UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

|X|   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934

      For the fiscal year ended December 31, 2001

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

                                   iVoice, Inc.
                  (Name of small business issuer in its charter)

                     Delaware                                 52-1750786
 (State or other jurisdiction of incorporation or           (I.R.S. Employer
                   organization)                          Identification No.)

            750 Highway 34, Matawan, NJ                          07747
     (Address of principal executive offices)                 (Zip Code)

Issuer's telephone number (732) 441-7700

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

Securities registered under Section 12(g) of the Exchange Act: Class A Common
$.001 Par Value

      Check whether the issuer (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Exchange Act during the past 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. |X| Yes |_| No

      Check if there is no disclosure of delinquent filers in response to Item
      405 of Regulation S-B 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. |_|

      State issuer's revenues for its most recent fiscal year. $425,948

      As of March 5, 2002, the Registrant had 158,625,029 shares of Class A,
      $.001 par value common stock outstanding. The aggregate market value of
      the voting stock held by non-affiliates as of that date based upon the
      average bid and ask prices on that date was $6,582,939.


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As of March 5, 2002, the Registrant had 354,000 shares of Class B, no par value
common stock outstanding.

Transitional Small Business Disclosure Format (Check one): Yes |_|; No |X|

                                     PART I
Item 1.  Description of business.............................................. 3
Item 2.  Description of property..............................................17
Item 3.  Legal proceedings....................................................18
Item 4.  Submission of matters to a vote of security holders..................19

                                     PART II
Item 5.  Market for common equity and related stockholder matters.............19
Item 6.  Management's discussion and analysis or plan of operations...........23
Item 7.  Financial statements.................................................27
Item 8.  Changes in and disagreements with accountants on accounting and
    financial disclosure......................................................27

                                    PART III
Item 9.  Directors, executive officers, promoters and control persons,
    compliance with Section 16(a) of the Exchange Act.........................27
Item 10. Executive compensation...............................................28
Item 11. Security ownership of certain beneficial owners and management.......30
Item 12. Certain relationships and related transactions.......................32

                                     PART IV
Item 13. Exhibits and reports on Form 8-K.....................................32


                                     PART I

Item 1. Description of Business.


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<PAGE>

Background

      Our current corporate configuration is the result of a number of separate
transactions over the past several years.

      On February 26, 1996, Select Resources, Inc., a publicly held Delaware
company, and three of its principal stockholders entered into a stock exchange
agreement with Visual Telephone of New Jersey, Inc., a privately held New Jersey
corporation, and its two stockholders pursuant to which Select Resources
acquired all of the outstanding shares of Visual Telephone and spun-off Select
Housing Associates, Inc., its wholly owned subsidiary. The aim of this agreement
was to provide for a more profitable business direction for Select Resources.
Pursuant to the agreement, Select Resources agreed to issue 5,611,000 shares of
its capital stock to one of the two stockholders of Visual Telephone and to
transfer one-half of the shares of Select Housing Associates to the other
stockholder of Visual Telephone, namely Joel Beagelman, in return for all of the
outstanding shares of Visual Telephone. In addition, Select Resources
transferred the other half of the shares of Select Housing Associates to Gary W.
Pomeroy and Brad W. Pomeroy, two of Select Resources' three principal
stockholders, in return for the cancellation of 1,111,000 shares of common stock
of Select Resources owned by them. At the time of the stock exchange agreement,
Mr. Beagelman, Gary W. Pomeroy and Brad W. Pomeroy were directors of Select
Resources. On February 26, 1996, the stock exchange agreement was approved by
the consent of stockholders a majority of the outstanding shares of common stock
of Select Resources. Visual Telephone then merged into Select Resources, which
changed its name to that of the subsidiary.

      In July 1996, Visual Telephone acquired 100% of the outstanding common
shares of Communications Research Inc., or "CRI," for $50,000 in cash, $150,000
in notes and 1,000,000 shares of Visual Telephone. CRI designs, develops, sells,
and supports PC-based communication systems that transmit data, voice and
full-motion video.

      On May 21, 1999, International Voice Technologies, Corp., a Delaware
corporation, merged with and into Visual Telephone (which in the interim had
changed its name to Visual Telephone International, Inc.), with Visual Telephone
surviving. Simultaneous with the merger, Visual Telephone changed its name to
iVoice.com, Inc., and it was planned that Visual Telephone would spin off CRI
prior to the merger with International Voice Technologies. Our current business
is essentially that of International Voice Technologies, and this merger was
aimed at giving that business better access to the capital markets by merging it
into a public company. In addition, we changed our OTC Bulletin Board trading
symbol to "IVOC."

      In consideration for the merger with International Voice Technologies,
Jerome R. Mahoney, the sole stockholder of International Voice Technologies,
received 10,000,000 shares of our Class A common stock and 700,000 shares of our
Class B common stock. In addition, the two controlling stockholders of Visual
Telephone sold 300,000 shares of Class B common stock to Mr. Mahoney and
concurrently canceled a total of 2,000,000 shares of their Class A common stock.
The consulting firm of Toby Investments was awarded 2,000,000 shares of common
stock for consulting services on the transaction.


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<PAGE>

The agreement also provided that certain of the assets of Visual Telephone would
be transferred to Visual Telephone's wholly owned subsidiary, CRI. The merger
was accounted for in its financial statements as a public shell merger. In a
public shell merger the stockholders of the operating company, in this case
International Voice Technologies, become the majority owners of the shell
company, in this case Visual Telephone, and the stockholders of Visual
Telephone, the public shell company, become minority stockholders in
International Voice Technologies, the operating company.

      As for the CRI spin-off, on September 18, 2000 CRI filed a registration
statement to provide for the distribution of its shares to Visual Telephone's
stockholders as of May 21, 1999. Visual Telephone's stockholders are to receive
one CRI share for every four shares owned in Visual Telephone. The principal
stockholders, officers and directors of Visual Telephone were Carl Ceragno and
Joel Beagelman. Mr. Ceragno remained with CRI as its President and Mr. Beagelman
entered into a consulting agreement with us.

      On April 24, 2000, we entered into an agreement and plan of reorganization
with all the stockholders ThirdCAI, another shell company that was a reporting
company under the Securities Exchange Act of 1934. In this transaction, which
took place by means of a short-form merger, with ThirdCAI's name being changed
to iVoice, we acquired all the issued and outstanding shares of ThirdCAI in
exchange for $150,000, and a finder's fee paid to Corporate Architect, Inc.,
consisting of 50,000 shares of our Class A voting common stock. The purpose of
this transaction was to enable our business to be conducted by a reporting
company, as pursuant to the "eligibility rule" adopted by the National
Association of Securities Dealers, Inc., or "NASD," as only reporting companies
may continue to have stock quoted on the OTC Bulletin Board.

      Our principal offices and facilities are located at 750 Highway 34,
Matawan, NJ 07747 and our telephone number is (732) 441-7700. Our common stock
is quoted on the OTC Bulleting Board under the trading symbol "IVOC."

Our Business

      We design, manufacture, and market innovative voice and computer telephony
communications systems for businesses and corporate departments with as many as
20,000 telephones. Our speech recognition software products enable our customers
to communicate more effectively by integrating their traditional office
telephone systems with automated attendant, voice mail, unified messaging, and
interactive voice response, or "IVR," functions. Our products are designed to be
"people oriented," with features that can be readily used without special
training or manuals. Our principal products, Speech-enabled Auto Attendant,
iVoiceMail, Unified Messaging, and iVoice IVR, incorporate this philosophy. We
also design, market, and support voice recognition products. Except for iVoice
IVR, which is generally sold directly to end users due to required
customization, iVoice markets and promotes its speech enabled products through
telephony reseller channels and Telephone equipment manufacturer distributor
networks. This allows iVoice to leverage those resellers' existing customer
bases. We


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<PAGE>

may however sell direct to end users in geographic locations where an existing
dealer relationship does not exist. On direct sales orders, the Company is able
to achieve greater profit margins through higher direct selling prices

Products and Services

      Our products use standard open-architecture PC platforms and Microsoft
Windows 2000, NT Server and NT Workstation operating systems, thereby
facilitating the rapid adoption of new PC-based technologies while reducing
overall product costs. We concentrate our development efforts on software rather
than hardware because we believe that the most efficient way to create product
value is to emphasize software solutions that meet customers' needs. We have
traditionally used standard PC-related hardware components in our products, in
part to limit our need to manufacture components however we have recently
developed our software for use with Telephony Application Program Interface or
TAPI. The use of TAPI, allows iVoice to integrate into different telephone
private branch exchange systems or PBX's, eliminating the need for additional
external hardware. iVoice's manufacturing operations consist only of the
installation of our proprietary software and a voiceboard, if required, into a
fully assembled PC system. The Company obtains from suppliers components such as
PCs, circuit boards, application cards, faxboards, and voiceboards.

      Our products include the iVoice Speech Enabled Auto Attendant allowing
businesses to incorporate speech recognition into their telephone systems
without duplicating their current voicemail applications. The Speech Enabled
Auto Attendant uses a customized dictionary of names and extension numbers that
enables callers to contact their party using their spoken voice. Also one our
principal products is iVoice IVR (interactive voice response) Except for iVoice
IVR that is generally sold direct due to requested customization, iVoice markets
and promotes its products to telephony reseller and distributor networks. This
allows iVoice to leverage those resellers' existing customer bases. Our flagship
product is iVoice IVR, an application generator that allows full connectivity to
the most popular databases, including Microsoft Access, Microsoft Excel,
Microsoft Fox Pro, DBase, Btrieve, and Paradox, or to standard text files.
iVoice IVR can be used to read information from, and write information to,
databases, as well as query databases and return information. iVoice IVR
performs over 40 different customizable commands. Properties can be set up for
each command, as if the commands were being executed manually. iVoice IVR links
a phone system to a database to provide customers with 24-hour immediate access
to account information, via telephone. With iVoice IVR, polished IVR
applications are quick and easy to install. No knowledge of computer programming
and minimal database knowledge is needed. iVoice IVR will execute any created
application when a caller dials in. Using DTMF (touch-tone telephones) or speech
activation allows callers to interact with the system. Advanced database
technology permits reading, writing, appending, searching and seeking database
information. A user can record product inventory, set up games, keep a record of
patients or customers, and perform limitless other applications. The advanced,
innovative technology, backed by a simple, easy-to-use drag-and-drop interface,
makes writing applications simple.


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<PAGE>

      The iVoice IVR also incorporates an Internet access tool, which can be
either connected to the IVR system or run as a standalone. This IVR system also
has a graphical user interface and provides for Internet access to the system.
Once logged onto the Internet, a user can gain access to the IRV system by
clicking on a hypertext link for the user's browser. Upon entering the IVR
system, the response prompts are in text form rather than voice form. The user
can enter selections and get information by clicking on icons or choosing items
from menus. Some of the Internet applications available are order processing and
transactions, database integration, questions and queries, account status,
delivery information, funds transfer, and claims information.

      The following is a list of Speech-enabled applications which the Company
has developed and are available for sale

            iVoice IVR (Interactive Voice Response). Enables a caller to obtain
      requested information in voice form from a local or non-local database.
      Examples of IVR range from simply selecting announcements from a list of
      options stored in the computer (also know as Audio Text) to more complex
      interactive exchanges such as querying a database for information. ).
      iVoice IVR allows information in PC databases to be accessed from a
      standard touch-tone telephone using a telephone keypad or voice commands.
      iVoice IVR is sold as a customized turnkey system or as an Application
      Generator giving the end user the ability to develop their own customized
      IVR application.

            Speech Enabled Auto Attendant. Any business can improve and speed up
      service for its customers by enabling them to reach the desired contact
      person or department by simply saying the appropriate name. Our speech
      recognition system is extremely accurate and reliable. Callers no longer
      need to punch in letters on a telephone keypad.

            Unified Messaging. This is a unified inbox application for Windows
      NT auto attendant/voice mail system and Windows NT IVR system. With
      Unified Messaging, e-mail, voice mail and faxes can be handled through a
      desktop PC or the telephone. All messages can be viewed and acted upon in
      order of importance via Microsoft Outlook or a Web Browser. E-mail can
      also be retrieved over the phone, using text-to-speech, and responded to
      with a voice message including directed to a fax machine.

            iVoiceMail. This allows a caller to store voice messages and reply
      via the computer. This method provides the caller to conduct a dialogue
      with another person without having to be on the same line at the same
      time. As with most voice mail systems, the caller can record, store and
      delete messages and direct messages to multiple subscribers.

            iVoice Name Dialer is an automatic phone dialing system. The system
      imports the necessary contact information for dialing (names and phone
      numbers) from a variety of sources including, but not limited to,
      Microsoft Outlook, ACT, and Gold Mine. The imported names are then
      transcribed, through software, into a set of phonemes to be used for voice
      recognition. When the end user picks up the handset, the call is
      automatically transferred through the PBX, to the Name Dialer


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      software running on a server machine. The user simply says the name of the
      person (whose name came from the contact list) and the Name Dialer places
      the call.

            iVoice Speech Directory allows employees to pick up their phone, say
      the name of a co-worker they wish to speak to, and the Speech Directory
      will transfer the call. Just by speaking the person's name, the Speech
      Directory can also return an internal pager number, cell numbers and email
      listings through a voice activated telephony directory.

            Interactive Voice Response/Web Applications. Using the Internet to
      access the IVR system, you "DIAL" the system by clicking on a hypertext
      link from your browser. The system responds the same way, except in text
      form, and not the normal voice prompt. You may enter selections and get
      information by clicking on icons or choosing items from menus.

      We are currently working on upgrading and enhancing existing products,
with the aim of adding to some products, a full toolkit that would enable
natural language recognition allowing the systems to understand spoken sentences
rather than just single words.

Marketing and Distribution

      iVoice is currently focused on developing its dealer and reseller
channels. Management believes it can leverage already existing equipment
manufacturers reseller channels by integrating its speech recognition software
directly into their established revenue producing product lines. We estimate
that each major telephony equipment manufacturer has an estimated 150-600
authorized dealers and resellers throughout North America. The recent
introduction of an entirely TAPI (Telephone Application Program Interface) based
Speech-enabled Auto Attendant and Name Dialer, allows integration into different
PBX systems without the need for additional hardware devices. Although
concentration on resellers is the predominate and preferred sales channel, the
Company also sells directly to end-users via its direct sales force providing
management with information on market trends and customer needs. The direct
channel also provides an avenue more suitable for iVoice IVR applications that
often require customized development, which is usually difficult to provide
through the reseller network.

      Our marketing strategy emphasizes our user-friendly PC-based processing
applications that offer integrated access to a broad range of communication
avenues with other people and information sources. Our strategy is built around
the following basic elements:

            Emphasize software, not hardware. We concentrate our developing
      software that meets our clients' needs, rather than on designing or
      modifying hardware. This allows us to create the most value from our
      products.

            Use of standard, Microsoft Windows-based architecture, open systems
      and hardware. Our products use standard, open-architecture PC platforms
      and


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      operating systems rather than proprietary computer hardware and operating
      systems. As a result, we can quickly adapt to new PC-based technologies,
      leveraging the substantial investments made by third parties in developing
      these new technologies for the PC environment. In addition, using
      available hardware components and software minimizes our manufacturing
      activity and thereby reduces the overall cost of our products.

            Focus on businesses and corporate departments having as many as
      20,000 telephones. Our products are designed for use by businesses and
      corporate departments having as many 20,000 telephones in a wide range of
      markets, including manufacturing, retail, service, healthcare, and
      government. Our products offer these organizations, features offered by
      large, proprietary call processing systems, but at a more affordable
      price.

            Develop user-friendly products. We aim to make our products as easy
      as possible to install, maintain, and use. We accomplish this by
      incorporating product features that can be used without special training
      or manuals. One example of this user-oriented philosophy is exhibited in
      our voicemail product. iVoiceMail has user prompts that encourage
      conversation between callers and subscriber and uses simplified screens
      and menus for ease of installation.

            Minimize distribution overhead. We are able to achieve broad market
      coverage in the U.S. via a nationwide network of independent telephone
      system dealers, and original-equipment-manufacturers, or "OEMs." This
      structure both minimizes our selling overhead and maximizes our product
      exposure, and allows us to focus our resources on product development.

New Products

      In December 2001, we introduced the iVoice Name Dialer that uses Telephony
Application Program Interface or ("TAPI"). The use of TAPI, allows iVoice to
integrate into different telephone private branch exchange systems ("PBX"),
eliminating the need for additional component hardware. Each phone system
hardware provider provides a specific software driver that interfaces directly
with the iVoice Name Dialer. TAPI provides a high-level interface for dialing
and disconnecting. The Name Dialer is an automatic phone dialing system. The
system imports the necessary contact information for dialing (names and phone
numbers) from a users' contact management software such as Microsoft Outlook,
ACT, and Gold Mine. The imported names are then transcribed, through our
software, into a set of phonemes to be used for voice recognition. When the user
picks up the handset, the call is automatically transferred through the PBX, to
the Name Dialer software running on a server machine. The user simply says the
name of the person (whose name came from the contact list) and the Name Dialer
places the call.

      iVoice is currently distributing demonstration copies of the Name Dialer
to resellers and distributors to determine customer interest and marketability.

