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, 1999 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)

    1040 First Avenue, New York, NY                            10022
    (Address of principal executive offices)                (Zip Code)

Issuer's telephone number, including area code: (212) 642-5476

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: $3,400

    As of December 31, 1999 as adjusted giving effect to the 2 for 1 stock-split
that became effective on March 17, 2000: (a) 9,831,022  Common Shares,  $.01 par
value, of the registrant were outstanding;  (b)  approximately  1,870,698 Common
Shares were held by  non-affiliates;  and (c) the aggregate  market value of the
Common  Shares held by  non-affiliates  was  $23,383,725  based on the last sale
price (as adjusted for the stock split) of $12.50 per share.


<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 80% 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,  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.  Additionally  the  Company's  Chief
Executive  Officer,  Mr.  Frank Carr,  is also a Board Member of VNA. All of the
other directors of the Company are members 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, which the
Company calls SPEECHware(TM).


<PAGE>


         Developed out of the experience  gained from five years in research and
development  in the speech  recognition  field and building on our technology in
digital  compression,  the SPEECHware  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  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   SPEECHware   is  an   enabling   technology   and  system
architecture  which  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
SPEECHware  platform  for  commercial  application.   We  believe  that  service
providers in the industry  have an urgent need for  value-added  services in the
telecommunications  network where the value of "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 commercial application of SPEECHware.

          The Company's  objective is to become a leader in the marketing of the
Voice  Systems.  The  Company's  strategy is to obtain  marketing  partners  and
licensees  for  the  sales  and  distribution  of its  Voice  Systems  to  other
applications and field of use.

          In  the  development  of  the  Voice  Systems,  VNA  has  successfully
developed  and  marketed  two  industry-specific  speech  recognition  products:
RADTALK(TM)   and   COURTSCRIPT(TM).   RADTALK(TM)   a  system   for   radiology
practitioners,  is  currently  installed  in  a  number  of  leading  Australian
hospitals and is creating interest within the U.S.  radiology  community,  while
COURTSCRIPT(TM), a digital audio court recording and transcription system, is in
use in a number of countries, including the United States, Canada, Hong Kong and
Australia.

          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  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 no 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,  1999,  the  Company  generated  a net  loss  from  operations  of
$1,053,236 and has a total accumulated deficit of $3,787,157.

          The Company had limited  revenues from  continuing  operations in 1999
and 1998 in the  amounts of $3,400 and  $45,500,  respectively.  The Company has
incurred net losses since its inception in 1996. The Company's  losses  incurred
since inception have resulted principally from legal,


<PAGE>


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 2000,  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  MARKET  THROUGH   LICENSING,   MARKETING  PARTNER  AND  DISTRIBUTOR
     RELATIONSHIPS.

          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.

VOICENET (AUST) LTD. AND DEVELOPMENT OF THE 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.


<PAGE>


     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  DART(TM).  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.  Earlier versions
of the  system  have  been sold by VNA to courts  in  Canberra  (the  Australian
Capital  Territory),  Hong Kong, and, in Pennsylvania,  California and Maryland.
Newer versions of the Court Reporting System are currently being marketed by VNA
and others in various other countries around the world.


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 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 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.

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.


<PAGE>


EMPLOYEES

     As of December 31, 1999, the Company had a total of two employees.  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 Company's  principal  business address is 1040 First Avenue,  New York,
New York 10022, and its telephone number is (212) 642-5476.

ITEM 2.  PROPERTIES

     The Company  maintains an office at 1040 First Avenue,  New York, New York,
on a month-to-month basis which is provided by an affiliate at no rental cost to
the Company.

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 1999.

                                     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 OTC Bulletin  Board under the
symbol "VNET" since January 5, 1998. There are currently 2 market-makers for the
Company's Common Stock. 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.  The following prices do not reflect the 2 for 1
stock split which was effective on March 17, 2000.


<PAGE>


1999                                        High              Low
----                                        ----              ---

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            $1.97


     On March 20,  2000,  the last  reported  bid price of the common  stock was
$47.50.

1998

Quarter ended March 31, 1998              $9.50             $6.00

Quarter ended June 30, 1998               $9.00             $8.00

Quarter ended September 30, 1998          $9.25             $6.00

Quarter ended December 31, 1998           $8.50             $1.25



  (b)    Holders of Common Stock

                                                 Approximate Number of

  TITLE OF CLASS                        RECORD HOLDERS AS OF DECEMBER 31, 1999
  --------------                        --------------------------------------
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

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


<PAGE>


$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.

RESULTS OF OPERATIONS 1998 AS COMPARED TO 1997

     Net losses  increased  from $615,330 for the 1997 Period to $2,117,866  for
the 1998 Period.  The Company had revenue of $45,500 for the year ended December
31, 1998 as compared to no revenue in 1997.  The Company had interest  income of
$7,235 in 1998 as  compared  to $38,372  for the 1997  Period.  The  decrease in
interest  was  due to the  use of  funds  raised  in the  prior  period  to meet
operating expense  requirements.  Total general,  administrative and development
expenses were  $2,156,493  for the 1998 Period in comparison to $638,610 for the
1997  Period an increase of  $1,517,883.  This  increase  was due  primarily  to
consulting  and  compensation  expenses  totaling  $1,490,050  relating  to  the
issuance of 75,000  shares of common stock and stock options at prices less than
the fair market  value as of the date of grant and $72,000 of  amortization  for
technology.

