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                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                       COMMISSION FILE NUMBER 0 - 23672

                          YIFAN COMMUNICATIONS, INC.
                (Name of small business issuer in its charter)

              DELAWARE                                 06-1607651
   (state or other jurisdiction of                  (I.R.S. Employer
   incorporation of organization)                  identification No.)

    41-60 Main Street, Suite 210
     Flushing, Queens, New York                           11355
(address of principal executive office)                (Zip Code)

Issuer's Telephone Number (718) 445-9843

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

Securities registered under Section 12(g) of the Exchange Act:    Common
Stock, $0.008 par value

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

     Yes [X]    No [_]

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of 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. [_]

     The Issuer's revenue for the year ended December 31, 2001 was $1,227,685.

     Based on the average bid and asked price of the Issuer's Common Stock on
April 21, 2002, as reported on the NASD's OTC Bulletin Board, the aggregate
market value of the 4,587,451 shares of Common Stock held by non-affiliates was
$688,118.

     On April 21, 2001, the Issuer had a total of 13,726, 951 shares of Common
Stock issued and outstanding.

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PART I

     This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including, without limitation, statements regarding our
expectations, beliefs, intentions or future strategies that are signified by the
words "expect," "anticipate," "intend," "believe," or similar language. All
forward-looking statements included in this report are based on information
available to us on the date hereof, and we assume no obligation to update any
such forward-looking statements. Our business and financial performance are
subject to substantial risks and uncertainties. Actual results could differ
materially from those projected in the forward-looking statements. In evaluating
our business, you should carefully consider the information set forth below
under the caption " Risk Factors." Readers are cautioned not to place undue
reliance on these forward-looking statements.

Item 1. Description of Business

Our Corporate History

     Incorporation and Name Changes. We were incorporated under the laws of the
State of Ohio in October 1991 as Sports Sciences, Inc. At our 1996 Annual
Meeting, our stockholders approved a plan to change our name and our corporate
domicile by means of a statutory merger with Smart Games Interactive, Inc., a
newly formed Delaware corporation that was a wholly owned subsidiary of our
company immediately before the merger. This merger was completed on October 11,
1996.

     On July 21, 2000 our board of directors approved a plan to change our name
by means of a statutory merger with Yifan Communications, Inc., a newly formed
Delaware corporation that was a wholly owned subsidiary of our company
immediately before the merger. This merger was completed on July 28, 2000.

     Prior Business Operations. Originally, our company created, designed,
developed and assembled interactive electronic game simulators. However, the
cash flow from these operations was not sufficient to pay operating costs and
our company had accumulated losses of approximately $5,570,000 by December 31,
1996. After several unsuccessful attempts to attract additional financing, our
former board of directors decided to terminate all ongoing business operations
in the third quarter of 1997.

     During the year ended December 31, 1998, our former board of directors
liquidated substantially all of our company's inventories and other operating
assets and used the proceeds to reduce its outstanding liabilities. Our company
was inactive and insolvent during the entire fiscal year ended December 31,
1999. At December 31, 1999, our company had no material assets and approximately
$700,000 in unpaid liabilities.

     Year 2000 Restructuring. On March 30, 2000, our former board of directors
approved the sale of a controlling interest in our company to Tobem Investments
Limited for $75,000 in cash. It then appointed Tobem's nominee, Sally A. Fonner,
to serve as a member of the board of directors. After appointing Ms. Fonner to
serve as a member of the board, all of our former directors resigned and Ms.
Fonner became the sole director of our company. Immediately thereafter, our
company and Tobem entered into a Project Management Agreement (the "PMA") with
Capston Network Company ("Capston"), a corporation owned by Ms. Fonner. Under
the PMA, Capston was specifically authorized and obligated to (a) manage our
company's ministerial accounting and administrative functions, (b) negotiate the
payment and/or compromise of our company's outstanding liabilities; and (c)
negotiate a business combination agreement with a suitable privately held
company

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     Between March 30, 2000 and July 28, 2000, Capston and Ms. Fonner devoted
substantial time and effort to negotiations with our company's creditors. As a
result of these negotiations, the creditors agreed to accept aggregate cash
payments of $98,107 in full settlement of approximately $700,000 in outstanding
indebtedness. During this same period, our company incurred aggregate operating
expenses of $35,179, for an aggregate cash outflow of $123,286. Of this amount,
$75,000 was paid from the cash contributed by Tobem. The $48,286 balance was
paid by Capston and accounted for as a stock purchase. Our company also issued
shares to its former legal counsel for unpaid fees. After giving effect to all
of the foregoing transactions, our company had 32,500,000 shares issued and
outstanding. Of this number, Tobem owned 15,000,000 shares and Capston owned
3,500,000 shares.

     On July 27, 2000, Tobem and Capston consented to an amendment to our
company's Certificate of Incorporation that implemented a 1 for 40 reverse split
of our outstanding common stock ("Old Common") and increased our authorized
capitalization to 100,000,000 shares of $0.008 par value common stock ("Common
Stock") and 10,000,000 shares of $.008 par value preferred stock ("Preferred
Stock"). The Amendment was a negotiated element of the Yifan Transaction
described below and ultimately became effective on September 25, 2000.

     Acquisition  of  Yifan.com,  Inc. On July 30, 2000,  our company  entered
into a reorganization agreement with Yifan.com,  Inc., a New York corporation.
In connection with this transaction:

     o    The stockholders of Yifan.com transferred all outstanding Yifan.com
          shares to our company in exchange for 11,994,750 shares of Common
          Stock;

     o    Our company issued 179,921 shares of Common Stock to certain finders
          who assisted in the negotiation of the transaction; and

     o    Capston transferred 89,961 shares of Common Stock to such finders;

     Our Company subsequently issued 180,000 shares of Common Stock to Ms.
Fonner as compensation under an administrative services agreement, 360,000
shares of Common Stock to our lawyers as compensation under a legal services
agreement and 200,000 shares of Common Stock in connection with our acquisition
of grocer2grocer.com. Taking all of the foregoing into account, there were
13,726,951 shares of Common Stock issued and outstanding at December 31, 2001
and at the date of this Report.