Competition


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      The voice-recognition industry is highly competitive, and we believe that
this competition will intensify. The segment of the industry that supplies
call-processing systems to businesses is also extremely competitive. Many of our
competitors have longer operating histories, significantly greater financial,
technical, product development, and marketing resources, greater name
recognition or larger client bases than we do.

      For example, industry analysts recognize Nuance Communications, Inc., and
SpeechWorks International, Inc. as the market leaders in voice recognition
software. Customers of Nuance include American Airlines, Bell Atlantic, Charles
Schwab, Sears and UPS. Nuance offers products through industry partners,
platform providers, and value-added resellers around the world. Corporate
investors in Nuance include Cisco Systems, Intel, Motorola, SAIC, Siebel
Systems, SRI International, Sun Microsystems, and Visa International.
SpeechWorks customers include America Online, First Union National Bank,
Microsoft, Thrifty Car Rental and United Airlines.

      On a more directly competitive scale, other companies that produce
computerized telephony systems that incorporate speech recognition into their
products such as the iVoice Speech-enabled Auto Attendant include companies like
Locus Dialogue, Phonetic Systems and Sound Advantage. Management believes that
the iVoice Speech-enabled Auto Attendant has competitive advantages based upon
product features, the accuracy of the speech recognition and product pricing.

Suppliers

      Our suppliers include Dialogic Corporation (an Intel company) that
distributes through a network of resellers for voiceboards, and iTox, Inc.,
Amer.com, Inc. and Ingram-Micro, Inc., for computer components. Since our
products are based and run on standard PC architecture and as result of the
Company's recent integration with TAPI, the Company does not rely on any one
specific supplier for its system components. We have not experienced any supply
shortages with respect to the components used in systems or developed
applications.

Customers

      Direct customers are comprised of businesses, organization and corporate
departments that use telephones as a principal means of communications.
Specifically, the end users of our products seek to automate the call process
for incoming callers in order to improve customer service and increase
productivity. The iVoice Speech-enabled Auto Attendant and iVoice IVR seek to
fulfill these customer needs. Customers who seek to automate the call process
for outbound calling are primary targets for the iVoice Name Dialer and iVoice
Patient Reminder.

      Wholesale customers include value added resellers and distributors of
telephony equipment throughout North America.

      For the year ended December 31, 2001, no one customer represented more
than 10% of our total revenues. iVoice does not rely on any one specific
customer for any significant portion of its revenue base.


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      We generally require customers to pay 50% down on any turnkey applications
purchased, with the balance due when installation has been completed. Software
only sales require COD or prepayment before shipping except for dealers and
resellers, which subject to credit approval are given 30 day payment terms.
iVoice accepts company checks or Visa/Mastercard.

      Approximately 70% of our revenues are derived from customers located in
the northeast U.S.; the remaining 30% are from customers located elsewhere in
the continental U.S.

Patents and Trademarks

      The Company currently has ten (10) patent applications pending with the
United States Patent and Trademark Office for speech enabled applications that
it has developed internally. These applications include various versions of the
"iVoice Speech Enabled Name Dialer", the "Voice Activated Voice Operated
Copier", the "Voice Activated Voice Operational Universal Remote Control", and
the "Voice Activated, Voice Responsive Product Locator."

      In February 2002, the Company filed a Trademark application for its
'iVoice' logo and approval is pending.

Government Regulation

      The Company is subject to all pertinent Federal, State, and Local laws
governing its business. The Company is subject to licensing and regulation by a
number of authorities in its State or municipality. These may include health,
safety, and fire regulations. The Company's operations are also subject to
Federal and State minimum wage laws governing such matters as working conditions
and overtime.

      The Company is not subject to any necessary government approval or license
requirement in order to market, distribute or sell its principal or related
products other than ordinary Federal, State, and Local laws which governs the
conduct of business in general. The Company is unaware of any pending or
probable government regulations that would have any material impact on the
conduct of business.

Research and Development

      Our research and development efforts focus on enhancing our existing
product line and the development of new products that integrate with our
existing products. We continually seek to improve our core speech recognition
technology through ease of use, broader application and increased accuracy.
iVoice employs qualified technical personnel to strengthen our product line and
maintain a competitive edge. In 2001, research and development expenditures
consisted of $380,692 in salaries and wages to the Company's technical staff and
$6,773 for technical hardware supplies, software tool-kits and technical
publications. In the year 2000, the Company spent $406,106 in technical salaries
and wages and $17,361 for related supplies, tools and publications.


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Reductions in amounts expended were deemed necessary for the conservation of
capital resources.

Licenses

      We have purchased a worldwide, non-exclusive, irrevocable, royalty-free,
fully paid license from Entropic, Inc., a Microsoft company, to incorporate
their speech engine into customized software applications for our customers. We
also have non-exclusive license agreements with Lernout & Hauspie Speech
Products and Fonix Corporation, each of which allows us to incorporate their
text-to-speech software into our applications so clients can listen to e-mail
messages from any telephone.

Employees

      As of December 31, 2001, we employed 11 individuals, consisting of 8
full-time employees and 3 part-time employees. None of our employees are
represented by a labor organization and we are not a party to any collective
bargaining agreements.

      In addition to other information in this Annual Report on Form 10-KSB, the
following important factors should be carefully considered in evaluating the
Company and its business because such factors currently have a significant
impact on the Company's business, prospects, financial condition and results of
operations.

Forward Looking Statements - Cautionary Factors

Certain statements in this report on Form 10-KSB contain "forward-looking
statements" within the meaning of the Private Securities Litigation Act of 1995.
These statements are typically identified by their inclusion of phrases such as
"the Company anticipates", or "the Company believes", or other phrases of
similar meaning. These forward-looking statements involve risks and
uncertainties and other factors that may cause the actual results, performance
or achievements to differ from any future results, performance or achievements
expressed or implied by such forward-looking statements. Except for the
historical information and statements contained in this Report, the matters and
items set forth in this Report are forward looking statements that involve
uncertainties and risks some of which are discussed at appropriate points in the
Report and are also summarized as follows:

We will need additional financing in the next twelve months..

      Based on our potential rate of cash operating expenditures and our current
plans, we will need to secure financing within the next twelve months to
continue operations. We unsure whether it can secure sufficient financing to
meet its current operating requirements. There can be no assurances that we will
be successful in procuring financing to meet our current obligations or
financing sufficient to enable us to meet our business plan objectives, or that
such financing will be available on terms acceptable to the Company. It should
be expected that any future debt or equity financing arrangement may dilute the
ownership of existing shareholders.


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We have a history of losses, expect to encounter future losses and may not
achieve or sustain profitability.

      To date, we have incurred significant losses. As of December 31, 2001, our
accumulated deficit was $12,430,869. We will incur operating losses in the
future until sales of our voice-recognition systems exceed our administrative,
selling, and research-and-development costs. This may never happen.

Our accountants have expressed substantial doubt about our ability to continue
as an operating concern.

      In connection with the reports on our consolidated financial statements
for the fiscal years ending December 31, 2001 and 2000, our independent
certified public accountants expressed substantial doubt about our ability to
continue operating as a going concern. Their doubt was based on our low levels
of cash, our negative working capital, and our failure to establish a source of
revenues sufficient to cover our operating costs.

                                 Our Operations

We have a limited operating history.

      We did not begin our voice-recognition business until December 1997.
Accordingly, we have a limited operating history on which to base your
evaluation of our business and prospects.

The voice-recognition business is in its infancy.

      Our prospects are subject to the difficulties frequently encountered by
companies in the early stage of development in new and evolving markets. These
difficulties include the following:

o     substantial delays and expenses related to testing and developing of our
new products;

o     marketing and distribution problems encountered in connection with our new
and existing products and technologies;

o     competition from larger and more established companies;

o     delays in reaching our marketing goals;

o     difficulty in recruiting qualified employees for management and other
positions;

o     lack of sufficient customers, revenues and cash flow; and

o     limited financial resources.


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<PAGE>

      We may continue to face these and other difficulties in the future, some
of which may be beyond our control. If we are unable to successfully address
these problems, our business will suffer.

We cannot accurately forecast our future revenues and operating results, which
may fluctuate.

      Our short operating history and the rapidly changing nature of the markets
in which we compete make it difficult to accurately forecast our revenues and
operating results. Furthermore, we expect our revenues and operating results to
fluctuate in the future due to a number of factors, including the following:

o     the timing of sales of our products and services, particularly given that
we depend on a relatively small number of large orders;

o     the timing of product implementation, particularly large design projects;

o     unexpected delays in introducing new products and services;

o     increased expenses, whether related to sales and marketing, product
development, or administration;

o     deferral in the recognition of revenue in accordance with applicable
accounting principles, due to the time required to complete projects;

o     the mix of product license and services revenue; and

o     costs related to possible acquisitions of technology or businesses.

We may fail to develop new products, or may incur unexpected expenses or delays.

      Although we currently have fully developed products available for sale, we
are also developing various products and technologies and will rely on them to
remain competitive. Due to the risks inherent in developing new products and
technologies--limited financing, competition, obsolescence, loss of key
personnel, and other factors--we may fail to develop these technologies and
products, or may experience lengthy and costly delays in doing so. Although we
may be able to license some of our technologies in their current stage of
development, we cannot assure that we will be able to do so.

Our technologies and products could contain defects.

      Voice-recognition products are not currently accurate in every instance,
and may never be. Furthermore, we could inadvertently release products and
technologies that contain defects. In addition, third-party technology that we
include in our products could contain defects. Clients who are not satisfied
with our products or services could bring claims against us for substantial
damages. Such claims could cause us to incur significant legal expenses and, if
successful, could result in the plaintiffs being awarded significant damages.


                                       13
<PAGE>

We face significant competition.

      The call-processing and voice-recognition industries are highly
competitive, and we believe that this competition will intensify. The segment of
the industry that supplies call-processing systems to businesses is also
extremely competitive. Many of our competitors have longer operating histories,
significantly greater financial, technical, product development, and marketing
resources, greater name recognition or larger client bases than we do. For
example, industry analysts recognize Nuance Communications, Inc., and
SpeechWorks International, Inc. as the market leaders. Customers of Nuance
include American Airlines, Bell Atlantic, Charles Schwab, Sears and UPS. Nuance
offers products through industry partners, platform providers, and value-added
resellers around the world. Corporate investors in Nuance include Cisco Systems,
Intel, Motorola, SAIC, Siebel Systems, SRI International, Sun Microsystems, and
Visa International. SpeechWorks customers include America Online, First Union
National Bank, Microsoft, Thrifty Car Rental and United Airlines.

We may be unable to protect our trademarks and proprietary rights.

      To succeed, we will need to protect our intellectual property rights. To
date, we have filed ten (10) patent applications for for internally developed
applications. Each of the foregoing applications may not be approved. To
maintain the confidentiality of our trade secrets, we require our employees,
consultants, and distributors to enter into confidentiality agreements, but
these agreements afford us only limited protection and can be time-consuming and
expensive to obtain and maintain. Monitoring for unauthorized use of our
intellectual property is difficult, and we cannot be certain that the steps we
have taken will be effective to prevent unauthorized use. We may have to
litigate to enforce our trade secrets; such lawsuits, regardless of their
merits, would likely be time consuming and expensive and would divert
management's time and attention away from our business.

We may unintentionally infringe on the proprietary rights of others.

      Many lawsuits currently are being brought in the software industry
alleging violation of intellectual property rights. In addition, a large number
of patents have been awarded in the voice-recognition area. Although we do not
believe that we are infringing on any patent rights, patent holders may claim
that we are doing so. Any such claim would likely be time-consuming and
expensive to defend, particularly if we are unsuccessful, and could prevent us
from selling our products or services. In addition, we may also be forced to
enter into costly and burdensome royalty and licensing agreements.

We may be unable to obtain component products from our vendors.

      We purchase major components of our products from outside suppliers. At
any given time we may find ourselves unable to obtain those components, which
could prevent us from meeting customer demand.

We may be unable to attract and retain qualified employees, and we depend upon
key employees.


                                       14
<PAGE>

      Our future success depends on our finding, hiring, training, motivating,
and retaining highly qualified technical, managerial, and other personnel, but
we may not be able to meet our needs in this regard, given the considerable
competition for qualified employees. If we lose the services of any of our
executive officers or other key employees, our business could suffer.

We may be unable to manage our significant growth.

      We intend to continue to expand our business operations significantly.
Such growth would require us to expand our management, operational, financial,
and human resources systems and could strain the capacity of our current
management team.

                                 Our Securities

We do not expect to pay dividends in the foreseeable future.

      We intend to retain any future earnings to finance the growth and
development of our business. Therefore, we do not expect to pay any cash
dividends in the foreseeable future. Any future dividends will depend on our
earnings, if any, and our financial requirements.

Our stock price is volatile.

      The market price of our common stock has been and is likely to continue to
be volatile and could be subject to wide fluctuations in response to quarterly
variations in operating results, announcements of technological innovations or
new products by us or our competitors, changes in financial estimates by
securities analysts, overall equity market conditions, or other events or
factors. Because our stock is more volatile than the market as a whole, our
stock is likely to be disproportionately harmed by factors that significantly
harm the market, such as economic turmoil or political uncertainty, even if
those factors do not relate to our business. In the past, securities class
action litigation has often been brought against companies following periods of
volatility in the market price of their securities. If securities class action
litigation is brought against us, such litigation could result in substantial
costs and would divert management's attention and resources.

Trading in our common stock may be limited.

      Our common stock is quoted on the OTC Bulletin Board. The OTC Bulletin
Board is not, however, an exchange, and trading in securities on the OTC
Bulletin Board is often more sporadic than trading in securities listed on an
exchange or NASDAQ. Consequently, you may have difficulty reselling any shares
of our Class A common stock that you purchase from the selling stockholders.

Because "penny stock" rules apply to trading in our Class A common stock, you
may find it difficult to sell the shares you purchase in this offering.


                                       15
<PAGE>

      Our Class A common stock is a "penny stock," as it is not listed on an
exchange and trades at less than $5.00 a share. Broker-dealers who sell penny
stocks must provide purchasers of these stocks with a standardized
risk-disclosure document prepared by the Securities and Exchange Commission, or
the "SEC." This document provides information about penny stocks and the nature
and level of risks involved in investing in the penny-stock market. A broker
must also give a purchaser, orally or in writing, bid and offer quotations and
information regarding broker and salesperson compensation, make a written
determination that the penny stock is a suitable investment for the purchaser,
and obtain the purchaser's written agreement to the purchase. Consequently, the
penny stock rules may make it difficult for you to sell your shares of our Class
A common stock.

One of our officers and directors controls a significant percentage of our Class
A common stock.

      As of December 31, 2001, Jerome R. Mahoney, our President and Chief
Executive Officer, owned approximately 38.8% of our outstanding voting shares.
Mr. Mahoney is able to influence all matters requiring stockholder approval,
including election of directors and approval of significant corporate
transactions. This concentration of ownership, which is not subject to any
voting restrictions, could limit the price that investors might be willing to
pay for our Class A common stock. In addition, Mr. Mahoney is in a position to
impede transactions that may be desirable for other stockholders. He could, for
example, make it more difficult for anyone to take control of us.

Future sales of our Class A common stock could cause our stock price to decline.

      The sale of a large number of our shares, or the perception that such a
sale may occur, could lower our stock price. Such sales could make it more
difficult for us to sell equity securities in the future at a time and price
that we consider appropriate. As of December 31, 2001, approximately 61,900,000
shares of our Class A common stock could be considered "restricted securities"
and saleable only upon registration under the Securities Act of 1933, upon
compliance with Rule 144 of the Securities Act, or pursuant to another exemption
from registration. Many of these shares will be eligible for sale in the public
market in 2002.

Issuance of our reserved shares of Class A common stock may significantly dilute
the equity interest of existing stockholders.

      We have reserved for issuance, shares of our Class A common stock upon
exercise or conversion of stock options, warrants, or other convertible
securities that are presently outstanding. Issuance of these shares will have
the effect of diluting the equity interest of our existing stockholders and
could have an adverse effect on the market price for our Class A common stock.
As of December 31, 2001, we had approximately 232,000,000 shares of Class A
common stock reserved for possible future issuance.

We are in breach of obligations relating to our 12% senior convertible
debentures.


                                       16
<PAGE>

      Holders of our 12% senior convertible debentures have told us that we have
breached a number of the terms of the debentures and the related registration
rights agreement and security agreement. Breach of the terms of the debentures
could result in the following: (1) a 20% increase in the principal amount of the
debentures; (2) an increase in the debentures' annual interest rate to 15%
commencing seven days after the date of default through the date that the
debentures are converted or repaid; and (3) the debentures immediately becoming
due in full. Additionally, we have not registered the shares issuable upon
conversion of the debentures. This could result in our being required to pay
liquidated damages of 2.5% per month of the principal amount of the debentures
from November 7, 1999, the date on which we were required to register the
shares. These increased interest amounts and liquidating damages have not been
accrued and do not appear on our financial statements. We anticipate having to
issue additional shares to settle the debenture holders, claims arising from our
default on the 12% senior convertible debentures.

