longer of twenty-five  years or the life of any
     patents and extensions  granted under the patent  applications.  The rights
     acquired are for territories  including North America,  Central America and
     South America. These rights were originally purchased for $4,500,000 in the
     form of a non-interest bearing promissory note. The note was converted into
     562,500  shares of the  Company's  common stock with a conversion  price of
     $8.00 per share in conjunction with the IPO (see Note 6).

     The  technology was deemed to be placed in service in July of 1998, and the
     Company  commenced  amortization  using  the  straight-line  method  over a
     25-year  period.  Effective  July 1999,  the Company  changed the estimated
     useful life of the technology to 7 years.

     Technology  rights are net of  accumulated  amortization  of $1,289,200 and
     $595,000 at December 31, 2000 and 1999, respectively.  Amortization expense
     for the years ended  December 31, 2000 and 1999 was $694,200 and  $505,000,
     respectively.


                                      F-10
<PAGE>


3.   NOTE RECEIVABLE

     Note receivable represents an unsecured loan to Eastland Medical Systems UK
     Limited  ("Eastland"),  a company  in the  United  Kingdom.  The loan bears
     interest at 10% and matures in August 2001. The loan is convertible, at the
     option of Eastland, into 200,000 shares of Eastland's common stock.

4.   CONVERTIBLE NOTE RECEIVABLE

     Effective   December  31,  2000,   the  Company   acquired  an   unsecured,
     non-interest  bearing convertible note receivable from Unveil Technologies,
     Inc.  ("Unveil") in the amount of $1,612,000.  Unveil is a software company
     located in Waltham, Massachusetts.  The note, which was previously owned by
     VNA was purchased at VNA's cost of $1,612,000.

     Effective  March 7, 2001,  $1,562,500  of the  balance was  converted  into
     2,500,000  shares of Unveil's Series A Convertible  Preferred  Stock.  Each
     share of preferred  stock is convertible  into one share of Unveil's common
     stock at the option of the  holder.  If  converted,  the  investment  would
     represent  25% of the  outstanding  common  stock of Unveil.  In  addition,
     Voicenet was granted options to purchase  246,250 shares of Unveil's common
     stock.

     The  $49,500  balance  of the  note,  which  was not  converted  to  stock,
     constitutes a prepayment of rent to sublease office space from Unveil.

5.   LONG-TERM DEBT

     Long-term debt consists of a note payable to VNA, bearing interest at 9.8%.
     All principal and interest is payable upon maturity on March 31, 2004.  The
     note is secured by the Company's  convertible  note  receivable from Unveil
     (Note 4).

6.   STOCKHOLDERS' EQUITY

          Common stock
          ------------

     At inception, the Company authorized 3,000 shares of $.001 par value common
     stock and issued 1,000 of these shares for $25,000.  On September 15, 1996,
     the Company  increased its number of authorized common shares to 10,000,000
     and changed the par value of these shares to $.01 per share (see Note 11).

     On  September  15, 1996,  the board of directors of the Company  declared a
     2,500-for-1  stock split on its common stock.  During March 2000, the Board
     of Directors  authorized a two-for-one  split of the Company's common stock
     effective March 17, 2000. The Company's  capital  structure,  including all
     references  to common  stock,  additional  paid-in  capital,  common shares
     outstanding,  average  number of common  stock  shares  outstanding,  stock
     options and per share amounts, have been restated for all periods presented
     to reflect the effect of the stock splits on a retroactive basis.

     Concurrent  with the March 2000 stock split described  above,  the Board of
     Directors  also  approved an increase in the number of shares of authorized
     common stock from 10,000,000 shares to 50,000,000  shares. The par value of
     the common stock remained unchanged at $.01.


                                      F-11
<PAGE>


6.   STOCKHOLDERS' EQUITY (CONTINUED)

          Preferred stock
          ---------------

     The Company authorized 1,000,000 shares of blank check preferred stock, par
     value $.01 per share with such designations,  powers, preferences,  rights,
     qualifications,  limitations  and  restrictions  and in such  series as the
     Board of Directors,  subject to the State of Delaware,  may determine  from
     time to time (see Note 11).