     At December 31, 1998,  the Company had total assets of  $4,586,196,  and at
December 31, 1997,  the Company had total  assets of  $5,424,499,  a decrease of
$838,303.  At December 31, 1997, the Company had total  liabilities of $455,267,
and at December  31, 1998 the Company had total  liabilities  of  $217,249.  The
decrease in liabilities is  attributable  of amounts due to a related party.  At
December 31, 1998 the Company had an total stockholders  equity of $4,368,947 in
comparison to a total stockholders'  equity of $4,969,232 at the comparable date
in 1997.

     The Company  had a working  capital  deficit of $80,878 as of December  31,
1998 as compared to working  capital of $465,332 as of December  31,  1997.  The
Company  had an  accumulated  deficit of  $616,055  as of  December  31, 1997 in
comparison to an  accumulated  deficit of  $2,733,921 at December 31, 1998.  The
increase in the accumulated deficit is primarily related to continuing operating
costs  without any  operating  income.  For the 1998 Period the  Company's  cash
requirements  were  satisfied  from  the  cash  reserves  in its  operating  and
investment accounts.


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     The Company does not  currently  possess a bank source of financing and has
had only revenues of  approximately  $3,400  during the year ended  December 31,
1999.  The  Company  believes  that  its  existing  $2,916,531  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, 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.  The  Company  wishes to caution
readers not to place  undue  reliance  on any such  forward-looking  statements,
which speak only as of the date made.  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


<PAGE>


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, 1999.  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

     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  significant  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.


<PAGE>


LIMITATIONS OF SCOPE FOR THE COMPANY'S PRODUCT LINE

     The Company  intends to engage in the marketing and  distribution of speech
recognition systems and of Voice Systems.  The Company's success will be totally
dependent on its ability to market its product line. The Company's current plans
do not include any other potential sources of revenue.

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

     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,  all of whom  devote  only a portion of their  time to the  Company.
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. Frank Carr, the
Chief Executive Officer will devote only a portion of his time to the Company as
set  forth in the  Agreement  under  which he is  retained.  Mr.  Carr is also a
Director of VNA, which is the majority  shareholder of the Company.  The loss of
the services of Mr. Carr,  as well as other key  personnel,  or any inability to
attract and retain  qualified  personnel,  may  adversely  affect the  Company's
business.  The Company has not applied for key man life insurance on the life of
Frank Carr and does not intend to.  Because of the nature of its


<PAGE>


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.  Mr. Carr
may also  have  conflicts  of  interest  if a  dispute  were to arise  under the
Technology Transfer Agreement.

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 76% of the Company, causes or
provides  for the  manufacturing  of three of the  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  planned  commencement  of  operations  is 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

     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.

MANAGEMENT OF CHANGING BUSINESS

     Due to the level of technical and marketing  expertise necessary to support
its  anticipated  new  customers,  the Company  must  attract and retain  highly
qualified and well-trained personnel. There are a limited number of persons with
the requisite skills to serve in these positions, and it may become increasingly
difficult for the Company to hire such personnel. There can be no assurance that
the Company will be able to have such personnel,  and if so, on favorable terms.
The Company's expansion may also significantly strain the Company's  management,
financial  and other  resources.  The  Company  believes  that  improvements  in
management and  operational  controls and  operations,  financial and management
information  systems are needed to manage future  growth,  should it occur.  The
failure to implement such improvements could have a material adverse effect upon
the Company.

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


<PAGE>


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 and digital audio technology
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 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.

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.


<PAGE>



CONTROL BY SINGLE MAJORITY SHAREHOLDER

     VNA, has been the  controlling  shareholder of the Company since  inception
and currently owns  approximately 80% 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.  There are
currently  9,391,022 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.  The Company
has no plans, arrangements, understandings or commitments to issue any preferred
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.

SHARES ELIGIBLE FOR FUTURE SALE

     There are  approximately  7,960,324 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


<PAGE>


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 AUSTRALIA

     Certain of the Company's  officers and all of the  Company's  directors are
residents of Australia,  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 Australia in the first
instance on the basis of liability predicated upon such law.

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 ending December 31,
1999, and 1998 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-8-9

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. Reference is
made to Form 8K  filed in  September,  1999  which  discloses  a  change  in the
registrant's accountants.

                                    PART III

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

     The  following  table  sets  forth  information  concerning  the  executive
officers, directors and key employees of the Company:

     (a) The  directors  of the Company as of December 31, 1999 are set forth in
the following table:


<PAGE>



                             Year First Elected As
Name               Age       Director                   Directorship Held
---------          ---       ----------------------     -----------------------
Frank Carr         51        1997                       Chairman and Director
Chris Brown        42        1998                       Director
Alan Dawson        47        1999                       Director

          Each  Director  is  elected  for a period  of one year and  thereafter
serves until his  successor is duly elected by the  stockholders.  Each director
receives an annual fee of $10,000

          On March 18, 1998, Mr.  Christopher  John Brown,  CPA, was appointed a
Director of the Company to fill a vacancy on the board.

          On February 26, 1999,  Mr. Alan Dawson was appointed a Director of the
Company to fill a vacancy on the board.