      We have settled with one previous holder of debentures regarding the
interest and penalties demanded by this former holder. As part of this
settlement, we issued 450,000 shares of our Class A common stock to this former
holder in full satisfaction of its claims.

      We are endeavoring to settle with the remaining debenture holders
attempting to resolve the default issues in a mutually favorable manner. If we
are unable to do so, we may be forced to pay the debenture holders amounts
substantially in excess of our original obligations under the debentures.

Reports to Security Holders

      The Company is a "reporting company" and it files reports with the
Securities and Exchange Commission. In this regard, the Company files quarterly
reports on Form 10-QSB, annual reports on Form 10-KSB and as required, files
reports on Form 8-K.

      The public may read and copy any materials the Company files with the
Securities and Exchange Commission at the Commission's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by call the Commission
at 1-800-SEC-0330. The Commission maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the Commission. The Internet address of
the Commission's site is (http://www.sec.gov).

Item 2. Description of Property.

      The Company does not own any real property for use in its operations or
otherwise.

      The Company leases its headquarters located at 750 Highway 34, Matawan,
New Jersey. On December 5, 2001 the Company renegotiated the former lease for
these premises reducing the square footage occupied by the Company from
approximately 8,000 to approximately 4,200 square feet of space. The new lease
is for a period of eight


                                       17
<PAGE>

months at a cost of $7,000 per month. Upon expiration of the lease term, the
Company can opt to enter a new lease for its current premises.

      The Company maintains a good relationship with its landlord and believes
that its current facilities will be adequate for the foreseeable future.

Item 3. Legal Proceedings.

      We have been named a defendant in a lawsuit brought about by Communication
Research, Inc., ("CRI") In this lawsuit, CRI makes claims against us of
constructive eviction, trespass, breach of contract, conversion, interference
with economic relations, and quantum merit. On March 4, 2002 a judgement in the
amount of $31,977.89 was entered against iVoice in the Superior Court of New
Jersey in Bergen County. iVoice has filed for a motion for reconsideration and
rehearing with respect to this judgment and a formal appeal is pending.

      We have been named as a defendant in a lawsuit brought by Lighthouse
Technical Consulting, Inc. filed July 9, 2001. In this lawsuit, the plaintiff is
claiming that we failed to pay Lighthouse $15,000 for placement services it
performed for us. Upon filing a Motion to Dismiss the Complaint, the complaint
was dismissed without prejudice on December 21, 2001.

      We have been named as a defendant in a lawsuit brought by Business
Staffing, Inc. filed April 12, 2001. In this lawsuit, the plaintiff claims
non-payment of $37,250 for placement services performed by Business Staffing. In
non-binding arbitration, the aribtrator determined an amount of $19,250 to be
owing to the plaintiff for services performed. This entire amount has previously
accrued and presents no impact to the financial position of iVoice. Management
is considering a request for trial and intends to vigorously defend itself
against this claim

      The Company has filed suit against PanAm Wireless, Inc. the parent company
of Celpage, Inc. for breach of contract related to the installation of a
196-port Integrated Voice Response System at the customer's Guaynabo, Puerto
Rico location. PanAm has refused to accept the remaining ports citing a
shortfall in their projected subscriber base. Subsequent to the filing and in
response to our claim, PanAm Wireless has entered a counterclaim against iVoice
alleging iVoice's failure to supply PanAm Wireless with the required equipment
and that the system did not provide the specified services specified in their
purchase order. iVoice denies PanAm Wireless' counterclaim allegations and
intends to vigorously defend itself in this suit.

      The Company is subject to litigation from time to time arising from its
normal course of operations. Currently, none of the open litigation matters
relate to the Company's products, product installations or techincal services
provided. Management does not believe that any such litigation and claims that
have arisen will have a material effect on the Company's financial position or
results of operations.

Item 4. Submission of Matters to a Vote of Security Holders.


                                       18
<PAGE>

No matters were submitted to a vote of the holders of the Company's Common Stock
during the last quarter of its fiscal year ended December 31, 2001.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

Market Information

      Our common stock is quoted on the OTC Bulletin Board under the symbol
"IVOC." The following table shows the high and low closing prices for the
periods indicated.

                           High                       Low
                           ----                       ---
      2000

      First Quarter        $5.9375                    $0.2900
      Second Quarter       $2.2812                    $0.3438
      Third Quarter        $0.7031                    $0.3281
      Fourth Quarter       $0.4900                    $0.0950

      2001

      First Quarter        $0.4000                    $0.0950
      Second Quarter       $0.1700                    $0.0500
      Third Quarter        $0.0820                    $0.0430
      Fourth Quarter       $0.0900                    $0.0400

Holders of Common Equity.

      As of December 31, 2001, the number of record holders of our common shares
was approximately 455.

Dividend Information.

      To date, the Company has never paid a dividend. We have no plans to pay
any dividends in the near future. We intend to retain all earnings, if any, for
the foreseeable future, for use in our business operations.

Sales of Unregistered Securities.

In the year ending December 31, 2001, the Company issued the following
unregistered securities pursuant to various exemptions from registration under
the Securities Act of 1933:

      We issued 4,394,287 shares of our Class A common stock to various parties
for consulting and legal services rendered to the Company valued at $545,205.


                                       19
<PAGE>

      We issued 2,183,834 shares of our Class A common stock at various times
during the year as compensation to Company employees valued at $234,432.

      On June 14, 2001, we issued 828,000 previously registered shares and
850,000 restricted shares of our Class A common stock as payment for termination
of the Swartz Financing Agreement valued at $154,830.

      On April 25, 2001, we issued 450,000 shares of our Class A common stock to
a holder of our 12% convertible debentures as settlement for failure to register
shares under the registration rights agreement related to the 12% convertible
debentures valued at $56,250.

      On January 30, 2001, we issued 328,951 shares of our Class A common stock
as repayment of amounts owed to related parties valued at $75,659.

      We issued 2,996,738 shares of our Class A common stock at various times
during the year, for the repayment of $142,200 in principal and $6,559 in
interest on our 12% Convertible Debentures.

      On November 20, 2001, we issued 1,000,000 shares of our Class A common
stock for the conversion of 10,000 shares of our Class B common stock.

      We relied upon the exemption provided in Section 4(2) of the Securities
Act and/or Rule 506 thereunder, which cover "transactions by an issuer not
involving any public offering," to issue securities discussed above without
registration under the Securities Act of 1933. The Company made a determination
in each case that the person to whom the securities were issued did not need the
protections that registration would afford. The certificates representing the
securities issued displayed a restrictive legend to prevent transfer except in
compliance with applicable laws, and our transfer agent was instructed not to
permit transfers unless directed to do so by our Company, after approval by our
legal counsel. The Company believes that the investors to whom securities were
issued had such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of the prospective investment. The
Company also believes that the investors had access to the same type of
information as would be contained in a registration statement.

Description of Securities

      Pursuant to our certificate of incorporation, as amended on August 24,
2001, we are authorized to issue 600,000,000 shares of Class A common stock, par
value $0.001 per share, 3,000,000 shares of Class B common stock, no par value
and 1,000,000 shares of preferred stock, par value of $1.00 per share.

Class A Common Stock

      Each holder of our Class A common stock is entitled to one vote for each
share held of record. Holders of our Class A common stock have no preemptive,
subscription,


                                       20
<PAGE>

conversion, or redemption rights. Upon liquidation, dissolution or winding-up,
the holders of Class A common stock are entitled to receive our net assets pro
rata. Each holder of Class A common stock is entitled to receive ratably any
dividends declared by our board of directors out of funds legally available for
the payment of dividends. We have not paid any dividends on our common stock and
do not contemplate doing so in the foreseeable future. We anticipate that any
earnings generated from operations will be used to finance our growth.

      A total of 158,625,029 shares of Class A common stock were issued and
158,025,029 shares were outstanding as of March 5, 2002.

Class B Common Stock

      Each holder of Class B common stock has voting rights equal to 100 shares
of Class A common stock. Holders of Class B common stock are not entitled to
receive dividends. Jerome R. Mahoney is the sole owner of the Class B common
stock, of which there are 3,000,000 shares authorized and 354,000 shares issued
and outstanding as of March 5, 2002. A holder of Class B common stock has the
right to convert each share of Class B common stock into 100 shares of Class A
common stock. Upon our liquidation, dissolution, or winding-up, holders of Class
B common stock will not be entitled to receive any distributions.

      There are no cumulative voting rights with respect to election of
directors, so holders of more than 50% of the outstanding shares of Class A
common stock can elect all of the directors if they choose to do so.

Preferred Stock

      On August 24, 2001, we filed a certificate of amendment to our certificate
of incorporation, authorizing us to issue 1,000,000 shares of preferred stock,
par value $1.00 per share. As of March 5, 2002, we have not issued any shares of
preferred stock.

      Our board of directors is authorized (by resolution and by filing an
amendment to our certificate of incorporation and subject to limitations
prescribed by the General Corporation Law of the State of Delaware) to issue,
from to time, shares of preferred stock in one or more series, to establish from
time to time the number of shares to be included in each series, and to fix the
designation, powers, preferences and other rights of the shares of each such
series and to fix the qualifications, limitations and restrictions thereon,
including, but without limiting the generality of the foregoing, the following:

      o     the number of shares constituting that series and the distinctive
            designation of that series;

      o     the dividend rate on the shares of that series, whether dividends
            are cumulative, and, if so, from which date or dates, and the
            relative rights of priority, if any, of payment of dividends on
            shares of that series;


                                       21
<PAGE>

      o     whether that series has voting rights, in addition to voting rights
            provided by law, and, if so, the terms of those voting rights;

      o     whether that series has conversion privileges, and, if so, the terms
            and conditions of conversion, including provisions for adjusting the
            conversion rate in such events as our board of directors determines;

      o     whether or not the shares of that series are redeemable, and, if so,
            the terms and conditions of redemption, including the dates upon or
            after which they are redeemable, and the amount per share payable in
            case of redemption, which amount may vary under different conditions
            and at different redemption dates;

      o     whether that series has a sinking fund for the redemption or
            purchase of shares of that series, and, if so, the terms and amount
            of that sinking fund;

      o     the rights of the shares of that series in the event of voluntary or
            involuntary liquidation, dissolution or winding up of iVoice, and
            the relative rights of priority, if any, of payment of shares of
            that series; and

      o     any other relative powers, preferences and rights of that series,
            and qualifications, limitations or restrictions on that series.

      If we liquidate, dissolve or wind up our affairs, whether voluntarily or
involuntarily, the holders of preferred stock of each series will be entitled to
receive only that amount or those amounts as are fixed by the certificate of
designations or by resolution of the board of directors providing for the
issuance of that series.

Options and Warrants

      As of December 31, 2001, our employees held options to purchase 1,946,083
shares of our Class A common stock. These options were granted to our employees
under our 1999 Stock Option Plan. The exercise prices ranged from $0.06 to $3.75
per share. All options issued to employees vest at 25% per year and expire in 5
years. As of December 31, 2001, 265,583 of the options were exercisable.

      As of December 31, 2001, we had outstanding, to persons other than
employees, warrants to purchase 6,558,260 shares of our Class A common stock.
These warrants have exercise prices ranging from $0.047 per share to $2.00 per
share. These warrants will expire at various times between January 1, 2001 and
May 1, 2006.

Debt

      As of December 31, 2001, we had outstanding, two series of convertible
debentures that are convertible into the company's Class A common stock at the
option of the holder.

      Our 12% debentures are convertible into shares of the Company's Class A
Common Stock at the option of the holder by dividing the outstanding principal
and


                                       22
<PAGE>

interest by the conversion price which shall equal 50% of the average bid price
during the 20 trading days before the conversion date. As of December 31, 2001,
$305,200 in principal of the 12% debentures and $6,559 in accrued interest had
been converted into 2,996,738 shares of the Company's Class A common stock.
Total outstanding principal balance of the 12% convertible debentures at
December 31, 2001 was $194,800 plus accrued interest of $82,514.

      Our 8% debentures are convertible into Class A common shares at the lesser
of (i) 140% of the closing bid price for the Common Stock on the Closing Date,
or (ii) 80% of the average of the three lowest closing bid for the 22 trading
days immediately preceding the date of conversion. As of December 31, 2001,
$260,000 in principal of the 8% debentures and $7,324 in accrued interest had
been converted into 7,149,992 shares of the Company's Class A common stock.
Total outstanding principal balance of the 8% convertible debentures at December
31, 2001 was $165,000 plus accrued interest of $3,936.

Item 6. Management's Discussion and Analysis or Plan of Operation.

      This discussion and analysis of our financial condition and results of
operations includes "forward-looking" statements that reflect our current views
with respect to future events and financial performance. We use words such as we
"expect," "anticipate," "believe," and "intend" and similar expressions to
identify forward-looking statements. You should be aware that actual results may
differ materially from our expressed expectations because of risks and
uncertainties inherent in future events, and you should not rely unduly on these
forward looking statements. We will not necessarily update the information in
this discussion if any forward-looking statement later turns out to be
inaccurate.

      This discussion and analysis of financial condition and results of
operations should be read in conjunction with our Financial Statements included
in this filing.

Plan of Operation.

      To date, iVoice has incurred substantial losses, does not produce enough
cash from operations to cover its operating cash requirements and will require
additional financing in the next twelve months. This financing may include the
issuance of common stock or instruments that are convertible into common stock,
which have a dilutive effect on current shareholders. We are unsure whether we
will be able to secure sufficient financing to meet our current operating
requirements. We are searching for potential merger candidates with compatible
technology and products, which Management feels may make financing more
appealing to potential investors, although we have not entered into any
agreements or letters of intent to, bind us.

      Recently, iVoice has announced that it has met interoperability standards
with several leading PC-based Private Branch Exchange (or PBX) manufacturers for
its award winning product, iVoice Speech-enabled Auto Attendant. To date,
rigorous testing and compatibility studies have developed into co-marketing
arrangements with 3Com, for its


                                       23
<PAGE>

NBX(R) platform, Artisoft for its TeleVantage(R) Communication server, and
AltiGen's AltiServ(R) phone systems. These recent platform integrations add to
several others previously completed including a Siemens Ready(TM) certification,
NEC Fusion Strategic Alliance and Sprint North Supply. Through these
co-marketing arrangements and strategic alliances, iVoice will attempt to
capture significant market share in the business communication solution market
by expanding distribution through these manufacturers' authorized reseller
networks.

      iVoice is currently focused on developing its dealer and reseller
channels. Management believes it can leverage already existing equipment
manufacturers reseller channels by integrating its speech recognition software
directly into their established revenue producing product lines. Each
manufacturer has an estimated 150-600 authorized dealers and resellers
throughout North America. The recent introduction of an entirely TAPI (Telephone
Application Program Interface) based Speech-enabled Auto Attendant and Name
Dialer, allows integration into different PBX systems without the need for
additional hardware devices. These integration changes should provide for
greater appeal to telephony re-sellers allowing for more economical customer
installations with no change in software pricing iVoice charges for its
software.

      Beginning in January 2002, in order to promote the iVoice Speech-enabled
Auto Attendant; the Company began a promotional program whereby it would sell to
authorized dealers and resellers of 3Com, Artisoft and AltiGen, a demonstration
copy of Speech-enabled Auto Attendant software. For the two months ending
February 28, 2002, iVoice has shipped over 50 copies to prospective dealers.

      Unless special arrangements are made, the Company receives 50% of the
contract as a down payment on any product purchased with the balance due upon
completion of the installation. The Company recognizes its revenue using the
percentage of completion method. The Company determines the expected costs on a
particular installation by estimating the hardware costs and anticipated labor
hours to configure and install a system. Revenues are then recognized in
proportion to the amount of costs incurred as of the reporting date over the
total estimated costs anticipated. The Company accepts company checks or
Visa/Mastercard.

      The Company's Research & Development efforts have produced greater product
reliability and have added features to existing products already available for
sale making our products highly competitive in the marketplace.

      Provided sufficient funding is obtained, the Company intends to hire
additional personnel in the next twelve months particularly in the sales
department.

December 31, 2001 compared to December 31, 2000

      Sales for the year ended December 31, 2001 were $425,948, a decrease of
$297,098 or 41.1% over the prior years sales of $723,046. The decrease was
largely attributable to weak economic conditions resulting in weak demand for
the Company's


                                       24
<PAGE>

products, coupled with the Company's lack of sufficient capital resources to
effectively develop a successful sales campaign. For the three months ending
December 31, 2001, the Company recorded sales of $122,000 as compared to $45,984
for the three months ending December 31, 2000, an increase of $76,016 or 165.3%.

      The Company is currently in discussions and has submitted a proposal to
speech-enable a leading telephone equipment manufacturer's proprietary voice
mail product. If accepted and with successful completion, the Company stands to
significantly increase its operating revenues through potential royalty
arrangements with the manufacturer. This is a significant project that requires
time, effort and professional care. We believe that our technical experience in
product design, development, integration and installation can produce a
successful engagement. Management strongly believes that integrating its speech
engine technology with other telephony products will provide superior product
offerings and greatly benefit both organizations.