          Initial public offering
          -----------------------

     During  1997,  the Company  offered to sell as part of the  initial  public
     offering  ("IPO") a minimum  of 375,000  shares and a maximum of  3,750,000
     shares at a public offering price of $4.00 per share. The IPO was completed
     on  November  5, 1997,  whereby  1,125,000  shares  were issued to Voicenet
     (Aust) Ltd. at a price of $4.00 per share in full  satisfaction of the $4.5
     million  obligation  of the  Company.  A total of 376,500  shares of common
     stock were sold to the public at $4.00 per share. The net proceeds from the
     sale of the common stock to the public amounted to $973,867,  net of direct
     related  costs of  $532,133.  On December  30,  1997,  the Company  sold an
     additional 21,600 shares of its common stock for $86,400,  and during March
     of 1999,  the Company sold an  additional  4,200 shares of its common stock
     for $16,800.

          Stock issuance
          --------------

     During 1999,  Voicenet  (Aust) Ltd.  invested  $3,000,000 in the Company in
     return for 100,000 shares of  convertible  preferred  stock.  The preferred
     stock was  subsequently  converted into  3,153,722  shares of the Company's
     common stock.  Such conversion was effected at the weighted average closing
     price of the Company's  common stock during the 30-day period preceding the
     conversion.  During 1999,  Voicenet (Aust) Ltd. made an additional  capital
     contribution of $78,439.

7.   WARRANTS AND OPTIONS

          Stock option plan
          -----------------

     In 1996 the Company  adopted a  non-qualified  stock  option plan (the 1996
     Plan).  An aggregate of 1,000,000  shares of Common Stock were reserved for
     issuance  under the 1996 Plan.  The 1996 Plan  provides for the granting of
     either incentive stock options and non-qualified options to purchase shares
     of the  Company's  common  stock  and for other  stock-based  awards to key
     employees, officers and directors and to non-employee consultants.  Options
     granted under the Plan are exercisable for a period of up to ten years from
     the date of grant. In addition,  the Company will not grant a non-qualified
     option with an exercise price less than 85% of the fair market value of the
     underlying common stock on the date of the grant.

     In 1998, the Company  adopted a  non-qualified  stock option plan (the 1998
     Plan).  An aggregate of 1,200,000  shares of Common Stock were reserved for
     issuance  under the 1998 Plan.  The 1998 Plan  provides for the granting of
     either incentive stock options and non-qualified options to purchase shares
     of the  Company's  common  stock  and for other  stock-based  awards to key
     employees, officers and directors and to non-employee consultants.


                                      F-12

<PAGE>


7.   WARRANTS AND OPTIONS (CONTINUED)

          Stock option plan (continued)
          -----------------------------

     During 1999, the Company  granted  1,200,000  options from the 1998 Plan to
     five  individuals  who are members of the Company's board or consultants to
     the  Company,  to  purchase  shares  of the  Company's  common  stock at an
     exercise price of $0.50 per share.  200,000 of the options are  immediately
     exercisable on the date of the grant and 1,000,000 are options  exercisable
     on June 15, 2000. The Company recorded $240,000 in compensation  expense in
     1999 for these  options.  During 2000,  option  holders  exercised  200,000
     options.

     During 2000, the Company granted  1,035,000 options to seven individuals or
     companies  who are members of the  Company's  board or  consultants  to the
     Company,  to  purchase  shares of the  Company's  common  stock at exercise
     prices ranging from $4.00 to $14.20 per share. The options were exercisable
     on the date of the grant.  Because  the  exercise  price was equal to or in
     excess  of the  market  value  of the  Company's  stock  on the date of the
     grants,  the  Company did not record any  compensation  expense in 2000 for
     these options.

          Other options and warrants
          --------------------------

     In accordance with SFAS 123,  non-employee  stock options must be accounted
     for using the fair market  value  method.  The fair market  value for these
     options were  estimated at the date of grant using a  Black-Scholes  option
     pricing model with the following weighted-average assumptions:

                                               2000             1999
                                              ------           ------

              Risk-free rate                    6.0%             6.0%
              Volatility factor                 0.50             0.50
              Average life                    1 year           1 year

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
     estimating  the  fair  value  of  traded  options,  which  have no  vesting
     restrictions  and are fully  transferable.  In addition,  option  valuation
     models  require the input of highly  subjective  assumptions  including the
     expected stock price  volatility.  Because the Company's stock options have
     characteristics  significantly  different from those of traded options, and
     because changes in the subjective input  assumptions can materially  affect
     the fair value estimate,  in management's  opinion,  the existing models do
     not necessarily  provide a reliable single measure of the fair value of its
     stock options.  The weighted  average fair value of options  granted during
     the  years  ended   December  31,  2000  and  1999  was  $0.00  and  $0.20,
     respectively,   based  upon  the   calculation   using  the   Black-Scholes
     option-pricing model.