     (b) The  current  executive  officers  of the  Company are set forth in the
following table:

                              Year First
Name               Age      Elected into Office      Office Held
-----              ---      -------------------      ------------------
Frank Carr         51              1997              Chairman, President, Chief
                                                     Executive Officer
Howard Messer      48              1998              Chief Financial Officer and
Secretary

     Except for its agreement with Mr. Carr,  there are no other  contracts with
the executive officers. Officers serve at the will of the Board of Directors.

FRANK CARR, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER. Mr. Carr has been a
director,  President  and  Chief  Executive  Officer  of the  Company  since its
inception in 1996. He was the Chief  Executive  Officer of VNA, a public company
listed on the Australia  Stock  Exchange,  for 5 years.  He has been involved in
company  management  and direction for 30 years and in 1986 was jointly  awarded
the Australian  Business  Entrepreneur  of the Year Award and, in the same year,
his  company  was  awarded  the  marketing  award  by the  Australian  Marketing
Institute.  Mr. Carr was elected to  Fellowship of the Institute of Directors in
the U.K. in 1981 and to Fellowship of the Australian  Institute of Management in
1986.

CHRISTOPHER J. BROWN,  DIRECTOR. Mr. Brown was appointed a director of Voicenet,
Inc. in 1998 and was  appointed  Secretary of Voicenet  (Aust) Ltd. in August of
1995 and to the Board of Voicenet  (Aust)  Ltd. in July of 1997.  In his role as
VNA  Secretary he is actively  involved on a daily basis in the  operations  and
direction  of the  Company.  Mr.  Brown is a principal  of a leading  Australian
accounting  firm,  William  Buck.  He has  extensive  experience in the field of
strategic  planning,   corporate  marketing,   international  tax  planning  and
technology transfer.  He received his Masters degree in Business  Administration
from Curtin  University of Technology in Perth and is, among his other pursuits,
currently completing doctorate studies in the field of intellectual property and
international  technology transfer.  He is a member of the Australian Society of
CPA's,  the  Australian  Institute  of  Management  Consultants  and  the  World
Institute of Management Consultants.


<PAGE>


ALAN DAWSON,  DIRECTOR. Mr. Dawson was appointed a director of Voicenet, Inc. in
February, 1999 and was appointed to the position of President of Voicenet (Aust)
Limited in March of 1997 and to the position of Chief  Executive  Officer of VNA
in January 1999, a position he currently  holds. He has extensive  experience in
management and related disciplines,  having held senior positions in a number of
leading Australian companies over the course of some 25 years. A former director
of the  Australian  Design  Council,  he has  also  practiced  in the  field  of
commercial law for several West Australian legal firms. Mr. Sawson is a graduate
of both the  University  of  Western  Australia  and the  Curtin  University  of
Technology  with  Bachelor  degrees  in  both  Business  and in Law and he has a
Masters degree in Business Administration. He is a member of both the Australian
Institute of Management and the Law Society of Western Australia.


HOWARD MESSER,  CHIEF FINANCIAL OFFICER.  Howard Messer is a CPA in the State of
New Jersey.  Since March of 1994, Mr. Messer served as Vice President of Finance
of Compuflex  Systems,  Inc. and was instrumental in its acquisition and pooling
of interests between it and Intec Overseas Software Limited.  During that period
Compuflex  combined revenues grew at an annual rate of 50% per annum, Mr. Messer
assisted the company in its  acquisition  of debt  financing and, as a result of
his business  plan, in July 1997,  Compuflex was acquired in a $12 million stock
purchase  agreement.  He is a graduate of the University of Virginia with a B.S.
in Commerce degree and began his professional  career with Arthur Andersen & Co.
Mr. Messer left Arthur Andersen as an audit manager.

     Except as set forth above, no director or executive  officer of the Company
is  currently  a  director  with any other  Company  with a class of  securities
registered  pursuant  to  Section  12 of  the  Exchange  Act or  subject  to the
requirements of Section 15(d) of such act or any investment  company  registered
under the Investment Company Act of 1940.

ELECTION OF DIRECTORS AND OFFICERS; COMMITTEES

     The  Company's  bylaws  provide for a Board of Directors  consisting of not
less than  three nor more than nine  members  who are  elected  annually  by the
shareholders.  The officers of the Company are elected by the Board of Directors
from time to time.

     The Company  currently has no committees of its Board of Directors,  but it
is  anticipated  that  standing  audit  and  compensation   committees  will  be
established in 2000. It is expected that the audit and  compensation  committees
will consist of three members of the Board, a majority of whom are not otherwise
affiliated with the Company as officers or employers.

EMPLOYMENT ARRANGEMENTS

     The Company  has  retained  Frank Carr as its  President,  Chief  Executive
Officer pusuant to a management services agreement at a fee of $180,000 per year
for a four year term which commenced in January,  2000. The management  services
agreement is with Noble Pacific Merchant  Capital,  Ltd., a corporation which is
controlled by Mr. Carr.

     No family relationships exist among the executive officers of the company.