      The Company anticipates it will be awarded a contract for a pilot program
to provide a major retail chain with a speech-enabled product locator. If
successful, the Company could experience a significant increase in revenues and
income from operations resulting from the potential installation of a product
locator in the customers retail locations throughout North America.

      The Company's gross profit for the year ended December 31, 2001 was
$258,719, a decrease of $161,432 or 38.4% compared to $258,719 for the year
ending December 31, 2000. The Company's gross margin percentage for the twelve
months ended December 31, 2001 was 60.7% versus 58.1% for the prior year. This
represents a 2.6% increase over the gross profit percentage recorded for the
same prior year period. The gross margin is dependent, in part, on product mix,
which fluctuates from time to time; complexity of a communication system
installation which determines necessary hardware requirements and may not have a
proportionate relationship with the system selling price; and the ability of
Company technology personnel to efficiently configure and install the Company's
communicaitons products. The dollar amount of gross profit has decreased due to
reduced revenues for the comparative periods however margin percentages are
consistent with prior periods with variances due only to product mix

      Operating expenses increased from $2,678,310 for the year ended December
31, 2000 to $3,035,994 for the year ended December 31, 2001 an increase of
$357,684 or 13.3%. Material changes in specific line items of operating expenses
include an increase in payroll costs of $559,543 which includes accruals for
reimbursement to the Company's principal shareholder, Jerome R. Mahoney, for a
charitable donation of his personal holdings of iVoice Class A common stock for
a total value of $350,000 and reimbursement for income tax incurred by Mr.
Mahoney for sales of Class A common stock which were sold in order to provide
working capital to the Company totalling $95,100. Also contributing to the
increase in operating expense was a charge of $56,250 for a reduction in the
strike price on warrants previously issued by the Company. This amount was not
incurred in the previous period. Rent expense also increased by $30,835. due to
the reflection of a full years rent for the Company's headquarters in Matawan
where the prior year included only eight months.Offsetting the increases in the
specific


                                       25
<PAGE>

operating expense items described above were a reduction in employee recruiting
fees amounting to $153,143, bad debt expense of $50,387 and a reduction in
advertising and promotional expense totalling $46,875.

      Throughout 2001, the Company reduced it staff from 21 employees at
December 31, 2000 to its current staff of 11 comprised of 8 full-time and 3
part-time individuals primarily to preserve its cash resources.

      The net loss from operations for the year ending December 31, 2001 was
$2,777,275 compared to $2,258,159 for the year ended December 31, 2000. This
decrease of $519,116 was a result of the decrease in net revenues and gross
profit from year to year combined with an increase in current year operating
expenses as described above.

      Other expense, comprised only of interest expense, increased $36,941 to
$670,161 in the year ended December 31, 2001 compared to $633,220 in 2000.
Interest expense reflects interest and discount amortization on the Company's
outstanding convertible debentures which were outstanding for most of the year
2001 and 2000.

Liquidity and Capital Resources

      We have funded our operations principally from (1) loans from our
principal stockholder; (2) proceeds of the sale of convertible debentures; (3)
proceeds from the exercise of warrants; and (4) sales of our products. To date,
we have had difficulty in raising sufficient cash to effectively implement our
business plan, and we are unsure whether we can secure sufficient financing to
meet our current operating requirements.

      On December 21, 2001, we filed a Registration Statement on Form SB-2 to
register 50,000,000 of our shares in connection with our proposed offering of
$300,000 in 8% convertible debentures with Beacon Capital, LLC. Based on
comments received by the SEC relating to the terms and conditions of the
subscription agreement and on advice of counsel, on February 20, 2002, we
withdrew the Registration Statement with the SEC and cancelled the subscription
agreement with Beacon Capital, LLC. This subscription agreement would have
provided short-term working capital requirements and as a result we will need
additional financing in the next several months.

       We are currently considering several proposals for additional financing
which should enable us to continue in operation for the continuation of the
fiscal year. To date, the Company has had difficulty in raising sufficient cash
to effectively implement its business plan. Management is unsure whether it can
secure sufficient financing to meet its current operating requirements. There
can be no assurances that the Company will be successful in procuring financing
to meet its current obligations or financing which is sufficient to enable the
Company to meet its business plan objectives, or that such financing will be
available on terms acceptable to the Company. It should be expected that any
future debt or equity financing arrangement may dilute the ownership of existing
shareholders. Any delay in securing such financing could have an effect on our
ability to operate.


                                       26
<PAGE>

      We are also searching for potential merger candidates with compatible
technology and products, which Management feels may make financing more
appealing to potential investors, although we have not entered into any
agreements or letters of intent to, bind us.

Item 7. Financial Statements.

      The financial statements and notes thereto, together with the report
thereon of Mendlowitz Weitsen, LLP. (the Company's accountants) dated February
11, 2002, included elsewhere in this report, are incorporated by reference in
answer to this Item 7 and the Financial Statements and Financial Statement
Schedules Indexes to financial statements appear after the signature page to
this Form 10-KSB.

Item 8. Changes In and DisagreementsWith Accountants on Accounting and Financial
Disclosure.

      On February 9, 2001, the Company dismissed Merdinger, Fruchter, Rosen &
Corso ("MFR&C") as its independent accountants. The dismissal was approved by
the Company's Board of Directors. The reports of MFR&C on the Company's
financial statements for past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles, except that the reports contained an
explanatory paragraph expressing substantial doubt regarding the Company's
ability to continue as a going concern.

      On February 9, 2001, the Company retained the firm of Mendlowitz Weitsen,
LLP as its new independant accountants. During the Company's two most recent
fiscal years and through February 9, 2001, the Company did not consult with
Mendlowitz Weitsen, LLP, on any accounting, auditing, financial reporting or any
other matters.

                                    Part III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.

The Company has one director who is also one of the Company's two principal
officers. He has served in the position shown since May 1999, and is expected to
continue to serve until the next annual meeting of shareholders.


                                       27
<PAGE>

                                                             Period Served as
Name                   Age            Position               Officer\Director
----                   ---            --------               ----------------

Jerome R. Mahoney      41             President, CEO,        5-21-99 to present
                                      Director

Kevin Whalen           38             CFO                    5-16-00 to present

There are no agreements or understandings for the officers or director to resign
at the request of another person and the above-named officers and director is
not acting on behalf of nor will act at the direction of any other person.

Jerome Mahoney sold shares of the Company's Class A common stock in the open
market during the past year to loan the Company monies pursuant to the
Promissory Note and Security Agreement executed by Mr. Mahoney and iVoice, Inc.
on March 20, 2001. Due to an oversight, although these sales were made under
Rule 144 of the regulations promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, he failed to file the requisite
Form 4. The proper forms will be filed with the SEC within the next ten days.

Business Experience

      Jerome R. Mahoney. Mr. Mahoney has been our Chief Executive Officer and
our sole director since May 21, 1999. Mr. Mahoney started at Executone
Information Systems, a telephone systems manufacturer, and was Director of
National Accounts from 1988 to 1989. In 1989, Mr. Mahoney founded Voice Express,
Inc., a New York company that sold voicemail systems and telephone system
service contracts and installed these systems. Mr. Mahoney sold Voice Express
Systems in 1993. From 1993 to 1997, Mr. Mahoney was President of IVS Corp., and
on December 17, 1997, he established International Voice Technologies, which we
merged with on May 21, 1999. Mr. Mahoney received a B.A. in finance and
marketing from Fairleigh Dickinson University, Rutherford, N.J. in 1983.

      Kevin Whalen. Mr. Whalen has been a Certified Public Accountant since 1988
and has over 10 years experience in public accounting and 4 years experience in
industry. From 1996 to 2000, he served as the Corporate Controller for Willcox
and Gibbs, Inc., a $160 million international sales and distribution company. He
was responsible for preparing consolidated analytical statements and SEC filings
and managing the company's independent audits, and assisted in the registration
of an $85 million public bond offering. From 1986 to 1996, Mr. Whalen was the
Tax Supervisor for Curchin and Company, P.A., where he was responsible for
compilation and review engagements as well as developing tax-planning strategies
for business and individual clientele. Mr. Whalen received a B.S. in Commerce
from Rider College, Lawrenceville, N.J. in 1986 and is a member of the American
Institute of Certified Public Accountants.

Item 10. Executive Compensation.

      The following table sets forth compensation information for services
rendered by certain of our executive officers in all capacities during the last
three completed fiscal years. The following information includes the dollar
value of base salaries, bonus


                                       28
<PAGE>

awards, the number of stock options granted, and certain other compensation, if
any, whether paid or deferred.

<TABLE>
<CAPTION>
                                                                                            Securities
                                                            Other Annual     Restricted     Underlying      All Other
Name and Position(s)           Year    Salary($)   Bonus    Compensation       Stock          Options      Compensation
--------------------           ----    ---------   -----    ------------       -----          -------      ------------
<S>                            <C>     <C>        <C>        <C>            <C>             <C>            <C>
Jerome R. Mahoney
   Chief Executive Officer     2001    $211,200   $75,000    $95,100 (3)         0               0         $354,416 (7)
   and President               2000    $192,000      0       $34,000 (4)         0               0           $4,416 (7)
                               1999    $180,000      0            0              0               0             $578 (7)

Joel G. Beagelman (1)          2001        0         0            0              0               0              0
   Former CFO, Secretary       2000     $39,000      0            0              0               0              0
   And Treasurer               1999    $108,000      0            0              0               0              0

Kevin Whalen (2)               2001     $93,333   $34,000         0         $115,000 (5)    1,200,000 (6)       0
   Chief Financial Officer     2000     $53,333      0            0          $20,950 (5)      200,000 (6)       0
                               1999        0         0            0              0               0              0
</TABLE>

                           Summary Compensation Table

(1)   Effective May 16, 2000, Mr. Beagelman resigned as our Chief Financial
      Officer, Secretary, and Treasurer.

(2)   Effective May 16, 2000, Mr. Whalen was promoted to Chief Financial Officer
      and is not subject to any employment contract with iVoice, Inc.

(3)   Represents amounts accrued for reimbursement of income taxes paid by Mr.
      Mahoney on sales of personal holdings of iVoice Class A common shares, the
      proceeds of which have been loaned to iVoice.

(4)   Represents accrued and unpaid sales commissions due to Mr. Mahoney.

(5)   Represents 1,000,000 Class A common shares granted on March 20, 2001and
      50,000 Class A common shares granted on September 20, 2000 and 5,000 Class
      A common shares granted on June 30, 2000. All shares granted vest with Mr.
      Whalen three years from the date granted. Total restricted shares held by
      Mr. Whalen total 1,055,000 valued at $58,025 as of December 31, 2001.

(6)   Represents options to purchase 1,000,000 Class A common shares at $.06
      granted on June 27, 2001; options to purchase 200,000 Class A common
      shares at $.10 granted on March 12, 2001, options to purchase 100,000
      Class A common shares at $.50 granted on June 30, 2000, options to
      purchase 50,000 Class A common shares at $.60 granted on May 17, 2000, and
      options to purchase 50,000 Class A common shares at $.75 granted on May 2,
      2000. All options vest 25% per year and expire 5 years from the date of
      issue. To date, none of these options have been exercised.

(7)   Represents $350,000 as reimbursement for the donation of personal holdings
      of iVoice Class A Common shares donated to charity and $4,416 in life
      insurance premiums paid on behalf of Mr. Mahoney for the year ending
      December 31, 2001; $4,416 in life insurance premiums paid on behalf of Mr.
      Mahoney for the year ending December 31, 2000; and $578 in life insurance
      premiums paid on behalf of Mr. Mahoney for the year ending December 31,
      1999;


                                       29
<PAGE>

                      Option/SAR Grants in Last Fiscal Year

                                Individual Grants

<TABLE>
<CAPTION>
                           Number of
                          Securities        % of Options/SARs
                          Underlying            Granted to
                         Options/SARs          Employees in       Exercise or Base
       Name               Granted (#)           Fiscal Year          Price ($/sh)        Expiration Date
       ----               -----------           -----------          ------------        ---------------
<S>                      <C>                       <C>                   <C>             <C>
Kevin Whalen, CFO        1,000,000 (1)             55.7%                 $.06             June 26, 2006

Kevin Whalen, CFO         200,000 (1)              11.1%                 $.10            March 11, 2006
</TABLE>

(1)   All options granted are subject to 25% per year vesting schedule and
      expire 5 years from the date of grant. To date, no options have been
      exercised.

Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values

<TABLE>
<CAPTION>
                                                         Number of Securities          Value of Unexercised
                     Shares Acquired                    Underlying Unexercised             In-the-Money
                           on             Value         Options/SARs at FY-End        Options/SARs at FY-End
                        Exercise         Realized                 (#)                           ($)
      Name                 (#)             ($)         Exercisable/Unexercisable     Exercisable/Unexercisable
      ----                 ---             ---         -------------------------     -------------------------
<S>                         <C>             <C>            <C>                                 <C>
Kevin Whalen, CFO           0               0              50,000 / 1,350,000                  0 / 0
</TABLE>

Employment Contracts

On May 1, 1999, the Company entered into a five-year employment agreement with
its majority stockholder (the "Executive"). He will serve as the Company's
Chairman of the Board and Chief Executive Officer for a term of five years. As
consideration, the Company agrees to pay the Executive a sum of $180,000 the
first year with a 10% increase every year thereafter. The employment agreement
with Mr. Mahoney provides for a severance payment to him of three hundred
percent (300%), less $100, of his gross income for services rendered to the
Company in each of the five prior calendar years (or shorter period during which
the Executive shall have been employed by the Company) should his employment be
terminated following a Change in Control, as defined in the agreement.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

      The following table sets forth certain information known to us with
respect to the beneficial ownership of our common stock on February 28, 2002, by
(1) all persons who are beneficial owners of 5% or more of our common stock, (2)
each director and nominee, (3) the executive officers named in the "Summary
Compensation Table," and (4) all directors and executive officers as a group.

      The number of shares beneficially owned is determined under rules
promulgated by the SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under those rules, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual has
the right to acquire within 60 days of February 28, 2002,


                                       30
<PAGE>

through the exercise or conversion of any stock option, convertible security,
warrant or other right. Including those shares in the tables does not, however,
constitute an admission that the named stockholder is a direct or indirect
beneficial owner of those shares. Unless otherwise indicated, each person or
entity named in the table has sole voting power and investment power (or shares
that power with that person's spouse) with respect to all shares of capital
stock listed as owned by that person or entity. The shares of our Class A common
stock represented here includes the shares of our Class A common stock that the
beneficial holders would directly possess if they converted all shares of our
Class B common stock held by them.

<TABLE>
<CAPTION>
     Name and Address of                                         Amount and Nature of            Percentage of
       Beneficial Owner            Title of Class                  Beneficial Owner                Class (1)
       ----------------            --------------                  ----------------                ---------
<S>                             <C>                                   <C>                            <C>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS

Joel Beagelman                  Class A common stock                   6,777,052  (2)                 3.5%
750 Highway 34
Matawan, NJ 07747

SECURITY OWNERSHIP OF
MANAGEMENT

Jerome R. Mahoney               Class A common stock                  38,145,156  (3)                37.9%
c/o iVoice, Inc.                Class B common stock                   2,100,610  (4)(5)              100%
750 Highway 34
Matawan, New Jersey
07747

Kevin Whalen                    Class A common stock                   1,055,000                       *
c/o iVoice, Inc.
750 Highway 34
Matawan, New Jersey
07747
</TABLE>

*     Represents less than 1% of the outstanding class

(1)   Based on 158,625,029 outstanding shares of our Class A common stock and
      354,000 shares of our Class B common stock, which Class B shares are
      convertible into 35,400,000 shares of Class A common stock.

(2)   Includes 600,000 shares held by Mr. Beagelman's three children.

(3)   Includes 450,000 shares of our Class A common stock held by Mr. Mahoney's
      minor children and 354,000 shares of Class B common stock held by Mr.
      Mahoney that have the voting power of, and may be converted into
      35,400,000 shares of Class A common stock.

(4)   The shares of Class B common stock held by Mr. Mahoney have the voting
      power of, and may be converted into 35,400,000 shares of Class A common
      stock.

(5)   Pursuant to the Promissory Note and Security Agreement executed by Mr.
      Mahoney and iVoice, Inc. on March 20, 2001, Mr. Mahoney may at his option
      convert amounts owed to him for monies loaned to the Company from the
      proceeds of stock sales, unpaid compensation, income taxes incurred from
      the sale of stock unreimbursed expenses and interest on the unpaid balance
      at an amount equal to one Class B share for each dollar owed. At December
      31 2001, the total balance equaled $1,746,610 representing 1,746,610 Class
      B common shares and subsequently convertible into 174,661,000 Class A
      common shares.


                                       31
<PAGE>

Item 12. Certain Relationships and Related Transactions.

      During the period from June 2000 to date, Jerome R. Mahoney, President and
Chief Executive Officer of the Company has sold personal holdings of the
Company's Class A common shares and has loaned the proceeds of these sales to
the Company to fund its working capital requirements. The Company has executed a
promissory note and Security Agreement in favor of Mr. Mahoney.