     Effective  December 27, 2000,  100,000 options issued to a consultant at an
     exercise  price of $4.00 per  share in 1998,  were  re-priced  to $0.50 per
     share.  Because the market value of the  Company's  stock was less than the
     revised  exercise  price  on the  date  of  the  re-pricing,  there  was no
     additional compensation cost recorded as a result of the re-pricing.


                                      F-13

<PAGE>


7.   WARRANTS AND OPTIONS (CONTINUED)

     On March 1, 2001, under the terms of an employment agreement, the Company's
     Chief Financial Officer and Secretary  received warrants to purchase 50,000
     shares of the Company's common stock. Such warrants were immediately vested
     and are exercisable  over a five-year period at $0.50 per share. The common
     stock issued upon the exercise of the warrants shall be registered with the
     Securities  and Exchange  Commission  on a Form S-8.  The warrants  contain
     anti-dilution  provisions  in the  event  that the  Company  consummates  a
     significant business combination.

     The following is a summary of stock option and warrant  transactions during
     the years ended December 31, 2000 and 1999:

                                                                     Weighted
                                                      Number of       average
                                                        Shares    exercise price
                                                      ---------   --------------

         Outstanding at January 1, 1999                 664,500       $ 0.69
         Granted - 1999                               1,200,000         0.50
                                                     ----------        -----

         Outstanding at December 31, 1999             1,864,500         0.57

         Granted - 2000                               1,035,000        13.81
         Exercised                                     (512,000)        0.62
                                                      ---------        -----

         Outstanding at December 31, 2000             2,387,500       $ 6.30
                                                     ==========       ======


8.   RELATED PARTY TRANSACTIONS

          Lease agreement
          ---------------

     Through  October  2000,  the  Company  rented  its  office  premises  on  a
     month-to-month  basis without a formal lease  agreement  from an officer of
     the Company.  The  arrangement was terminated  effective  October 31, 2000.
     Rent expense was $43,420 and $32,732 for the years ended  December 31, 2000
     and 1999, respectively.


9.   INCOME TAXES

     The Company has no taxable  income to date;  therefore,  no  provision  for
     income taxes has been made.  The minimum  state and local  franchise  taxes
     have been provided in the accompanying financial statements.



                                      F-14
<PAGE>


9.   INCOME TAXES (CONTINUED)

     Deferred  tax  assets  recognized  by the  Company in  connection  with net
     operating loss  carryforwards at December 31, 2000 and 1999 were $2,030,000
     and $1,330,000,  respectively.  A valuation allowance is required if, based
     on the weight of evidence  available,  it is more likely than not that some
     portion or all of the deferred asset will not be realized. It was concluded
     that a  valuation  allowance  was  appropriate  for the full  amount of the
     deferred tax asset at December 31, 2000 and 1999,  due to losses  incurred.
     The valuation allowance increased $700,000 and $350,000 for the years ended
     December 31, 2000 and 1999, respectively.

     Operating  loss  carryforwards,  which may  provide  future  tax  benefits,
     approximate  $5,800,000  and  $3,800,000  at  December  31,  2000 and 1999,
     respectively.  These operating loss  carryforwards  expire through the year
     2020.


10.  COMMITMENTS

          Licensing agreement
          -------------------

     On April 26, 2000, the Company entered into a definitive  Sales,  Licensing
     and Marketing  Agreement with  RimpexChile,  S.A.  ("Rimpex").  Rimpex is a
     wholly-owned  subsidiary  of VNA.  Pursuant  to the  Agreement,  Rimpex  is
     granted a 20-year  non-exclusive  license from Voicenet to market, sell and
     distribute the Voicenet  Products  described  below and all derivatives and
     components  thereof in the  geographic  area of South  America  and Central
     America (the "Territory") to providers of wireless or land-based  telephone
     service and their end-users.

     The licensed  Voicenet products include without  limitation:  (i) "Voicenet
     Speechware",  an  integrated  collection  of automatic  speech  recognition
     ("ASR")  tools;   (ii)  "Voicenet   Voice  Operating   System",   a  system
     architecture  and platform for creating and accessing  e-mails,  facsimiles
     and other  digitally  stored  textual  material by wireless and  land-based
     telephone;  and  (iii)  "Voicenet  Internet  Commander"  provides  a speech
     command and control  mechanism  to access the Internet and dictate URLs for
     user desired Web site destinations by wireless and land-based telephone.