ITEM 10.  EXECUTIVE COMPENSATION

Summary Compensation Table
--------------------------

     The following  table sets forth  information  concerning  the  compensation
earned for the past three years for the Company's Chief Executive  Officer as of
December 31, 1999. No other executive  officer's total salary and bonus for 1999
exceeded  $100,000.  In accordance with the rules of the


<PAGE>


Securities and Exchange  Commission,  the  compensation  described in this table
does not include  perquisites  and other  benefits  received by these  executive
officers that do not exceed the lesser of $50,000 or 10% of the total salary and
bonus reported for these officers.  The amounts shown include  compensation  for
services  in  all   capacities   that  were  provided  to  the  Company  or  its
subsidiaries. Long Term

<TABLE>
<CAPTION>
                                                                             Compensation
                                                                             ------------
                                                                        No. of Securities Under-      All Other
Name and Principal Position       Year      Salary(a)    Bonus   Other   lying Options Granted      Compensation
---------------------------       ----      ---------    -----   -----   ---------------------      -------------

<S>                               <C>       <C>          <C>     <C>            <C>                   <C>
Frank Carr                        1999      $ 180,000      --     --             95,000(b)            $--
  Chief Executive                 1998         90,000      --     --            350,000(b)             --
  Officer and Chairman            1997         31,196      --     --               --                  --
</TABLE>

(a)  Represents amounts earned with respect to the years indicated, whether paid
     or accrued.

(b)  Represents the  difference  between the market price and the exercise price
     of the Stock Options granted.

Option Grants Table
-------------------

          The following table sets forth  information  concerning  stock options
which were granted  during 1999 to the executive  officers  named in the Summary
Compensation Table and to the directors of the Company. Information with respect
to options relates to options on the Company Common Stock at December 31, 1999.

<TABLE>
<CAPTION>
                                 % of
              Number of       Total Options                                           Potential Realizable Value at
              Securities       Granted to                  Market                        Assumed Annual Rates of
              Underlying      Employees in                Price at                    Stock Price Appreciation for
               Options           Fiscal       Exercise     Date of      Expiration           Option Term (3)
                                                                                             ---------------
    Name      Granted (1)         Year         Price      Grant (2)        Date            5%               10%
    ----      -----------         ----         -----      ---------        ----            --               ---

<S>            <C>                <C>            <C>        <C>          <C>             <C>             <C>
Frank
Carr           760,000            63.33%         $.50       $.625        October 31,     $226,234         $384,992
                                                                         2004

Howard
Messer         200,000            16.67%         $.50       $.625        October 31,      $62,890         $159,374
                                                                         2004

Alan
Dawson         120,000            10.0%          $.50       $.625        October 31,      $37,734          $95,624
                                                                         2004

Chris
Brown          120,000            10.0%          $.50       $.625        October  31,     $37,734          $95,624
                                                                         2004
</TABLE>

(1)  Adjusted for the 2 for 1 stock split  effective for  shareholders of record
     on March 17, 2000

(2)  Assumes a fair market  value of the Company  Common  Stock  underlying  the
     Stock Options of $.625 based on the valuation of Company's  publicly traded
     Common  Stock on the date of issuance of the Stock  Options as adjusted for
     the 2 for 1 stock split which occurred on March 17, 2000.



<PAGE>


(3)  The potential  realizable value  represents the  hypothetical  gains of the
     options granted based on assumed annual compound stock  appreciation  rates
     of 5% and 10% over the option exercise price. The 5% and 10% assumed annual
     rates  of  stock  price  appreciation  are  required  by the  rules  of the
     Securities  and Exchange  Commission  and do not  represent our estimate or
     projection of future common stock prices.

Fiscal 1999 Year End Option Values
----------------------------------

<TABLE>
<CAPTION>
                              Number of Securities             Value of Unexercised In the Money
                         Underlying Unexercised Options            Options at Fiscal Year End
                         ------------------------------            --------------------------

Name                     Exercisable       Unexercisable        Exercisable          Unexercisable
----                     -----------       -------------        -----------          -------------

<S>                       <C>                <C>                 <C>                  <C>
Frank Carr                100,000            760,000(1)          $1,200,000           $9,120,000


Howard J. Messer          200,000               --               $2,400,000                 --


Alan Dawson                  --              120,000(1)                --             $1,440,000


Chris Brown                  --              120,000(1)                --             $1,440,000
</TABLE>

Pusuant to the terms of the referenced  stock options,  they are not exercisable
into common stock of the Company until June 15, 2000.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF DIRECTORS'
LIABILITY

     Our certificate of  incorporation  limits the liability of our directors to
the maximum  extent  permitted  by Delaware  law.  Delaware  law  provides  that
directors of a corporation  will not be personally  liable for monetary  damages
for breach of their fiduciary duties as directors, except liability for:

    - any  breach  of  their  duty  of  loyalty  to  the   corporation   or  its
      stockholders;

    - acts or omissions not in good faith or that involve intentional misconduct
      or a knowing violation of law;

    - unlawful   payments  of  dividends  or  unlawful   stock   repurchases  or
      redemptions; or

    - any transaction from which they derived an improper personal benefit.

This  limitation of liability  does not apply to  liabilities  arising under the
federal  securities  laws and does not  affect  the  availability  of  equitable
remedies such as injunctive relief or rescission.

Our certificate of  incorporation  and bylaws provide that we will indemnify our
directors and executive  officers and may indemnify other officers and employees
and other  agents to the  fullest  extent  permitted  by law.  We  believe  that
indemnification under our bylaws covers at least negligence and gross negligence
on the  part of  indemnified  parties.  Our  bylaws  also  permit  us to  secure
insurance  on behalf of any officer,  director,  employee or other agent for any
liability  arising out of his or her  actions in that  capacity,  regardless  of
whether Delaware law would permit indemnification.