      As of December 31, 2001, the outstanding loan balance including monies
loaned from the proceeds of stock sales, unpaid compensation, income taxes
incurred from the sale of stock unreimbursed expenses and interest on the unpaid
balance at 9.5%, totaled $1,746,610.

      Under the terms of the loan agreements, the note holder may elect
prepayment of the principal and interest owed pursuant to this note by issuing
Jerome Mahoney, or his assigns, one Class B common share of iVoice, Inc., no par
value, for each dollar owed

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

(a)   Exhibits

No.     Description
---     -----------

3.1     Certificate of incorporation of Del Enterprises, Inc., filed October 20,
        1989 (incorporated herein by reference to Exhibit 3.1 of the
        registration statement on Form SB-2, filed with the SEC on November 17,
        2000).

3.2     Certificate of amendment to the certificate of incorporation of Del
        Enterprises, Inc., filed March 14, 2000 (incorporated herein by
        reference to Exhibit 3.2 of the registration statement on Form SB-2,
        filed with the SEC on November 17, 2000).

3.3     Certificate of merger of International Voice Technologies, Inc. into
        Visual Telephone International, Inc., filed May 21, 1999 (incorporated
        herein by reference to Exhibit 3.3 of the registration statement on Form
        SB-2, filed with the SEC on November 17, 2000).

3.4     Certificate of amendment to the certificate of incorporation of
        iVoice.com, Inc., filed April 27, 2000 (incorporated herein by reference
        to Exhibit 3.4 of the registration statement on Form SB-2, filed with
        the SEC on November 17, 2000).

3.5     Certificate of amendment to the certificate of incorporation of
        iVoice.com, Inc., filed August 24, 2001 (incorporated herein by
        reference to Exhibit 3.5 of the registration statement on Form SB-2,
        filed with the SEC on September 7, 2001).


                                       32
<PAGE>

3.6     Bylaws of Del Enterprises, Inc (incorporated herein by reference to
        Exhibit 3.5 of the registration statement on Form SB-2, filed with the
        SEC on November 17, 2000).

4.1     Debenture No.1 issued by iVoice.com, Inc. for $50,000 in 12% Secured
        Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on
        October 29, 1999 (incorporated herein by reference to Exhibit 4.1 of the
        registration statement on Form SB-2, filed with the SEC on November 17,
        2000).

4.2     Debenture No. 2 issued by iVoice.com, Inc. for $50,000 in 12% Secured
        Convertible Debenture Due December 1, 2000 to New Millenium Capital
        Partners, LLC on October 29, 1999 (incorporated herein by reference to
        Exhibit 4.2 of the registration statement on Form SB-2, filed with the
        SEC on November 17, 2000).

4.3     Debenture No. 3 issued by iVoice.com, Inc. for $50,000 in 12% Secured
        Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on
        October 29, 1999 (incorporated herein by reference to Exhibit 4.3 of the
        registration statement on Form SB-2, filed with the SEC on November 17,
        2000).

4.4     Debenture No. 4 issued by iVoice.com, Inc. for $50,000 in 12% Secured
        Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on
        October 29, 1999 (incorporated herein by reference to Exhibit 4.4 of the
        registration statement on Form SB-2, filed with the SEC on November 17,
        2000).

4.5     Debenture No. 5 issued by iVoice.com, Inc. for $50,000 in 12% Secured
        Convertible Debenture Due December 1, 2000 to Bank Insinger de Beaufort,
        N.V. on October 29, 1999 (incorporated herein by reference to Exhibit
        4.5 of the registration statement on Form SB-2, filed with the SEC on
        November 17, 2000).

4.6     Debenture No. 6 issued by iVoice.com, Inc. for $100,000 in 12% Secured
        Convertible Debenture Due December 1, 2000 to New Millenium Capital
        Partners, LLC on October 29, 1999 (incorporated herein by reference to
        Exhibit 4.6 of the registration statement on Form SB-2, filed with the
        SEC on November 17, 2000).

4.7     Debenture No. 7 issued by iVoice.com, Inc. for $50,000 in 12% Secured
        Convertible Debenture Due December 1, 2000 to New Millenium Capital
        Partners II, LLC on October 29, 1999 (incorporated herein by reference
        to Exhibit 4.7 of the registration statement on Form SB-2, filed with
        the SEC on November 17, 2000).

4.8     Debenture No. 8 issued by iVoice.com, Inc. for $50,000 in 12% Secured
        Convertible Debenture Due December 1, 2000 to AJW Partners, LLC on
        October 29, 1999 (incorporated herein by reference to Exhibit 4.8 of the
        registration statement on Form SB-2, filed with the SEC on November 17,
        2000).


                                       33
<PAGE>

4.9     Debenture No. 9 issued by iVoice.com, Inc. for $25,000 in 12% Secured
        Convertible Debenture Due December 1, 2000 to New Millenium Capital
        Partners II, LLC on October 29, 1999 (incorporated herein by reference
        to Exhibit 4.9 of the registration statement on Form SB-2, filed with
        the SEC on November 17, 2000).

4.10    Debenture No. 10 issued by iVoice.com, Inc. for $25,000 in 12% Secured
        Convertible Debenture Due December 1, 2000 to AJW Partners, LLC, on
        October 29, 1999 (incorporated herein by reference to Exhibit 4.10 of
        the registration statement on Form SB-2, filed with the SEC on November
        17, 2000).

4.11    Form 8% Convertible Debentures issued by iVoice.com, Inc. for $150,000
        due April 30, 2006 to the purchasers thereof on April 30,
        2001(incorporated herein by reference to Exhibit 4.11 of the
        registration statement on Form SB-2, filed with the SEC on September 7,
        2001)

4.12    Form 8% Convertible Debentures issued by iVoice.com, Inc. to certain
        purchasers thereof for an aggregate of $125,000 (incorporated herein by
        reference to Exhibit 4.12 of the registration statement on Form SB-2,
        filed with the SEC on September 7, 2001).

4.13    Form 8% Convertible Debentures to be issued by iVoice.com, Inc. to
        Beacon Capital, LLC in the amount of $150,000. (incorporated herein by
        reference to Exhibit 4.12 of the registration statement on Form SB-2,
        filed with the SEC on December 21, 2001).

10.1    iVoice.com, Inc. 1999 Option Stock Plan (incorporated herein by
        reference to Exhibit 10.1 of the registration statement on Form SB-2,
        filed with the SEC on November 17, 2000).

10.2    Investment agreement dated August 17, 2000, between iVoice.com, Inc. and
        Swartz Private Equity, LLC with exhibits (incorporated herein by
        reference to Exhibit 10.2 of the registration statement on Form SB-2,
        filed with the SEC on November 17, 2000).

10.3    Registration rights agreement dated August 17, 2000, between iVoice.com,
        Inc. and Swartz Private Equity, LLC (incorporated herein by reference to
        Exhibit 10.3 of the registration statement on Form SB-2, filed with the
        SEC on November 17, 2000).

10.4    Registration rights agreement by and among iVoice.com, Inc. and the
        investors' signatories thereto dated as of October 28, 1999
        (incorporated herein by reference to Exhibit 10.4 of the registration
        statement on Form SB-2, filed with the SEC on November 17, 2000).

10.5    Warrant to purchase 5,490,000 shares of iVoice.com, Inc. issued to
        Swartz Private Equity, LLC, dated August 17, 2000 (incorporated herein
        by reference to Exhibit


                                       34
<PAGE>

        10.5 of the registration statement on Form SB-2, filed with the SEC on
        November 17, 2000).

10.6    Subscription agreement between iVoice.com, Inc. and Beacon Capital, LLC,
        November 20, 2001, for the purchase of an aggregate of $150,000 of 8%
        Convertible Debentures. (incorporated herein by reference to Exhibit
        4.12 of the registration statement on Form SB-2, filed with the SEC on
        December 21, 2001).

10.7    Registration rights agreement between iVoice.com, Inc. and Beacon
        Capital, LLC, dated as of November 20, 2001. (incorporated herein by
        reference to Exhibit 4.12 of the registration statement on Form SB-2,
        filed with the SEC on December 21, 2001).

10.8    Form of warrant to purchase 250,000 shares of iVoice.com, Inc. to be
        issued to Beacon Capital, LLC (incorporated herein by reference to
        Exhibit 4.12 of the registration statement on Form SB-2, filed with the
        SEC on December 21, 2001).

10.9    Subscription agreement between iVoice.com, Inc. and the purchaser
        signatories thereof, dated April 30, 2001, for the purchase of an
        aggregate of $275,000 of 8% Convertible Debentures due April 30, 2001
        (incorporated herein by reference to Exhibit 10.9 of the registration
        statement on Form SB-2, filed with the SEC on September 7, 2001).

10.10   Registration rights agreement by and among iVoice.com, Inc. and the
        investor signatories thereto dated as of April 30, 2001 (incorporated
        herein by reference to Exhibit 10.10 of the registration statement on
        Form SB-2, filed with the SEC on September 7, 2001).

10.11   Warrant to purchase 171,875 shares of iVoice.com, Inc. issued to Michael
        Jacobs of The May Davis Group, Inc., dated April 30, 2001 (incorporated
        herein by reference to Exhibit 10.11 of the registration statement on
        Form SB-2, filed with the SEC on September 7, 2001).

10.12   Warrant to purchase 171,875 shares of iVoice.com, Inc. issued to Owen
        May of The May Davis Group, Inc., dated April 30, 2001 (incorporated
        herein by reference to Exhibit 10.12 of the registration statement on
        Form SB-2, filed with the SEC on September 7, 2001).

10.13   Consulting agreement entered into on March 15, 2001 by and between
        iVoice.com, Inc. and Finnigan USA (incorporated herein by reference to
        Exhibit 10.13 of the registration statement on Form SB-2, filed with the
        SEC on September 7, 2001).

10.14*  Real Property Lease Agreement dated December 5, 2001 between iVoice.com,
        Inc. and B&R Holding Company.

13.1    Form 10-SB12G (incorporated by reference and previously filed on
        February 4, 2000 with the Commission).


                                       35
<PAGE>

13.2    Form 10-K for the year ending December 31, 2000 (incorporated by
        reference and previously filed with the Commission).

13.3    Form 10-QSB for the quarter ending March 31, 2001 (incorporated by
        reference and previously filed with the Commission).

13.4    Form 10-QSB for the quarter ending June 30, 2001 (incorporated by
        reference and previously filed with the Commission).

13.5    Form 10-QSB for the quarter ending September 30, 2001 (incorporated by
        reference and previously filed with the Commission).

15      Letter on unaudited interim financial information (incorporated by
        reference and previously filed with the Commission).

----------
      *  Filed herewith

(b)   Reports on Form 8-K

      No reports on Form 8-K were filed during the last quarter of the period
covered by this report.


                                       36
<PAGE>

Signatures

      In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report on Form 10-KSB to be signed on its behalf by the undersigned,
thereunto duly authorized.

      Dated:            March 22, 2002

                                   iVoice, Inc..


                                   By:/s/ JEROME R MAHONEY
                                   -----------------------

                                   Jerome R. Mahoney

                                   President, Chief Executive Officer and

                                   Director

      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant, and in the capacities and on
the dates indicated.


By: /s/ KEVIN WHALEN     Chief Financial Officer      Dated: March 22, 2002
--------------------

        Kevin Whalen


                                       37
<PAGE>

                                  iVOICE, INC.

                              FINANCIAL STATEMENTS

                                DECEMBER 31, 2001
<PAGE>

                                  iVOICE, INC.

                              FINANCIAL STATEMENTS

                                    CONTENTS

                                                                       Page
                                                                       ----

INDEPENDENT AUDITOR'S REPORT                                             1

FINANCIAL STATEMENTS

         Balance Sheets                                                  2

         Statements of Operations                                        3

         Statements of Stockholders' Deficiency                          4 - 7

         Statements of Cash Flows                                        8 - 10

NOTES TO FINANCIAL STATEMENTS                                            11 - 28
<PAGE>

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                          INDEPENDENT AUDITOR'S REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS' OF
iVOICE, INC.

Matawan, New Jersey

We have audited the accompanying balance sheets of iVoice, Inc. as of December
31, 2001 and 2000, and the related statements of operations, stockholders'
deficiency and cash flows for the years 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 audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of iVoice, Inc. as of December 31,
2001 and 2000, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1(a), the Company
had net losses and negative cash flows from operations for the years ended
December 31, 2001 and 2000, and as of those dates had negative working capital,
which raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note 1(a).
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.


                                                         MENDLOWITZ WEITSEN, LLP

East Brunswick, New Jersey
February 11, 2002
<PAGE>

                                  iVOICE, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                               ------------
                                                                                           2001            2000
                                                                                       ------------    -----------
<S>                                                                                    <C>             <C>
                                     ASSETS
CURRENT ASSETS
  Cash and cash equivalents                                                            $     85,543    $    55,349
  Accounts receivable, net of allowance for
   doubtful accounts of $4,000 and $31,025                                                   37,284        292,554
  Inventory                                                                                  20,586         20,228
  Prepaid expenses and other current assets                                                 331,361        164,711
                                                                                       ------------    -----------
      Total current assets                                                                  474,774        532,842
                                                                                       ------------    -----------

PROPERTY AND EQUIPMENT, net                                                                 106,585        140,921
                                                                                       ------------    -----------

OTHER ASSETS
  Other receivable                                                                          67,650              --
  Software license costs, net of accumulated amortization of $272,000 and $163,200          272,000        380,800
  Financing costs, net of accumulated amortization of $0 and $1,297                          35,427        118,370
  Intangible assets, net of accumulated amortization of $21,041 and $7,917                  271,299        254,584
  Deposits and other assets                                                                  13,900         13,900
                                                                                       ------------    -----------
      Total other assets                                                                    660,276        767,654
                                                                                       ------------    -----------
      TOTAL ASSETS                                                                     $  1,241,635    $ 1,441,417
                                                                                       ============    ===========

                  LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
  Obligations under capital leases - current                                           $     35,018    $    28,339
  Accounts payable and accrued expenses                                                   1,454,055        566,337
  Due to related parties                                                                    806,419        648,078
  Convertible debentures                                                                    359,800        337,000
  Billings in excess of costs and estimated earnings                                         43,617        170,237
                                                                                       ------------    -----------
      Total current liabilities                                                           2,698,909      1,749,991

LONG-TERM DEBT
  Obligations under capital leases - non-current                                             13,928         48,945
                                                                                       ------------    -----------
      Total liabilities                                                                   2,712,837      1,798,936
                                                                                       ------------    -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY
  Preferred stock, $1 par value; Authorized shares - 1,000,000 in 2001; none in 2000
    Issued and outstanding shares - none in 2001 and 2000
  Common stock, Class A - par value $.001 in 2001 and $.01 in 2000
    Authorized shares - 600,000,000 shares in 2001 and 150,000,000 in 2000
    Issued and outstanding shares -  154,123,517 in 2001 and 103,969,715 in 2000          1,175,278      1,039,697
  Common stock, Class B - no par value
    Authorized shares - 3,000,000 in 2001 and 700,000 in 2000
    Issued shares - 700,000
    Outstanding shares  - 354,000 in 2001 and 364,000 in 2000                                    36             37
  Subscription receivable                                                                  (783,750)            --
  Additional paid in capital                                                             10,568,103      7,586,182
  Accumulated deficit                                                                   (12,430,869)    (8,983,435)
                                                                                       ------------    -----------
      Total stockholders' deficiency                                                     (1,471,202)      (357,519)
                                                                                       ------------    -----------
      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                   $  1,241,635    $ 1,441,417
                                                                                       ============    ===========
</TABLE>

     The accompanying notes are an integral part of the financial statement.


                                       2
<PAGE>

                                  iVOICE, INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                For the Years Ended
                                                                    December 31,
                                                                    ------------
                                                                2001           2000
                                                            -----------    -----------
<S>                                                         <C>            <C>
SALES, net                                                  $   425,948    $   723,046

COST OF SALES                                                   167,229        302,895
                                                            -----------    -----------

GROSS PROFIT                                                    258,719        420,151
                                                            -----------    -----------

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES
    Selling expenses                                            165,617        371,272
    General and administrative expenses                       2,297,015      1,662,142
    Research and development                                    387,463        423,467
    Bad debt expense                                             24,808         75,195
    Depreciation and amortization                               161,089        146,234
                                                            -----------    -----------

       Total selling, general and administrative expenses     3,035,992      2,678,310
                                                            -----------    -----------

LOSS FROM OPERATIONS                                         (2,777,273)    (2,258,159)

OTHER EXPENSE
    Interest expense                                           (670,161)      (633,220)
                                                            -----------    -----------

LOSS BEFORE INCOME TAXES                                     (3,447,434)    (2,891,379)

PROVISION FOR INCOME TAXES                                           --             --
                                                            -----------    -----------

NET LOSS                                                    $(3,447,434)   $(2,891,379)
                                                            ===========    ===========

NET LOSS PER COMMON SHARE
    Basic                                                   $      (.03)   $      (.03)
                                                            ===========    ===========
    Diluted                                                 $      (.03)   $      (.03)
                                                            ===========    ===========
</TABLE>

     The accompanying notes are an integral part of the financial statement.