     The royalty payable to Voicenet under the Agreement is twenty (20%) percent
     of all gross revenues of the Products in the Territory, which amounts shall
     be paid in United States dollars on a quarter-annual basis.

     During the year ended December 31, 2000, the Company derived licensing fees
     of $43,169 from Rimpex.


                                      F-15
<PAGE>


10.  COMMITMENTS (CONTINUED)

          Employment and management agreements
          ------------------------------------

     On  November 5, 1997,  the Company  entered  into a  three-year  employment
     agreement  with an officer of the Company  whereby  the Company  will pay a
     salary of  $180,000  per annum  plus  direct  expenses.  During  1999,  the
     employment  agreement was  superseded by a management  agreement with Noble
     Pacific  Merchant  Capital Ltd.  ("Noble") a corporation  owned by the same
     officer of the Company. Under the terms of the agreement, the Company shall
     pay  Noble an annual  management  fee of  $180,000  plus  direct  expenses.
     Expense  relating to these  agreements  was  $135,000  and $180,000 for the
     years  ended  December  31,  2000  and  1999,  respectively.  In  addition,
     effective  October 31, 2000,  this agreement was terminated and the Company
     paid a severance expense of $652,000.

          Management services agreement
          -----------------------------

     Effective November 1, 2000, the Company entered into a management  services
     agreement  ("MSA") with Boston  Consulting  Ltd.  ("Boston") a  corporation
     under the control of an officer of the Company. Under the terms of the MSA,
     which may be terminated  without cause as defined in the MSA,  Boston is to
     provide broad based executive  management and advisory  services,  guidance
     and  assistance  to the Company for an initial  period of three  years.  At
     commencement  an annual  management  fee applied,  structured  on a base of
     $180,000 with an accompanying  bonus incentive  aligned to the satisfaction
     of certain  performance  criteria as  established by the MSA. Under certain
     circumstances  payment of management  fees may be made in the form of stock
     rather  than  cash.  Boston  is  also  entitled  to  reimbursement  for all
     reasonable  and  necessary   business   expenses.   Establishment,   legal,
     administrative,  travel and  compensation  expense  incurred by the Company
     under its agreement  with Boston were $137,333 for year ended  December 31,
     2000. In the event that the MSA is terminated by the Company without cause,
     the Company  reserves  the right to effect any payment or  entitlement  due
     Boston in respect to any  remainder of unpaid fees and benefits in the form
     of stock.


11.  SUBSEQUENT EVENT

     On April 12, 2001,  Voicenet  executed a definitive  Agreement  and Plan of
     Merger (the "Merger  Agreement")  whereby Voicenet agreed to acquire all of
     outstanding  capital  stock  from  the  four  corporate  entities  ("Target
     Companies")  from the  unaffiliated  shareholders  thereof (the "Exchanging
     Shareholders")  that  own 100% of the  membership  interests  in ESS  ("ESS
     Common Stock") in exchange for shares of Voicenet Common Stock.  The Target
     Companies  will merge  into ESS  Holdings,  Inc.,  a newly  formed  Florida
     corporation which is a wholly-owned  subsidiary of Voicenet ("Merger Sub").
     The Merger  Agreement  also called for  Voicenet to infuse  $500,000 in the
     form of a bridge loan upon execution of the Merger Agreement.


                                      F-16
<PAGE>


11.  SUBSEQUENT EVENT (CONTINUED)

     Pursuant to the Merger  Agreement the Target  Companies will be merged with
     and into  Merger Sub and all  outstanding  shares of the Target  Companies'
     common  stock will be  converted  into the right to receive an aggregate of
     2,000,000  shares of  Voicenet  Common  Stock  and  1,000,000  of  Voicenet
     preferred stock designated as "Senior Convertible Preferred Stock" ("Senior
     Preferred  Stock"),  The  Common  Stock is being  issued to the  Exchanging
     Shareholders  at the most recent  publicly  traded  Voicenet  common  stock
     market  price  of $.72  per  share as  quoted  on the  AMEX and the  Senior
     Preferred  Stock is being issued at the stated  liquidation  value of $7.20
     per share.  The Senior  Preferred  Stock has voting rights on a 10 vote per
     share basis. The Senior Preferred Stock shall  automatically  and mandatory
     converted into 10,000,000  shares of Common Stock upon the approval of such
     conversion privilege by a vote of Voicenet's shareholders.