<PAGE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table  identifies each person known to the Company to be the
beneficial owner of more than five percent of the Company's  Common Stock,  each
director  of the  Company  and all  directors  and  officers of the Company as a
group,  and sets  forth  the  number of shares  of the  Company's  Common  Stock
beneficially  owned by each such person and such group and the percentage of the
shares of the Company's  outstanding  Common Stock owned by each such person and
such group.  In all cases,  the named person  individually  or together with his
spouse has sole voting power and sole investment power over the securities.

     (a) As of December  31,  1999,  one person owned of record or were known by
the Company to own beneficially  more than five percent (5%) of the Common Stock
outstanding.

     (b) The  following  table  sets forth  certain  information  regarding  the
beneficial  ownership  (determined  in accordance  with  Securities and Exchange
Commission  Rule 13d-3  Securities  Exchange Act of 1934) of common stock of the
Company as of  December  31,  1999  (adjusted  for a 2 for 1 split of the common
stock which took effect for  stockholders of record on March 17, 2000),  by: (i)
each person who is known by the Company to own beneficially  more than 5% of the
outstanding  shares of common stock; (ii) each of the Company's  directors;  and
(iii) all officers and directors of the Company's as a group:

Name and Address of             Amount and Nature of
Beneficial Owner                Beneficial Ownership (2)        Percent of Class
-------------------             ------------------------        ----------------

Voicenet (Aust) Ltd.
72 Kings Park Road
West Perth, Australia 6005             7,510,324                     80.0%

Frank Carr(1)(3)
72 Kings Park Road
West Perth, Australia 6005               100,000                         1%

Alan Dawson(1)(3)
72 Kings Park Road
West Perth, Australia 6005                 --                           --

Chris Brown(1)(3)
72 Kings Park Road
West Perth, Australia 6005                 --                           --

Howard J. Messer
1040 First Avenue
New York, New York                       200,000                         2%

All Officers and Directors

as a group (4 persons) (3)               300,000                         3%

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

(1)  Denotes a director of the Company.


<PAGE>


(2)  Unless  otherwise noted, the Company believes that each person named in the
     table has sole voting and  investment  power with  respect to all shares of
     common stock beneficially owned by him or it.

(3)  Excludes  options  issued to the Chairman and CEO, Frank Carr in 1999 which
     are  exercisable  commencing  June 15, 2000 into  760,000  shares of common
     stock at $.50 per share for the period  ending  October  31,  2004;  option
     issued to Alan Dawson which are  exerciable  into 120,000  shares of common
     stock at $.50 per share for the period ending October 31, 2004; and options
     issued to Chris Brown which are  exercisable  into 120,000 shares of common
     stock at $.50 per share for the period ending October 31, 2004.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since January 1, 1998, there has not been, nor is there currently proposed,  any
transaction or series of similar transactions to which we were or are a party in
which the amount  involved  exceeds  $60,000 and in which any of our  directors,
executive  officers or holders of more than 5% of our capital  stock had or will
have a direct or indirect material interest other than:

    - the salaries,  options,  share  repurchase and other  agreements  that are
      described in "Executive Compensation;" and

    - the transactions described below.

Financing Transactions
----------------------

          VNA, the majority  shareholder of the Company since  inception in 1996
and  which has all of the  Company's  directors  as  members  of VNA's  board of
directors,  acquired  $3,000,000  of  Series A  Convertible  Preferred  Stock in
October  1999,  which was  convertible  into common  stock based on the weighted
average  closing bid price for the Company  publicly traded common stock for the
thirty  days  prior to the  conversion  date.  All of the  Series A  Convertible
Preferred was  converted  into common stock by December 31, 1999. As a result of
the conversion of the Series A Convertible  Preferred Stock,  VNA's ownership of
common stock of the Company increased to approximately 80%.

Other Transactions
------------------

          All  of the  shareholders  existing  at the  date  of  initial  public
offering of the Company in November 1997 acquired the then outstanding 5,000,000
shares of the Company's common stock for $.005 per Share.

          In connection  with the  acquisition of the  Technology  from VNA, the
Company  agreed  to pay VNA  $4,500,000.  This  obligation  was  evidenced  by a
Promissory Note in the amount of $4,500,000,  which bore no interest, secured by
a first  security  interest  collateral  pledge  of the  Technology  to VNA.  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 (after  giving effect to the 2
for 1 split  effective on March 17, 2000).  Upon  conversion  of the  Promissory
Note,  1,125,000  additional shares were to be issued to VNA, in satisfaction of
the  Company's  $4.5  million  obligation.  VNA elected to exercise its right of
conversion and 1,125,000 shares of common stock were issued to VNA in 1997.

    See item 7(b) above.


<PAGE>


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



(b) Reports on Form 8-K

     The  Company  filed  one  report on Form 8-K for the last  quarter  of year
ending  December 31, 1999 with respect to the purchase of the Series A Preferred
Stock by VNA.