                                       3
<PAGE>

                                  iVOICE, INC.
                     STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                      Common Stock Class A        Common Stock Class B

                                                      Shares        Amount          Shares    Amount
                                                      ------        ------          ------    ------
<S>                                                 <C>           <C>               <C>        <C>
Balance at January 1, 2001                          103,969,715   $1,039,697        364,000    $37

Issuance of common stock for settlements              2,128,000       21,280             --     --

Issuance of common stock for services                15,194,287       32,693             --     --

Issuance of common stock for exercise
  of stock options                                   18,000,000       18,000             --     --

Subscriptions received                                       --           --             --     --

Issuance of common stock for cash                     1,172,000       11,720             --     --

Issuance of common stock for compensation             2,183,834       20,371             --     --

Issuance of convertible debentures                           --           --             --     --

Issuance of stock on conversion of Class B shares     1,000,000        1,000        (10,000)    (1)

Issuance of stock for repayment of amounts
  due to related parties                                328,951        3,290             --     --

Issuance of stock on debenture conversion             9,829,204       25,972             --     --

Issuance of stock on interest conversion                317,526        1,255             --     --

Net loss for the year ended December 31, 2001                --           --             --     --
                                                    -----------   ----------        -------    ---

Balance at December 31, 2001                        154,123,517   $1,175,278        354,000    $36
                                                    ===========   ==========        =======    ===
</TABLE>

     The accompanying notes are an integral part of the financial statement.


                                       4
<PAGE>

                                  iVOICE, INC.
               STATEMENTS OF STOCKHOLDERS' DEFICIENCY (Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                      Stock       Additional                        Total
                                                  Subscriptions    Paid in       Accumulated    Stockholders'
                                                    Receivable     Capital         Deficit       Deficiency
                                                    ----------     -------         -------       ----------
<S>                                                 <C>          <C>            <C>             <C>
Balance at January 1, 2001                          $      --    $ 7,586,182    $ (8,983,435)   $  (357,519)

Issuance of common stock for settlements                   --        189,800              --        211,080

Issuance of common stock for services                      --        886,212              --        918,905

Issuance of common stock for exercise
  of stock options                                   (990,000)       972,000              --             --

Subscriptions received                                206,250             --                        206,250

Issuance of common stock for cash                          --        153,370              --        165,090

Issuance of common stock for compensation                  --        214,060              --        234,431

Issuance of convertible debentures                         --        106,250              --        106,250

Issuance of stock on conversion of Class B shares          --           (999)             --             --

Issuance of stock for repayment of amounts
  due to related parties                                   --         72,369                         75,659

Issuance of stock on debenture conversion                  --        376,229              --        402,201

Issuance of stock on interest conversion                   --         12,630              --         13,885

Net loss for the year ended December 31, 2001              --             --      (3,447,434)    (3,447,434)
                                                    ---------    -----------    ------------    -----------

Balance at December 31, 2001                        $(783,750)   $10,568,103    $(12,430,869)   $(1,471,202)
                                                    =========    ===========    ============    ===========
</TABLE>

     The accompanying notes are an integral part of the financial statement.


                                       5
<PAGE>

                                  iVOICE, INC.
                     STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                      Common Stock Class A    Common Stock Class B

                                                       Shares       Amount      Shares    Amount
                                                       ------       ------      ------    ------
<S>                                                  <C>          <C>           <C>        <C>
Balance at January 1, 2000                           54,093,663   $  540,937    700,000    $ 70

Issuance of common stock for legal settlement         2,000,000       20,000         --      --

Issuance of common stock for services                   848,718        8,487         --      --

Issuance of common stock for exercise
  of stock options                                    9,100,000       91,000         --      --

Issuance of common stock for cash                     3,240,047       32,400         --      --

Issuance of common stock for compensation                80,000          800         --      --

Issuance of convertible debentures                           --           --         --      --

Issuance of stock on conversion of Class B shares    33,600,000      336,000   (336,000)    (33)

Issuance of stock on debenture conversion             1,007,287       10,073         --      --

Net loss for the year ended December 31, 2000                --           --         --      --
                                                    -----------   ----------   --------    ----

Balance at December 31, 2000                        103,969,715   $1,039,697    364,000    $ 37
                                                    ===========   ==========   ========    ====
</TABLE>

     The accompanying notes are an integral part of the financial statement.


                                       6
<PAGE>

                                  iVOICE, INC.
                STATEMENT OF STOCKHOLDERS' DEFICIENCY (Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                                     Additional                      Total
                                                      Paid in      Accumulated   Stockholders'
                                                      Capital        Deficit      Deficiency
                                                      -------        -------      ----------
<S>                                                 <C>           <C>            <C>
Balance at January 1, 2000                          $1,395,671    $(6,092,056)   $(4,155,378)

Issuance of common stock for legal settlement        4,480,000             --      4,500,000

Issuance of common stock for services                  509,668             --        518,155

Issuance of common stock for exercise
  of stock options                                     228,166             --        319,166

Issuance of common stock for cash                      936,579             --        968,979

Issuance of common stock for compensation               69,138             --         69,938

Issuance of convertible debentures                     150,000             --        150,000

Issuance of stock on conversion of Class B shares     (335,967)            --             --

Issuance of stock on debenture conversion              152,927             --        163,000

Net loss for the year ended December 31, 2000               --     (2,891,379)    (2,891,379)
                                                    ----------    -----------    -----------

Balance at December 31, 2000                        $7,586,182    $(8,983,435)   $  (357,519)
                                                    ==========    ===========    ===========
</TABLE>

     The accompanying notes are an integral part of the financial statement.


                                       7
<PAGE>

                                  iVOICE, INC.
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                               For the Years Ended
                                                                   December 31,
                                                                   ------------
                                                               2001           2000
                                                           -----------    -----------
<S>                                                        <C>            <C>
CASH FLOW FROM OPERATING ACTIVITIES
   Net loss                                                $(3,447,434)   $(2,891,379)
   Adjustments to reconcile net loss to net
    cash (used in) provided by operating activities
   Depreciation and amortization                               161,089        147,531
   Bad debt expense                                             24,808         75,195
   Stock option discounts                                       56,250             --
   Debt issue costs                                            259,780        544,041
   Common stock issued for services                            536,989        518,155
   Common stock issued for compensation                        234,431         69,938
   Common stock issued for settlements                         211,080             --
   Common stock issued for interest                             13,883             --
      Changes in certain assets and liabilities:
      (Increase) decrease in accounts receivable                15,587        231,277
      (Increase) decrease in inventory                            (358)       (10,088)
      Decrease in other assets                                 124,589         23,489
      Increase in accounts payable and accrued expenses        916,220        384,583
      Increase (decrease) in legal settlement payable               --       (300,000)
      Increase (decrease) in billings in excess of costs
        on uncompleted contracts                                20,605       (397,063)
                                                           -----------    -----------
   Total cash used in operating activities                    (872,481)    (1,604,321)
                                                           -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of property and equipment                           (4,828)       (22,135)
   Purchase of intangibles                                      (3,090)      (382,168)
                                                           -----------    -----------
Total cash used in investing activities                         (7,918)      (404,303)
                                                           -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Issuance of common stock                                    129,931        818,979
   Proceeds from stock option exercise                              --        319,166
   Proceeds from related party loans                           354,000        627,078
   Repayments of related party loans                          (120,000)            --
   Prepaid offering and debt issue costs                            --        (31,500)
   Collections of stock subscriptions                          150,000             --
   Repayment of capital leases payable                         (28,338)       (15,611)
   Sale of convertible debentures                              425,000        150,000
                                                           -----------    -----------
Total cash provided by financing activities                    910,593      1,868,112
                                                           -----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS            30,194       (140,512)

CASH AND CASH EQUIVALENTS - beginning                           55,349        195,861
                                                           -----------    -----------
CASH AND CASH EQUIVALENTS - end                            $    85,543    $    55,349
                                                           ===========    ===========

CASH PAID DURING THE YEAR FOR:
   Interest expense                                        $    13,872    $     7,590
                                                           ===========    ===========
   Income taxes                                            $        --    $        --
                                                           ===========    ===========
</TABLE>

     The accompanying notes are an integral part of the financial statement.


                                       8
<PAGE>

                                  iVOICE, INC.
                      STATEMENTS OF CASH FLOWS (Continued)
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES

      For the Year Ended December 31, 2001

      a)    The Company issued 15,194,287 shares of its Class A Common Stock for
            services valued at $1,062,055. Of these shares, the company has
            registered for resale with the U.S. Securities and Exchange
            Commission, 10,600,000 shares during the year ended December 31,
            2001.

      b)    The Company issued 2,183,834 restricted shares of its Class A Common
            Stock as compensation to Company employees valued at $234,431.

      c)    The Company issued 828,000 registered shares and 850,000 restricted
            shares of its Class A Common Stock as payment for termination of the
            Swartz Financing Agreement valued at $154,830.

      d)    The Company issued 450,000 restricted shares of its Class A Common
            Stock to a holder of its 12% convertible debentures as settlement
            for failure to register shares under the registration rights
            agreement related to the 12% Convertible Debentures valued at
            $56,250.

      e)    The Company issued 328,951 restricted shares of its Class A Common
            Stock as repayment of amounts owed to related parties valued at
            $75,659.

      f)    The Company issued 2,892,628 shares of its Class A Common Stock for
            the repayment of $142,200 in principal on its 12% Convertible
            Debentures.

      g)    The Company issued 6,936,576 shares of its Class A Common Stock for
            the repayment of $260,000 in principal on its 8% Convertible
            Debentures

      h)    The Company issued 317,526 shares of its Class A Common Stock for
            interest on its 8% and 12% Convertible Debentures valued at $13,883.

      i)    The Company issued $425,000 of its 8% Convertible Debentures
            exercisable at an 80% conversion price. The 20% conversion discount
            totaling $106,250 was recorded as interest expense.

     The accompanying notes are an integral part of the financial statement.


                                       9
<PAGE>

                                  iVOICE, INC.
                      STATEMENTS OF CASH FLOWS (Continued)
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES - Continued

For the Year Ended December 31, 2000

      a)    On February 10, 2000, the Company converted a $4,500,000 legal
            settlement payable into 2,000,000 shares of its restricted Class A
            Common Stock.

      b)    On January 10 and February 2, 2000, the Company issued $100,000 and
            $50,000 respectively, of its 12% Convertible Debentures exercisable
            at a 50% conversion price. The 50% conversion discount totaling
            $150,000 was recorded as a prepaid debt issue cost and will be
            amortized over the life of the debt.

      c)    During the year ended December 31, 2000, the Company issued 848,718
            shares of its restricted Class A Common Stock for services valued at
            $518,155.

      d)    On April 24, 2000, the Company issued 50,000 shares of its
            restricted Class A Common Stock to Corporate Architects, Inc. with a
            value of $46,875 as a referral fee for the purchase of ThirdCAI,
            Inc. ("ThirdCAI")

      e)    During the year the Company issued 80,000 shares of its restricted
            Class A Common Stock as compensation valued at $69,938.

      f)    During the year the Company purchased equipment under capital leases
            totaling $92,895.

     The accompanying notes are an integral part of the financial statement.


                                       10
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      a)    Basis of Presentation

            The accompanying financial statements include the accounts of
            iVoice, Inc. (the "Company" or "iVoice"), formerly known as Visual
            Telephone International, Inc. ("Visual") which was incorporated
            under the laws of Utah on December 2, 1995, subsequently changed to
            Delaware.

            Effective May 21, 1999, Visual and International Voice Technologies,
            Corp. ("IVT") entered into a merger agreement whereby the Company
            was the surviving entity (see Note 2 for Reorganization). As a
            result, IVT's former stockholder obtained control of Visual. For
            accounting purposes, this acquisition has been treated as a
            re-capitalization of IVT.

            On August 24, 2001, the Company amended its certificate of
            incorporation to change its name to iVoice, Inc. from iVoice.com,
            Inc.

            The Company is publicly traded and is currently traded on the Over
            The Counter Bulletin Board ("OTCBB") under the symbol "IVOC".

            As reflected in the accompanying financial statements, the Company
            had a loss and a negative cash flow from operations as well as a
            negative working capital as of December 31, 2001 and 2000. These
            matters raise substantial doubt about the Company's ability to
            continue as a going concern.

            In view of the matters described in the preceding paragraph,
            recoverability of a major portion of the recorded asset amounts
            shown in the accompanying balance sheets is dependent upon continued
            operations of the Company, which in turn, is dependent upon the
            Company's ability to continue to raise capital and/or generate
            positive cash flows from operations.

            To date, the Company has funded its operations through the issuance
            of convertible debt, sales of its Class A Common Stock and loans
            from its principal stockholder, the proceeds of which are derived
            from sales of this principal stockholder's personal holdings of the
            Company's Class A Common Stock. The Company has incurred accumulated
            net losses totaling $12,430,869 through the year ended December 31,
            2001, and had a cash balance of $85,543 as of that date. Considering
            expected cash requirements for the up coming year, there is
            substantial doubt as to the Company's ability to continue
            operations.

            The Company believes that its' condition resulted from the inherent
            risks associated with small technology companies. Such risks
            include, but are not limited to, the ability to: a) generate sales
            of its product at levels sufficient to cover its costs and provide a
            return for investors, b) attract additional capital in order to
            finance growth, c) further develop and successfully market
            commercial products and d) successfully compete with other


                                       11
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            technology companies having financial, production and marketing
            resources significantly greater than those of the Company.

            The financial statements do not include any adjustments relating to
            the recoverability and classification of recorded assets, or the
            amounts and classification of liabilities that might be necessary in
            the event the Company cannot continue in existence.

            Throughout the 2001 fiscal year, the Company has reduced its
            operating budget to conserve its cash resources. These reductions
            include renegotiating the lease for its corporate headquarters,
            staff reductions through consolidation of job functions,
            consolidation of telecommunication contracts for voice and data
            service as well as careful analysis of other recurring monthly
            expense items.

            In an effort to reach profitability and become less dependent on its
            requirement to finance continuing operations, the Company is working
            on increasing its revenue and profit margins through the
            establishment of its own dealer and reseller channel. Management
            believes that leveraging already existing equipment manufacturers
            reseller channels will provide an avenue to distribute software
            only, which produce greater profit margins as opposed to turnkey
            systems which involve purchasing and sub-assembly of hardware
            components. The recent introduction of an entirely TAPI (Telephone
            Application Program Interface) based Speech-enabled Auto Attendant
            and Name Dialer, allows integration into different PBX systems
            without the need for additional hardware devices. These integration
            changes should provide for greater appeal to telephony re-sellers
            allowing for more economical customer installations with no
            reduction in the prices iVoice charges for its own software.

            Furthermore, the Company intends to add sales personnel in the
            upcoming fiscal year to increase its efforts in establishing
            relationships with original equipment manufacturers. Management
            considers good working relationships with manufacturers will assist
            in the promotion of iVoice products to the manufacturers authorized
            re-seller networks.

            In order to provide necessary working capital in the current fiscal
            year, the Company will seek to raise cash through issuances of
            additional equity, and/or convertible debt arrangements. Management
            believes that appropriate funding will be generated and future
            product sales will result from its increased marketing efforts and
            that the Company will continue operations through the next fiscal
            year; however, no assurance can be given that sales will be
            generated or that additional necessary funding will be raised.

      b)    Line of Business

            The Company is a communication company primarily engaged in the
            development, manufacturing and marketing of voice recognition and
            computerized communication systems for small-to-medium sized
            businesses and corporate departments. The technology allows these
            businesses to communicate more effectively by integrating speech
            recognition into their traditional office telephone systems with
            voicemail, automated


                                       12
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            attendant and interactive voice response ("IVR") functions. IVR
            products allow information in PC databases to be accessed from a
            standard touch-tone telephone system. The Company sells its products
            directly to business customers, through Dealer and Reseller channels
            as well as through OEM agreements with certain telecommunications
            and networking companies throughout the United States.

      c)    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
            revenue and expenses during the reporting period. Actual results
            could differ from those estimates.

      d)    Revenue Recognition

            The Company obtains its income primarily from the sale of its voice
            recognition and computer technology communication systems. Revenue
            for systems which require customization to meet a customer's
            specific needs or technical requirements, is recognized by the
            contract method of accounting, using percentage of completion.
            Progress toward completion is measured by costs incurred to date as
            a percentage of total estimated costs for each contract. Under the
            percentage of completion method, the liability "Billings in excess
            of costs and estimated earnings" represents billings in excess of
            revenues earned. The completed contract method is used for systems,
            which do not require customization or installation. The Company
            recognizes revenue from support services at the time the service is
            performed or over the period of the contract for
            maintenance/support.

      e)    Advertising Costs

            Advertising costs are expensed as incurred and are included in
            selling expenses. For the years ended December 31, 2001 and 2000,
            advertising expense amounted to $42,006 and $88,881, respectively.

      f)    Cash and Cash Equivalents

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

      g)    Concentration of Credit Risk

            The Company places its cash in what it believes to be credit-worthy
            financial institutions. However, cash balances exceeded FDIC insured
            levels at various times during the year.

      h)    Inventory

            Inventory, consisting primarily of system components such as
            computer components, voice cards, and monitors, is valued at the
            lower of cost or market. Cost is determined on a first-in, first-out
            basis.