          Capitalization
          --------------

     Effective  April 16,  2001,  the Board of  Directors  and VNA  approved  an
     amendment to the Company's  certificate of  incorporation,  authorizing the
     issuance of a total of  100,000,000  shares of $0.01 par value common stock
     and 10,000,000 shares of preferred stock.



                                      F-17
<PAGE>


                                   SIGNATURES

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


                                               VOICENET, INC.


                                               By: /s/ Alan Dawson
                                                   ---------------------
                                               Chief Executive Officer

                                               Date:  April 12, 2001


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities an on the dates indicated.

SIGNATURES                          TITLE                        DATE


/s/ Alan Dawson                     Chief Executive Officer      April 12, 2001
----------------------------        Director
Alan Dawson


/s/ Howard Messer                   Chief Financial Officer      April 12, 2001
----------------------------
Howard Messer


/s/ Christopher J. Brown            Director                     April 12, 2001
----------------------------
Christopher J. Brown


----------------------------
John Gilbert                        Director




<PAGE>


                                  EXHIBIT INDEX

The exhibits listed below are filed with this Annual Report on Form 10-KSB.

1.1       Placement Agreement (1)

1.2       Form of International Advisory Agreement (2)

1.3       Form of Selected Dealer Agreement (2)

3.1       Certificate  of  Incorporation  of the Voicenet,  Inc.  dated April 2,
          1996.

3.2       Certificate of Amendment to Certificate of  Incorporation of Voicenet,
          Inc. dated September 16, 1996.

3.3       Bylaws of the Company(1)

3.4       Certificate of Amendment to Certificate of  Incorporation of Voicenet,
          Inc. dated March 2, 2000.

3.5       Certificate  of Correction to  Certificate of Amendment to Certificate
          of Incorporation of Voicenet, Inc dated April 13, 2001.

4.1       Form of Common Stock Certificate (1)

4.2       Form of Representatives' Warrant Agreement(1)

4.3       Form of Representatives' Warrant (included in Exhibit 4.2)

4.5       Form of Subscription Agreement (2).

5.1       Opinion of Epstein, Becker & Green, P.C.(2)

5.2       Technology Evaluation of Gorey & Sinclair (2)

10.1      Form of Escrow Agreement for proceeds from sale of Shares.(1)

10.2      Form of Technology Transfer Agreement (1)

10.3      Form of Note and Security Agreement (1)

10.4      Amendment to Technology Transfer Agreement and Security Agreement.(2)

10.5      Employment Agreement between the Company and Frank Carr.(2)

10.6      Management Agreement between the Company and James Sim.(2)

10.7      Advisory   Agreement   between  the  Company   and   Ridgewood   Group
          International.(2)

10.8      Second  Amendment  to  Technology   Transfer  Agreement  and  Security
          Agreement.(2)

10.9      Series A Preferred Stock Purchase  Agreement dated as of March 7, 2001
          between Unveil Technologies, Inc. and Voicenet, Inc. (3)

10.10     Agreement  and Plan of Merger  dated as of April 12, 2001 by and among
          Voicenet,  Inc.,  ESS  Holdings,  Inc.,  ESS.Com,  LLC,  Finger  Lakes
          Technologies,  Inc., 5CD+1, Inc.,  Telecom Holdings of Andover,  Inc.,
          Saka  International,  Inc., Douglas Brough,  Shae Spencer  Management,
          LLC,  Peter  Capriotti,  Steven  Muoio and Mark  Kiley (to be filed by
          amemdment to this Form 10-KSB).

23.1      Consent of Tanton & Company (1)

23.2      Consent of Epstein Becker & Green, P.C. (2)

24        Power of Attorney (Included at page II-7)(1)


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

(1)  Incorporated  by reference to the  Registrant's  Registration  Statement on
     Form SB-1 filed September 27, 1996 (File No. 333-12979)

(2)  Incorporated  by  reference  to  the   Registrant's   Amendment  No.  1  to
     Registration  Statement  on Form  SB-1  filed  March  12,  1997  (File  No.
     333-12979)

(3)  Filed Herewith.