<PAGE>


                                 VOICENET, INC.
                          (a development stage company)

                          INDEX TO FINANCIAL STATEMENTS
                                                                            Page
                                                                            ----

Independent Auditors' Report                                                 F-2

Balance sheets as of December 31, 1999 and 1998                              F-3

Statements of operations for the years ended
   December 31, 1999 and 1998                                                F-4

Statements of stockholders' equity for the years ended
   December 31, 1999 and 1998                                          F-5 - F-6

Statements of cash flows for the years ended
   December 31, 1999 and 1998                                                F-7

Notes to financial statements                                         F-8 - F-15








<PAGE>



                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors
Voicenet, Inc.
New York, New York

We have audited the accompanying balance sheet of Voicenet,  Inc. (a development
stage  company)  as  of  December  31,  1999,  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,
1999,  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
February 29, 2000, except for Note 8
   as to which the date is March 6, 2000



                                       F-2
<PAGE>


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

                                 BALANCE SHEETS

<CAPTION>
                                     ASSETS
                                     ------

                                                                                 December 31,
                                                                                 ------------
                                                                             1999             1998
                                                                             ----             ----

<S>                                                                     <C>               <C>
Current assets:
   Cash and equivalents ...........................................     $  2,916,531      $     34,610
   Investment, at market value ....................................             --              12,246
   Accounts receivable, net .......................................             --              39,700
   Due from Voicenet (Aust) Ltd. ..................................             --              45,015
   Other receivables ..............................................             --               4,800
                                                                        ------------      ------------

               Total current assets ...............................        2,916,531           136,371
                                                                        ------------      ------------

Other assets:
   Technology rights ..............................................        3,905,000         4,410,000
   Security deposits and other ....................................           12,891            13,375
   Deferred compensation expense ..................................             --              26,450
                                                                        ------------      ------------

               Total other assets .................................        3,917,891         4,449,825
                                                                        ------------      ------------

               Total assets .......................................     $  6,834,422      $  4,586,196
                                                                        ============      ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current liabilities:
   Accounts payable ...............................................     $    186,753      $    217,249
                                                                        ------------      ------------

               Total current liabilities ..........................          186,753           217,249
                                                                        ------------      ------------

Stockholders' equity:
   Common stock, $.01 par value
      50,000,000 shares authorized
      9,831,022 shares issued, 9,391,022 shares outstanding in 1999
      6,677,300 shares issued and outstanding in 1998 .............           98,310            66,773
   Additional paid-in capital .....................................       10,338,716         7,051,814
   Accumulated deficit ............................................       (3,787,157)       (2,733,921)
   Treasury stock, 440,000 shares in 1999, at cost ................           (2,200)             --
   Accumulated other comprehensive loss ...........................             --             (15,719)
                                                                        ------------      ------------

               Total stockholders' equity .........................        6,647,669         4,368,947
                                                                        ------------      ------------

               Total liabilities and stockholders' equity .........     $  6,834,422      $  4,586,196
                                                                        ============      ============
</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,
                                                                1999               1998              1999
                                                             -----------        -----------       -----------

<S>                                                          <C>                <C>               <C>
Revenue ..........................................           $     3,400        $    45,500       $    48,900
                                                             -----------        -----------       -----------

Costs and expenses:
   Cost of sales .................................                  --               25,958            25,958
   Selling and administrative ....................               328,106            564,193         1,546,132
   Stock-based compensation ......................               266,450          1,490,050         1,756,500
   Amortization ..................................               505,900             90,400           597,000
                                                             -----------        -----------       -----------

                                                               1,100,456          2,170,601         3,925,590
                                                             -----------        -----------       -----------

Operating loss ...................................            (1,097,056)        (2,125,101)       (3,876,690)
                                                             -----------        -----------       -----------

Other income:
   Interest ......................................                40,682              7,235            86,395
   Gain on sale of securities ....................                 3,138               --               3,138
                                                             -----------        -----------       -----------

                                                                  43,820              7,235            89,533
                                                             -----------        -----------       -----------

Net loss .........................................           $(1,053,236)       $(2,117,866)      $(3,787,157)
                                                             ===========        ===========       ===========


Loss per share ...................................           $     (0.14)       $     (0.32)
                                                             ===========        ===========

Weighted average shares outstanding ..............             7,290,575          6,656,324
                                                             ===========        ===========
</TABLE>





                        See notes to financial statements


                                       F-4
<PAGE>


                                 VOICENET, INC.

                          (a development stage company)

<TABLE>
                       STATEMENTS OF STOCKHOLDERS' EQUITY

                   Years ended December 31, 1999 and 1998 and

       for the period April 2, 1996 (inception) through December 31, 1997

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

<S>                                     <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)    --      --        --           --
                                       ----------   -----------   -----------  ----------    -----   -----   -------     --------

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

Balance, December 31, 1997 (forward)    6,523,100   $    65,231   $ 5,520,056  $ (616,055)    --     $--     $  --       $   --
                                       ----------   -----------   -----------  ----------    -----   -----   -------     --------
</TABLE>


                        See notes to financial statements

                                       F-5


<PAGE>


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

                       STATEMENTS OF STOCKHOLDERS' EQUITY

                   Years ended December 31, 1999 and 1998 and
       for the period April 2, 1996 (inception) through December 31, 1997


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

<S>                             <C>         <C>       <C>           <C>             <C>       <C>        <C>         <C>
Balance, December 31,
  1997 (forward) ............   6,523,100   $65,231   $ 5,520,056   $  (616,055)       --     $  --      $   --      $      --

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 ..   6,677,300    66,773     7,051,814    (2,733,921)       --        --       (15,719)   $(2,133,585)
                                                                                                                     ===========

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)
                                =========   =======   ===========   ===========    ========   =======    ========    ===========
</TABLE>

                        See notes to financial statements

                                       F-6


<PAGE>


<TABLE>
                                 VOICENET, INC.