                                       13
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

      i)    Property and Equipment

            Property and equipment is stated at cost. Depreciation is computed
            using the straight-line method based upon the estimated useful lives
            of the assets, generally five to seven years. Maintenance and
            repairs are charged to expense as incurred.

      j)    Software License Cost

            Software license costs are recorded at cost, which approximates fair
            market value as of the date of purchase. These costs represent the
            purchase of various exploitation rights to certain software,
            pre-developed codes and systems patented by Parwan Electronics,
            Corp. ("Parwan"), a non-related third party. These costs are
            capitalized pursuant to Statement of Financial Accounting Standards
            ("SFAS") 86, "Accounting for the Costs of Computer Software to be
            Sold, Leased or Otherwise Marketed", and are being amortized using
            the straight-line method over a period of five years. As described
            later in Note 1, the Company has adopted SFAS No. 121. The carrying
            value of software license costs are regularly reviewed by the
            Company and a loss would be recognized if the value of the estimated
            un-discounted cash flow benefit related to the asset falls below the
            unamortizated cost. No impairment loss was recognized as of December
            31, 2001.

      k)    Income Taxes

            Income taxes are provided for based on the liability method of
            accounting pursuant to SFAS No. 109, "Accounting for Income Taxes."
            The liability method requires the recognition of deferred tax assets
            and liabilities for the expected future tax consequences of
            temporary differences between the reported amount of assets and
            liabilities and their tax basis.

      l)    Financing Costs

            Financing costs consist primarily of professional fees and various
            commissions paid relating to the issuance of the Company's
            convertible debentures. These costs are deferred and amortized over
            the term of the issues to which they relate.

      m)    Debt Issue Costs

            Debt issue costs represent the estimated cost of the conversion
            discount feature relating to the issuance of the Company's
            convertible debentures. In previous years, these costs were
            amortized and charged to interest expense over the life of the debt.
            During the year ended December 31, 2001, the Company charged to
            expense the fair value of the beneficial conversion features of the
            convertible debt as measured at the date of issuance in accordance
            with EITF Issue 98-5. The switch to this method of accounting did
            not have a material affect on the Company's financial statements.

      n)    Fair Value of Financial Instruments


                                       14
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            The carrying value of cash and cash equivalents, accounts
            receivable, inventory, accounts payable, accrued expenses and
            deferred revenue approximates fair value due to the relatively short
            maturity of these instruments.

      o)    Long-Lived Assets

            SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
            and for Long-Lived Assets to be Disposed of," requires that
            long-lived assets and certain identifiable intangibles to be held
            and used or disposed of by an entity be reviewed for impairment
            whenever events or changes in circumstances indicate that the
            carrying amount of an asset may not be recoverable. The Company has
            adopted this statement and determined that an impairment loss should
            not be recognized for applicable assets of continuing operations.

      p)    Earnings Per Share

            SFAS No. 128, "Earnings Per Share" requires presentation of basic
            earnings per share ("basic EPS") and diluted earnings per share
            ("diluted EPS").

            The computation of basic EPS is computed by dividing income
            available to common stockholders by the weighted average number of
            outstanding Common shares during the period. Diluted earnings per
            share gives effect to all dilutive potential Common shares
            outstanding during the period. The computation of diluted EPS does
            not assume conversion, exercise or contingent exercise of securities
            that would have an anti-dilutive effect on earnings. The shares used
            in the computations are as follows:

                                                      As of December 31,
                                                      ------------------
                                                    2001              2000
                                                    ----              ----
            Basic and Diluted EPS               125,732,776       87,034,303
                                                ===========       ==========

      q)    Comprehensive Income

            SFAS No. 130, "Reporting Comprehensive Income", establishes
            standards for the reporting and display of comprehensive income and
            its components in the financial statements. The items of other
            comprehensive income that are typically required to be displayed are
            foreign currency items, minimum pension liability adjustments, and
            unrealized gains and losses on certain investments in debt and
            equity securities. As of December 31, 2001 and 2000, the Company has
            no items that represent comprehensive income, and thus, has not
            included a statement of comprehensive income.

      r)    Recent Accounting Pronouncements

            SFAS No. 131, "Disclosure About Segments of an Enterprise and
            Related Information" requires that a public company report financial
            and descriptive information about its reportable operating segments.
            It also requires that an enterprise report certain information about
            its products and services, the geographic areas in which they
            operate and their major


                                       15
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            customers. In determining the requirements of this pronouncement,
            Management believes that there is no materially reportable segment
            information with respect to the Company's operations and does not
            provide any segment information regarding products and services,
            major customers, and the material countries in which the Company
            holds assets and reports revenue.

            SFAS No. 133, "Accounting for Derivative Instruments and for Hedging
            Activities" requires that certain derivative instruments be
            recognized in balance sheets at fair value and for changes in fair
            value to be recognized in operations. Additional guidance is also
            provided to determine when hedge accounting treatment is appropriate
            whereby hedging gains and losses are offset by losses and gains
            related directly to the hedged item. While the standard, as amended,
            must be adopted in the fiscal year beginning after June 15, 2000,
            its impact on the Company's financial statements is not expected to
            be material as the Company has not historically used derivative and
            hedge instruments.

            SFAS No. 142, "Goodwill and Other Intangible Assets" requires
            goodwill to be tested for impairment under certain circumstances,
            and written off when impaired, rather than being amortized as
            previous standards require. It is effective for fiscal years
            beginning after December 15, 2001. Early application is permitted
            for entities with fiscal years beginning after March 15, 2001
            provided the first interim period financial statements have not been
            previously issued. The Company is currently assessing the impact of
            this pronouncement on its operating results and financial condition.

            Statement of Position ("SOP") No. 98-1 specifies the appropriate
            accounting for costs incurred to develop or obtain computer software
            for internal use. The new pronouncement provides guidance on which
            costs should be capitalized, and over what period such costs should
            be amortized and what disclosures should be made regarding such
            costs. This pronouncement is effective for fiscal years beginning
            after December 15, 1998, but earlier application is acceptable.
            Previously capitalized costs will not be adjusted. The Company
            believes that it is already in substantial compliance with the
            accounting requirements as set forth in this new pronouncement and
            therefore believes that adoption will not have a material effect on
            financial condition or operating results.

            SOP No. 98-5 requires that companies write-off defined previously
            capitalized start-up costs including organization costs and expense
            future start-up costs as incurred. The Company believes that it is
            already in substantial compliance with the accounting requirements
            as set forth in this new pronouncement and therefore believes that
            adoption will not have a material effect on financial condition or
            operating results.

NOTE 2 - CORPORATE REORGANIZATION AND MERGER

            On May 21, 1999, the Company executed a Reorganization Agreement
            (the "Agreement") that provided that the Company and International
            Voice Technologies, Corp. ("IVT")


                                       16
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            would be merged and the Company would be the surviving entity. On
            May 25, 1999, a certificate of merger was filed with the State of
            Delaware. In connection with the merger transaction, the sole
            stockholder of IVT, received the following:

                  i)    10,000,000 shares of the Company's Class A Common Stock;
                        and

                  ii)   400,000 shares of the Company's Class B Common Stock.

            In addition, the two controlling stockholders of Visual sold 300,000
            shares of the Company's Class B Common Stock to IVT's sole
            stockholder and concurrently canceled a total of 2,000,000 shares of
            their Class A Common Stock.

            A finder's fee of 2,000,000 shares was issued on August 30, 1999, in
            connection with the reorganization.

            The Agreement also provided that certain assets of the Company would
            be transferred to Communications Research, Inc., ("CRI"), a wholly
            owned subsidiary of Visual, and that shares of CRI would be
            distributed pro rata to the Class A stockholders of the Company
            before the issuance of the 10,000,000 shares to the sole stockholder
            of IVT. The stock of CRI was distributed at the rate of one share of
            CRI for four shares of the Company's Class A Common Stock. On
            September 18, 2000, CRI filed a registration statement with the U.S.
            Securities and Exchange commission to provide for the distribution
            of its shares to former Visual stockholders.

            This merger transaction has been accounted for in the financial
            statements as a public shell merger. As a result of this transaction
            the former stockholders of IVT acquired or exercised control over a
            majority of the shares of Visual. Accordingly, the transaction has
            been treated for accounting purposes as a recapitalization of IVT
            and, therefore, these financial statements represent a continuation
            of the legal entity, IVT, not Visual, the legal survivor.
            Consequently, the comparative figures are those of iVoice.com, Inc.
            Because the historical financial statements are presented in this
            manner, proforma financial statements are not required.

            In accounting for this transaction:

                  i)    IVT is deemed to be the purchaser and surviving company
                        for accounting purposes. Accordingly, its net assets are
                        included in the balance sheet at their historical book
                        values;

                  ii)   Control of the net assets and business of Visual was
                        acquired effective May 21, 1999 (the "Effective Date").
                        This transaction has been accounted for as a purchase of
                        the assets and liabilities of Visual by IVT at the fair
                        value of


                                       17
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

                        $138,000. The historical cost of the net assets acquired
                        was $90,780. A summary of the assigned values of the net
                        assets acquired is as follows:

                              Cash and cash equivalents       $    191
                              Property and equipment           138,809
                              Accrued expenses                  (1,000)
                                                              --------
                              Net assets acquired             $138,000
                                                              ========

            On April 24, 2000, the Company entered into an agreement and plan of
            reorganization with all the stockholders of ThirdCAI, another shell
            company that was a reporting company under the Securities Exchange
            Act of 1934. In this transaction, which took place by means of a
            short-form merger, with ThirdCAI's name being changed to iVoice, the
            Company acquired all the issued and outstanding shares of ThirdCAI
            in exchange for $150,000, and a finder's fee paid to Corporate
            Architect, Inc., consisting of 50,000 shares of Class A voting
            Common Stock. The fee was negotiated between the Company and
            ThirdCAI. The purpose of this transaction was to enable the
            Company's business to be conducted by a reporting company, as
            pursuant to the "eligibility rule" adopted by the National
            Association of Securities Dealers, Inc., or "NASD," as only
            reporting companies may continue to have stock quoted on the OTC
            Bulletin Board.

NOTE 3 - PROPERTY AND EQUIPMENT

      Property and equipment is summarized as follows:

                                                 December 31,
                                                 ------------
                                               2001       2000
                                             --------   --------
            Equipment                        $ 56,196   $ 59,524
            Leasehold improvements             10,184      8,684
            Furniture and fixtures            123,394    123,394
                                             --------   --------
                                              193,102    188,274
            Less: Accumulated depreciation     86,517     47,353
                                             --------   --------
               Property and equipment, net   $106,585   $140,921
                                             ========   ========

            Depreciation expense for the years ended December 31, 2001 and 2000
            was $39,164 and $29,517, respectively.

NOTE 4 - BILLINGS IN EXCESS OF COSTS AND ESTIMATED EARNINGS

      Billings in excess of costs and estimated earnings on uncompleted
      contracts as of December 31, 2001 and 2000 consists of the following:


                                       18
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

                                                            December 31,
                                                         2001         2000
                                                      ---------    ---------

            Costs incurred on uncompleted contracts   $  56,385    $  91,745
            Estimated earnings                           53,763      117,488
                                                      ---------    ---------
                                                        110,148      209,233
            Less billings to date                       153,765      379,450
                                                      ---------    ---------
                                                      $ (43,617)   $(170,237)
                                                      =========    =========

NOTE 5 - INCOME TAXES

      The components of the provision for income taxes are as follows:

                                                               December 31,
                                                               ------------
                                                              2001     2000
                                                             ------   ------
            Current Tax Expense
              U.S. Federal                                   $   --   $   --
              State and Local                                    --       --
                                                             ------   ------
            Total Current                                        --       --
                                                             ------   ------

            Deferred Tax Expense
              U.S. Federal                                       --       --
              State and Local                                    --       --
                                                             ------   ------
            Total Deferred                                       --       --
                                                             ------   ------
            Total Tax Provision from Continuing Operations   $   --   $   --
                                                             ======   ======

            The reconciliation of the effective income tax rate to the Federal
            statutory rate is as follows:

            Federal Income Tax Rate                          (34.0)%
               Deferred Tax Charge (Credit)                     --
               Effect on Valuation Allowance                  38.7%
            State Income Tax, Net of Federal Benefit          (4.1)%
                                                             -----
            Effective Income Tax Rate                          0.0%
                                                             =====

            As of December 31, 2001 and 2000, the Company had net carryforward
            losses of approximately $6,900,000 and $3,500,000 that can be
            utilized to offset future taxable income through 2014. Utilization
            of these net carryforward losses is subject to the limitations of
            Internal Revenue Code Section 382. Because of the current
            uncertainty of realizing the benefit of the tax carryforward, a
            valuation allowance equal to the tax benefit for deferred taxes has
            been established. The full realization of the tax benefit associated
            with the carryforward depends predominantly upon the Company's
            ability to generate taxable income during the carryforward period.

            Deferred tax assets and liabilities reflect the net tax effect of
            temporary differences between the carrying amount of assets and
            liabilities for financial reporting purposes and amounts


                                       19
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            used for income tax purposes. Significant components of the
            Company's deferred tax assets and liabilities are summarized as
            follows:

                                                       December 31
                                                       -----------
                                                   2001           2000
                                               -----------    -----------
            Net Operating Loss Carryforwards   $ 2,630,000    $ 1,190,000
            Less: Valuation Allowance           (2,630,000)    (1,190,000)
                                               -----------    -----------
            Net Deferred Tax Assets            $        --    $        --
                                               ===========    ===========

            Net operating loss carryforwards expire starting in 2007 through
            2016.

NOTE 6 - DUE TO RELATED PARTY

            During the period from June 2000 to date, Jerome R. Mahoney,
            President and Chief Executive Officer of the Company has sold
            personal holdings of the Company's Class A common shares and has
            loaned the proceeds of these sales to the Company to fund its
            working capital requirements. The Company has executed a promissory
            note and Security Agreement in favor of Mr. Mahoney.

            As of December 31, 2001, the outstanding loan balance including
            monies loaned from the proceeds of stock sales, unpaid compensation,
            income taxes incurred from the sale of stock unreimbursed expenses
            and interest on the unpaid balance at 9.5% totaled $1,746,610, of
            this amount, $940,191 is reflected in accrued expenses.

            Under the terms of the loan agreements, the note holder may elect
            prepayment of the principal and interest owed pursuant to this note
            by issuing Jerome Mahoney, or his assigns, one Class B common share
            of iVoice, Inc., no par value, for each dollar owed.

NOTE 7 - CONVERTIBLE DEBENTURES

            The Company has previously issued two series of convertible
            debentures consisting of ten notes payable totaling $500,000 bearing
            interest at 12% per annum and payable on December 1, 2000 and
            fifteen notes payable totaling $425,000 bearing interest at 8% and
            maturing 5 years from the date of issue.

            The 12% debentures are convertible into shares of the Company's
            Class A Common Stock at the option of the holder by dividing the
            outstanding principal and interest by the conversion price which
            shall equal 50% of the average bid price during the 20 trading days
            before the conversion date. As of December 31, 2001, $305,200 in
            principal of the 12% debentures and $6,559 in accrued interest had
            been converted into 2,996,738 shares of the Company's Class A Common
            Stock. Total outstanding principal balance of the 12%


                                       20
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            convertible debentures at December 31, 2001 was $194,800 plus
            accrued interest of $82,514.

            The 8% debentures are convertible into Class A common shares at the
            lesser of (i) 140% of the closing bid price for the Common Stock on
            the Closing Date, or (ii) 80% of the average of the three lowest
            closing bid for the 22 trading days immediately preceding the date
            of conversion. As of December 31, 2001, $260,000 in principal of the
            8% debentures and $7,324 in accrued interest had been converted into
            7,149,992 shares of the Company's Class A Common Stock. Total
            outstanding principal balance of the 8% convertible debentures at
            December 31, 2001 was $165,000 plus accrued interest of $3,936.

            The Company has been advised by the holders of the 12% debentures
            that the Company has breached the following terms of the debentures:
            (a) Failure to register, on a timely basis, under the Securities Act
            of 1933, the shares issuable upon the conversion of the debentures,
            (b) Registering additional shares other than the shares issuable
            upon the conversion of the debentures, and (c) Failure to provide
            the debenture holders a perfected security interest in certain
            assets of the Company pursuant to a Security Agreement that was part
            of the debenture documentation. The Company has reached settlement
            terms with one previous holder of the 12% debentures regarding the
            interest and penalties demanded under default by this former holder
            whereby the Company has issued 450,000 shares to this former holder
            in full settlement of their claim. The Company has not accrued any
            amounts with respect to the Company's default on the 12% debentures
            that may be due to the remaining holders. The Company anticipates
            issuing additional shares to settle the debenture holders, claims
            arising from our default the amount of which is undeterminable at
            this time.