                          (a development stage company)

                            STATEMENTS OF CASH FLOWS

                                                                                                    April 2, 1996
                                                                                                     (inception)
                                                                     Years ended December 31,          through
                                                                   ----------------------------      December 31,
                                                                      1999              1998             1999
                                                                   -----------      -----------      ------------

<S>                                                                <C>              <C>              <C>
Net loss .....................................................     $(1,053,236)     $(2,117,866)     $(3,787,157)
                                                                   -----------      -----------      -----------
Adjustments to  reconcile  net loss to net cash
  (used in)  provided by operating activities:
      Amortization ...........................................         505,900           90,400          597,000
      Stocks issued for consulting services ..................            --            600,000          600,000
      Stock option compensation costs ........................         240,000          916,500        1,156,500
      Gain on sale of marketable securities ..................          (3,138)            --             (3,138)
      Changes in assets and liabilities:
         (Increase) decrease in accounts receivable ..........          39,700          (39,700)            --
         (Increase) decrease in other receivables ............           2,600           (4,800)          (2,200)
         (Increase) decrease in prepaid expenses .............            --             11,382             --
         (Increase) decrease in security deposits ............            (416)          (9,875)         (12,891)
         (Increase) decrease in deferred compensation expense           26,450          (26,450)            --
         Increase (decrease) in accounts payable .............         (30,497)          78,606          186,752
                                                                   -----------      -----------      -----------

               Total adjustments .............................         780,599        1,616,063        2,522,023
                                                                   -----------      -----------      -----------

               Net cash used in operating activities .........        (272,637)        (501,803)      (1,265,134)
                                                                   -----------      -----------      -----------

Cash flows from investing activities:

   Payments for organization costs ...........................            --               --             (2,000)
   Purchases of investment ...................................            --            (27,965)         (27,965)
   Proceeds from sale of investment ..........................          31,103             --             31,103
                                                                   -----------      -----------      -----------

               Net cash provided by (used in) investing ......          31,103          (27,965)           1,138
                                                                   -----------      -----------      -----------
activities

Cash flows from financing activities:

   Proceeds from issuance of stock ...........................       3,078,440           16,800        4,293,181
   Advances (to) from Voicenet (Aust) Ltd. ...................          45,015         (357,639)            --
   Advances (to) from related party ..........................            --             (4,000)            --
   Payments of offering costs ................................            --               --           (112,654)
                                                                   -----------      -----------      -----------

               Net cash provided by (used in) financing ......       3,123,455         (344,839)       4,180,527
                                                                   -----------      -----------      -----------
activities

               Net increase (decrease) in cash and equivalents       2,881,921         (874,607)       2,916,531

               Cash and equivalents at beginning of period ...          34,610          909,217             --
                                                                   -----------      -----------      -----------

               Cash and equivalents at end of period .........     $ 2,916,531      $    34,610      $ 2,916,531
                                                                   ===========      ===========      ===========
</TABLE>

                        See notes to financial statements


                                       F-7
<PAGE>


                                 VOICENET, INC.

                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1999 and 1998

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, 1999,
     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,  (80%) and (65%)
     as of December 31, 1999 and 1998, respectively, by Voicenet (Aust) Ltd., 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, 1999
     and 1998.  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.

          Reclassifications
          -----------------

     Certain  accounts  in  the  prior  year  financial   statements  have  been
     reclassified  for comparative  purposes to conform with the presentation in
     the current year  financial  statements.  These  reclassifications  have no
     effect on previously reported income.

          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.
     During 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, 1999, the Company's
     balance was  approximately  $2,800,000 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.

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

     The Company's  financial  instruments include cash, accounts 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 other liabilities 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 3).

     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  $595,000  and
     $90,000 at December 31, 1999 and 1998,  respectively.  Amortization expense
     for the years ended  December  31, 1999 and 1998 was  $505,000 and $90,000,
     respectively.

3.   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 8.


                                      F-10
<PAGE>


3.       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
     Company, subject to the State of Delaware, may determine from time to time.

          Stock split
          -----------

     On  September  15, 1996,  the board of directors of the Company  declared a
     2,500-for-1 stock split on its common stock. The financial  statements have
     been adjusted to reflect this transaction.

          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. 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.

          Consulting costs
          ----------------

     During February of 1998, the Company issued 150,000 shares of the Company's
     common stock to two consultants in consideration for services provided. The
     fair  market  value of stock at the date of  issuance  was $4.00 per share.
     Consulting costs of $600,000  relating to this issuance was recorded by the
     Company for the year ended December 31, 1998.

          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.


                                      F-11
<PAGE>


4.   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.

     During 1999, the Company  granted  1,200,000  options from the 1998 Plan to
     four  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.  At  December  31,  1999,  no  options  had been
     exercised.