NOTE 8 - CAPITAL LEASE OBLIGATIONS

            During the year ended December 31, 2000, the Company incurred two
            capital lease obligations totaling $92,895 in connection with the
            acquisition of computers and office furniture.

            The future minimum lease payments due under the capital leases at
            December 31, 2001 are follows:

            Lease payable for computer equipment, payable
            at $1,367 per month, including interest at 22.31%
            Final payment is due June 2003                       $20,749

            Lease payable for furniture, payable at $2,151 per
            month, including interest at 20.79%. Final payment
            due April 2003                                        28,197
                                                                 -------

            Present value of net minimum lease payments          $48,946
                                                                 =======


                                       21
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            The future minimum lease payments                    $56,864
            Less amount representing interest                      7,918
                                                                 -------
            Present value of net minimum lease payments           48,946
            Less current portion                                  35,018
                                                                 -------

            Long term capital lease obligations                  $13,928
                                                                 =======

NOTE 9 - COMMITMENTS AND CONTINGENCIES

            a)    In April 2000, the Company entered into a two-year lease
                  agreement for their office currently utilized as the corporate
                  headquarters. Monthly lease payments total $11,000. On
                  December 5, 2001, the Company renegotiated this lease and
                  reduced the space it occupies. The new lease has an
                  eight-month term with monthly payments of $7,000. At December
                  31, 2001, the Company was in arrears on rents due under the
                  original lease for a total of $9,000. Under the renegotiated
                  lease, this arrearage is being paid in monthly amounts of
                  $2,000 along with amounts currently due.

                  Rent expense under operating leases for the year ended
                  December 31, 2001 and 2000 was $176,560 and $153,175,
                  respectively.

                  The Company's future net minimum annual aggregate rental
                  payments required under operating leases that have initial or
                  remaining non-cancelable lease terms in excess of one year are
                  as follows:

                      December 31,
                      ------------
                          2002                                   $65,000
                                                                 =======

            b)    On May 1, 1999, the Company entered into a five-year
                  employment agreement with its majority stockholder (the
                  "Executive"). He will serve as the Company's Chairman of the
                  Board and Chief Executive Officer for a term of five years. As
                  consideration, the Company agrees to pay the Executive a sum
                  of $180,000 the first year with a 10% increase every year
                  thereafter.

            c)    In connection with the Reorganization Agreement, the Company
                  entered into a five-year consulting agreement with one of
                  Visual's Directors (the "Director"). The agreement provided
                  that the Director would receive a fee of $104,000. This
                  agreement was terminated with the Director's resignation on
                  May 16, 2000.

            d)    On June 2, 1999, subsequently amended January 11, 2000, the
                  Company entered into a three-year employment agreement,
                  expiring on May 31, 2002, with an employee. As compensation,
                  such employee will receive a base salary of $80,000, 250,000
                  shares of the Company's Class A Common Stock and options to
                  purchase 140,000 shares of the Company's Class A Common Stock.
                  On August 23, 2001 this employee


                                       22
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

                  was terminated. All unvested options to purchase Company
                  shares were subsequently canceled at the employee's
                  termination date.

            e)    The Company's revenues for the year ending December 31, 2000
                  include $140,950 from Celpage, Inc. The amount of the contract
                  dated February 9, 2000 totaled $288,175 for the installation
                  of a 196-port Integrated Voice Response System at the
                  customer's Guaynabo, Puerto Rico location. To date, the
                  Company has received $42,800 for the installation of 24-ports,
                  which include all database development costs necessary for the
                  entire installation. Celpage has refused to accept the
                  remaining ports citing a shortfall in their projected
                  subscriber base. Other assets of the Company's balance sheet
                  at December 31, 2001 reflects a receivable of $67,650
                  representing total amounts due under the contract related to
                  this installation of $245,375 less deferred revenues of
                  $147,225 and a reserve of $30,500. The Company has made
                  attempts to complete the remaining installation by offering
                  incentives in the form of price reductions however, the
                  customer has refused. The Company has filed suit against PanAm
                  Wireless, Inc., the parent company of Celpage, Inc., to
                  attempt to recover the balance of the contract. PanAm
                  Wireless, Inc. has subsequently filed a counterclaim against
                  iVoice alleging iVoice's failure to supply PanAm with the
                  required equipment and that the system did not provide the
                  services as specified in the purchase order. iVoice denies
                  PanAm's counterclaim allegations and intends to vigorously
                  defend itself in this lawsuit.

            f)    The Company is currently involved with three lawsuits in which
                  it is the defendant. Two of these suits were served by
                  employment agencies for non-payment of placement fees in
                  connection with the hiring of employees, one of which has been
                  dismissed without prejudice by the presiding judge. The
                  Company believes that the amount of the claims will not have a
                  material affect on the financial statements. The third is a
                  claim by a sub-leasee and former subsidiary of the Company
                  with respect to certain property rights and expenses relating
                  to the tenancy between the Company and this sub-tenant.
                  Management believes the suit will be dismissed, however, if
                  not, the amount of the claim will not materially affect the
                  financial statements.

            g)    The Company's assets are subject to a Security Agreement with
                  the majority stockholder. See Note 6.

            NOTE 10 - COMMON STOCK

            In August 2001, the Company amended its Certificate of Incorporation
            to change the par value of its Class A Common Stock from $.01 to
            $.001 and to increase the number of shares the Company is authorized
            to issue of its Class A Common Stock from 150,000,000 to 600,000,000
            and its Class B Common Stock from 700,000 to 3,000,000. The
            amendment also granted the board of directors the rights to
            prescribe and authorize the issuance of 1,000,000 preferred shares,
            $1.00 par value.


                                       23
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            a)    Class A Common Stock

                  Class A Common Stock consists of the following as of December
                  31, 2001: 600,000,000 shares of authorized common stock with a
                  par value of $.001, 154,123,517, shares were issued and
                  outstanding.

                  As of December 31, 2000, the Company was authorized to issue
                  150,000,000 shares of Class A Common Stock with a $.01 par
                  value, 103,969,715 shares were issued and outstanding.

                  Class A Common Stock has voting rights of 1:1. Class A Common
                  Stock has voting rights of 1 to 100 with respect to Class B
                  Common Stock. Each holder of Class A Common Stock is entitled
                  to receive ratably dividends, if any, as may be declared by
                  the Board of Directors out of funds legally available for the
                  payment of dividends. The Company has never paid any dividends
                  on its Common Stock and does not contemplate doing so in the
                  foreseeable future. The Company anticipates that any earnings
                  generated from operations will be used to finance the growth
                  objectives.

                  For the year ended December 31, 2001, the Company had the
                  following transactions in its Class A Common Stock:

                        1.    The Company issued 15,194,287 shares of its Class
                              A Common Stock for services rendered valued at
                              $1,062,055.

                        2.    The Company issued 2,183,834 shares of its Class A
                              Common Stock for compensation to Company employees
                              valued at $234,431.

                        3.    The Company issued 1,172,000 shares of its Class A
                              common to Swartz Private Equity, LLC under the
                              terms of their financing agreement with Swartz for
                              net proceeds of $129,931.

                        4.    The Company issued 328,951 shares of its Class A
                              Common Stock as repayment of loans to related
                              parties for a total value of $75,659.

                        5.    The Company issued 9,829,204 shares of Class A
                              Common Stock for the conversion of $402,201 in
                              debenture principal and 317,576 shares for $13,885
                              in accrued interest.

                        6.    The Company issued 2,128,000 shares of its Class A
                              Common Stock valued at $211,080 to settle disputes
                              arising from financing agreements entered into by
                              the Company.


                                       24
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

                        7.    The Company issued 1,000,000 shares of its Class A
                              Common Stock for conversion of 10,000 shares of
                              Class B Common Stock.

                        8.    The Company issued 18,000,000 shares of its Class
                              A Common Stock for the exercise of a warrant
                              issued to EMCO\Hanover Group, Inc. issued pursuant
                              to a consulting agreement with them.

            b)    Class B Common Stock

                  Class B Common Stock consists of the following as of December
                  31, 2001: 3,000,000 shares of authorized common stock with no
                  par value. As of December 31, 2001, 700,000 shares were
                  issued; and 354,000 shares were outstanding with a total of
                  346,000 Class B shares converted into 34,600,000 Class A
                  shares. Class B common stockholders are not entitled to
                  receive dividends.

                  As of December 31, 2000, the Company was authorized to issue
                  700,000 shares of Class B Common Stock with no par value. As
                  of December 31, 2000, 700,00 shares were issued; and 364,000
                  were outstanding.

                  On April 24, 2000, the Company amended its Articles of
                  Incorporation to state that Class B Common Stock is
                  convertible into its Class A Common Stock at a conversion rate
                  of one share of Class B for one hundred shares of Class A
                  Common Stock. The conversion ratio is in relation to the
                  voting ratio.

                  For the year ended December 31, 2001, the Company had the
                  following transactions in its Class B Common Stock:

                        On November 11, 2001, 10,000 shares of Class B Common
                        Stock were converted into 1,000,000 shares of Class A
                        Common Stock.

            c)    Preferred Stock

                  Preferred Stock consists of 1,000,000 shares of authorized
                  preferred stock with $1.00 par value. As of December 31, 2001,
                  no shares were issued or outstanding. As of December 31, 2000,
                  the Company was not authorized to issue preferred shares.

NOTE 11 - STOCK OPTIONS

            During 2001, the Company issued various options as follows:

            a)    The Company issued to its employees, options to purchase
                  1,655,000 shares of iVoice Class A Common Stock at an average
                  price of $.076 per share. Of these options, 255,000 were
                  cancelled due to employee terminations in 2001. The remaining
                  options vest at 25% per year and have a five-year expiration
                  from date of issue.


                                       25
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            b)    Warrants to purchase 404,510 shares of iVoice Class A Common
                  Stock with an average exercise price of $.1220, to Swartz
                  Private Equity, LLC as drawdown fees under the financing
                  agreement with them. The warrants expire five years from the
                  date of issue.

            c)    Warrants to purchase a total of 343,750 shares of iVoice Class
                  A Common Stock with an exercise price of $.1323 to Owen May
                  and Michael Jacobs of the May Davis Group as a fee for the
                  placement of the Company's 8% convertible debentures, pursuant
                  to a subscription agreement with them. The warrants expire
                  five years from the date of issue.

            d)    Warrants to purchase 18,000,000 shares of iVoice Class A
                  Common Stock with an exercise price of $.055 to the
                  EMCO\Hanover Group, Inc. pursuant to a consulting agreement
                  with them. The warrants were exercised and are reflected as a
                  subscription receivable. See Note 10 regarding shares issued
                  for exercise of this warrant.

            e)    On November 15, 2001, the Company issued warrants to purchase
                  a total of 250,000 shares of iVoice Class A Common Stock at
                  $.047 per share to Beacon Capital LLC in consideration for the
                  placement of $150,000 of the Company's 8% convertible
                  debentures pursuant to an subscription agreement with them.
                  The warrants are exercisable at any time prior to their five
                  (5) year expiration and carry a cash or cashless exercise at
                  the option of the holders.

            During 2000, the Company issued various options as follows:

            a)    On August 17, 2000, in connection with a financing agreement
                  with Swartz Private Equity, LLC, the Company issued a warrant
                  to purchase 5,490,000 shares of Class A Common Stock at $.484
                  per share The warrant expires in five years on August 16, 2005
                  and contains strike price reset provisions.

            Options outstanding, except options under employee stock option
            plan, are as follows as of December 31, 2001:

                  Expiration Date              Exercise Price         Shares
                  ---------------              --------------         ------
                  December 22, 2003                .1000               10,000
                  January 5, 2004                  .1200               10,000
                  January 21, 2004                 .1177               10,000
                  February 5, 2004                 .1430               10,000
                  March 17, 2004                   .0869               15,000
                  April 6, 2004                    .0583               15,000
                  August 17, 2005                  .1406            5,490,000
                  January 9, 2006                  .1045              200,000
                  February 27, 2006                .1406               87,310
                  February 28, 2006                .1458               78,000
                  March 13, 2006                   .1221               39,200
                  April 30, 2006                   .1323              343,750
                  November 14, 2006                .0470              250,000
                                                                   ----------
                                                                    6,558,260
                                                                   ==========


                                       26
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            Employee Stock Option Plan

            During the year ended December 31, 1999, the Company adopted the
            Employee Stock Option Plan (the "Plan") in order to attract and
            retain qualified personnel. Under the Plan, the Board of Directors
            (the "Board"), in its discretion may grant stock options (either
            incentive or non-qualified stock options) to officers and employees
            to purchase the Company's common stock at no less than 85% of the
            market price on the date the option is granted. Options generally
            vest over four years and have a maximum term of five years. During
            1999, 20,000,000 shares were reserved for future issuance under the
            plan. As of December 31, 2001, 11,559,000 options to purchase shares
            were granted. A total of 9,000,000 of these granted options were
            exercised. A total of 1,946,083 options to purchase Class A common
            shares were outstanding and held by company employees. The exercise
            prices range from $0.06 to $3.75 per share. All options issued to
            employees vest at 25% per year and expire in 5 years.

            As of December 31, 2000, employee stock options exercised are as
            follows:

               Optionee             Exercised         # Shares             Price
               --------             ---------         --------             -----
            Joel Beagleman          03/20/00         9,000,000             0.033

            The Company has adopted only the disclosure provisions of SFAS No.
            123. It applies Accounting Principles Bulletin ("APB") Opinion No.
            25, "Accounting for Stock Issued to Employees", and its related
            interpretations in accounting for its plan. It does not recognize
            compensation expense for its stock-based compensation plan other
            than for restricted stock and options/warrants issued to outside
            third parties. If the Company had elected to recognize compensation
            expense based upon the fair value at the grant date for awards under
            its plan consistent with the methodology prescribed by SFAS No. 123,
            the Company's net loss and loss per share would be increased to the
            proforma amounts indicated below:

                                              For The Year Ended,
                                                  December 31,
                                                  ------------
                                              2001           2000
                                          -----------    -----------
            Net Loss
               As Reported                $(3,447,434)   $(2,891,379)
                                          ===========    ===========
               Proforma                   $(3,848,540)   $(3,296,417)
                                          ===========    ===========

            Basic Loss Per Share
               As Reported                $      (.03)   $      (.03)
                                          ===========    ===========
               Proforma                   $      (.03)   $      (.04)
                                          ===========    ===========


                                       27
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

            The fair value of these options were estimated at the date of grant
            using the Black-Scholes option-pricing model with the following
            weighted-average assumptions for the years ended December 31, 2001
            and 2000: dividend yield of 0%; expected volatility of 320%;
            risk-free interest rates of 5.50% and 5.56% respectively; and
            expected life of 4.05 and 4.1 years, respectively.

            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
            employee 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 employee stock
            options.

            The following summarizes the stock option and warrant transactions:

<TABLE>
<CAPTION>
                                                       Weighted           Other            Weighted
                                       Employee         Average          Options            Average
                                    Stock Options      Exercise            and             Exercise
                                     Outstanding         Price           Warrants            Price
                                     -----------         -----           --------            -----
<S>                                  <C>                 <C>           <C>                  <C>
Balance, January 1, 2000              9,510,000          $.033             665,185          $0.120
  Granted                               544,000          $.806           5,490,000          $0.484
  Exercised                          (9,000,000)         $.033            (195,185)         $0.104
  Canceled                             (290,000)         $.191                  --          $0.110
                                     ----------          -----         -----------          ------

Balance, December 31, 2000              764,000          $.670           5,960,000          $0.456
  Granted                             1,795,000          $.078          18,998,260          $0.058
  Exercised                                  --          $.000         (18,000,000)         $0.040
  Canceled                             (612,917)         $.246            (400,000)         $1.328
                                     ----------          -----         -----------          ------

Balance, December 31, 2001            1,946,083          $.257           6,558,260          $0.135
                                     ==========          =====         ===========          ======

Outstanding and Exercisable,
 December 31, 2000                       66,620          $.333           5,960,000          $0.456
                                     ==========          =====         ===========          ======

Outstanding and Exercisable,
 December 31, 2001                      265,583          $.587           6,558,260          $0.135
                                     ==========          =====         ===========          ======
</TABLE>

      The weighted average remaining contractual lives of the employee stock
      options is 4.05 years at


                                       28
<PAGE>

                                  iVOICE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2001 AND 2000

      December 31, 2001.

NOTE 12 -  SUBSEQUENT EVENTS

            a)    On February 14, 2002, through mutual agreement, the Company
                  cancelled its subscription agreement for the purchase of
                  $300,000 of the Company's 8% convertible debentures with
                  Beacon Capital, LLC. As compensation, the Company issued to
                  Beacon, 2,000,000 restricted shares of its Class A Common
                  Stock.

            b)    On February 14, 2002, the Company received a notice of
                  conversion of $93,085 in interest from the holders of its 12%
                  convertible debentures. In accordance with the debenture
                  agreements, the Company issued 4,279,750 of its Class A Common
                  Stock for the conversion of the interest.


                                       29