          Other options
          -------------

     During the year ended  December 31, 1998,  separate from the 1998 Plan, the
     Company  granted  200,000  and 60,000  options to two  directors  and three
     members of the Company's advisory board,  respectively,  to purchase common
     shares of the Company at an exercise price of $0.50 per share.  The 200,000
     options  are  immediately  exercisable  on the date of grant and the 60,000
     options are vested at a rate of one half at the date of grant and the other
     half at the first  anniversary of the date of grant.  The Company  recorded
     $890,050 in compensation expense in 1998 for these options. At December 31,
     1999 and 1998, no options had been exercised.

     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:

                                                1999                  1998
                                             ---------          ----------------

                  Risk-free rate                 6.0%           5.17% and 5.36%
                  Volatility factor              0.50                     0.525
                  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  year  ended   December   31,  1999  and  1998  was  $0.20  and  $3.53,
     respectively,   based  upon  the   calculation   using  the  Black  Scholes
     option-pricing model.


                                      F-12
<PAGE>


4.   WARRANTS AND OPTIONS (CONTINUED)

          Other options (continued)
          -------------------------

         In accordance with the amended underwriting agreement,  the underwriter
         has been  issued  warrants  to  purchase  22,500  shares of stock at an
         exercise price of $5.60 per share.  The warrants  expire on October 31,
         2002 and no warrants have been exercised as of December 31, 1999.

         On June 9, 1998, the Company  issued a warrant to a former  director to
         purchase  100,000  shares of the Company's  common stock at an exercise
         price of $4.00 per share.  The warrant expires on June 30, 2003 and has
         not been exercised at December 31, 1999.

5.   RELATED PARTY TRANSACTIONS

          Due from (to) Voicenet (Aust) Ltd.
          ----------------------------------

     This balance represents  advances from (to) Voicenet (Aust) Ltd. during the
     normal course of business.  In addition,  the Company may incur expenses on
     behalf of Voicenet  (Aust) Ltd. and Voicenet (Aust) Ltd. may incur expenses
     on  behalf of the  Company,  and such  expenses  will be  reimbursed.  Such
     advances and reimbursable costs are non-interest bearing and due on demand.
     At December 31,  1998,  the amount due from (to)  Voicenet  (Aust) Ltd. was
     $45,015.

          Investment
          ----------

     Investment  at  December  31, 1998  consists of 100,000  shares of Voicenet
     (Aust)  Ltd.'s  common stock at market value of $12,246,  net of unrealized
     loss of $15,719. The investment was sold during 1999 at a gain of $3,138.

          Advisory services agreement
          ---------------------------

     The Company had retained Ridgewood Group International Ltd.  ("Ridgewood"),
     a stockholder of the Company,  for various advisory  services.  The Company
     paid Ridgewood  $5,758 during the year ended December 31, 1998 for services
     provided. The advisory services agreement was terminated on March 1, 1998.

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

     The Company rents its office premises on a  month-to-month  basis without a
     formal lease  agreement  from an officer of the  Company.  Rent expense was
     $32,732  and  $34,240  for the  years  ended  December  31,  1999 and 1998,
     respectively.


                                      F-13

<PAGE>


6.   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.

     Deferred  tax  assets  recognized  by the  Company in  connection  with net
     operating loss carryforwards at December 31, 1999 and 1998 was $950,000 and
     $700,000,  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, 1999 and 1998 due to losses incurred.

     Operating  loss  carryforwards   which  may  provide  future  tax  benefits
     approximate  $2,600,000  and  $1,800,000  at  December  31,  1999 and 1998,
     respectively.  These operating loss  carryforwards  expire through the year
     2114.

7.   COMMITMENTS

          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 ws  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 $180,000 and $90,000 for the years
     ended December 31, 1999 and 1998, respectively.

          Consulting agreement
          --------------------

     On  February  1, 1998,  the  Company  entered  into a  one-year  consulting
     agreement with IPAC,  Inc.  ("IPAC")  whereby IPAC provides  consulting and
     product  development  services  for a monthly  fee of $10,000  plus  direct
     expenses.  The agreement was terminated during 1998. Total expense relating
     to this agreement was $111,294 for the year ended December 31, 1998.

          Financial advisory agreement
          ----------------------------

     On March 19, 1998, the Company entered into a five-month financial advisory
     agreement with Brooks, Houghton & Company, Inc. ("Brooks Houghton") whereby
     Brooks Houghton provides  financial advisory services for a down payment of
     $25,000 and monthly fee of $6,500 plus direct  expenses.  The agreement was
     terminated  during  1998.  Total  expense  relating to this  agreement  was
     $58,212 for the year ended December 31, 1998.


                                      F-14
<PAGE>


8.   SUBSEQUENT EVENTS

     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  two-for-one  stock  split  on  a
     retroactive basis.

     Concurrent  with the 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-15


<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/ Frank Carr
                                          ---------------------
                                       Frank Carr, Chairman and
                                       Chief Executive Officer

                                       Date: March 28, 2000


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 and on the dates indicated.

      SIGNATURES                             TITLE                    DATE
      ----------                             -----                    ----

/s/ Frank Carr
-------------------------       President, Chief Executive        March 28, 2000
Frank Carr                      Officer Director, Principal
                                Executive Officer
/s/ Howard Messer
-------------------------       Chief Financial Officer           March 29, 2000
Howard J. Messer                Principal Accounting Officer


/s/ Christopher J. Brown
-------------------------       Director                          March 28, 2000
Christopher J. Brown

/s/ Alan Dawson
-------------------------       Director                          March 28, 2000
Alan Dawson