Introduction to Our Business

     We are an Internet communications, e-commerce and software development
company that provides a variety of software products and Internet services
tailored to the specific needs of the Chinese speaking population. While over
one-quarter of the world's population reads and writes Chinese, Internet sites
written in the Chinese language are relatively rare and the companies that focus
on the needs of the Chinese speaking population are ordinarily much smaller than
their English language counterparts. We believe that over the next 15 to 20
years, the Chinese language Internet will become an important communications
medium. We also believe underdeveloped communications infrastructure,
unpredictable regulatory policies and immature markets are likely to impede the
growth and development of the Internet in the Peoples Republic of China (the
"PRC") and other Chinese speaking countries. Since we believe the market for
Chinese language Internet services will develop at different rates in different
parts of the world, we intend to grow our business by focusing first on the
needs of Chinese communities in North America and other industrialized nations.
Then, when the infrastructure, regulatory policies and market potential in the
PRC and other less-developed Chinese speaking countries justifies the
anticipated cost of expansion, we intend to expand our operations into these
larger markets.

     We established our first Chinese language Internet portal, www.yifan.com,
in May 1997. This Portal focused primarily on the needs of the Chinese community
in the New York Metropolitan area. As our business developed, we expanded our
Portal network and embarked on an ambitious software development program that
has resulted in several proprietary software products, including:

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     o    Search Engine - provides one of the fastest  Chinese  language  search
          capabilities on the Internet;

     o    Translation Utility - converts pages from Simplified to Traditional
          Chinese characters on the fly;

     o    Web Crawler - captures both Chinese formatted web-pages and Chinese
          character information by searching multithreads on the Internet;

     o    Content Manager Shell - provides the core programming modules needed
          by users who want to establish Chinese language "content" sites;

     o    E-commerce Shell - provides the core programming modules needed by
          merchants who want to establish business to business ("B2B") and
          business to consumer ("B2C") e-commerce sites;

     o    E-Reader/Tollgate Utility - protects copyright owners by allowing
          users to download books and other copyrighted materials in a form that
          can only be read on the computer that downloaded the document;

     o    Remote Learning Products  -  facilitates Internet-based education
          programs in Chinese,

     o    Chinese language chat room software.

     By 1999, we had expanded our Portal network to four domains. In October
2000, we purchased the business plan and preliminary software source code for a
proposed Internet web site that will provide members with a convenient and cost
effective nationwide information clearinghouse for available grocery diversion
transactions. In January 2001, we launched our first e-commerce site at
www.yifanmall.com. Our second e-commerce site at www.grocer2grocer.com launched
in early May. We presently serve 50,000 registered users and generate an average
of two million page impressions per day. To date, we have grown our business
with virtually no advertising or promotion, other than word of mouth. We are
focusing our principal efforts on:

     o    Building an active online community of Internet users who are bound
          together by a common language, history and culture;

     o    Developing software tools, server networks and business systems that
          we will use in an Application Service Provider ("ASP") environment to
          provide e-commerce facilities for our business clients;

     o    Developing software tools and business systems that we will license to
          business clients that want to establish and maintain stand-alone
          e-commerce and content provider web sites; and

     o    Developing company-owned e-commerce sites that will function as
          stand-alone profit centers while serving as working demonstrations of
          our software and business systems.

     As a diversified communications, e-commerce and software development
company, we intend to derive revenues from a variety of sources including:

     o    Sale of advertisements, promotions and sponsorships to merchants and
          other advertisers;

     o    Development  and  management of e-commerce  web sites for our business
          clients;

o        Sales and licenses of our proprietary software and related maintenance;
         and

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     o    Operation of company-owned e-commerce web sites.

Our Business Strategy

     Our board of directors is controlled by "old economy" businessmen who know
how to buy a product and move it out the door at a profit. We have selected a
target market that has favorable demographics and immense growth potential. We
focus on the current needs of existing and users and business customers in our
target market. We are meticulous when it comes to cost control and are willing
to invest in new technology only when there is a direct link between the
investment and a clearly identified revenue stream. While we believe aesthetics
are important, they are a secondary consideration. Our primary goals are
functionality, reliability, utility, ease of use, and value.

     Our business goal is to capitalize on the growth of the Internet among
Chinese users worldwide. We believe Chinese users represent one of the fastest
growing and potentially one of the largest user groups on the Internet. To reach
this goal, we intend to offer a comprehensive suite of Internet products,
services and software solutions to our users and believe that by offering an
integrated platform of content, community, commerce and services, we will be
well positioned to capitalize on the growth of the Chinese language Internet.
Our platform includes the following:

     o    Online Community. We will continue to emphasize online communities and
          rely on user feedback, word of mouth advertising and responsiveness to
          community needs as a foundation for future growth.

     o    Portal Network. Our portal network is committed to content, community
          and commerce, and provides a platform for a rich variety of online
          products and services.

     o    Advertising Platform. Our portal network provides a desirable platform
          for ad hosting and targeted advertising to the Chinese communities we
          serve.

     o    Cost-Effective Software Solutions. Our proprietary Chinese language
          software solutions facilitate the development of web-based businesses
          in a variety of fields ranging from content and information services
          to B2B and B2C e-commerce.

     Initial Focus on North America. Our operations to date have focused
primarily on serving the Chinese communities in North America. Our products and
services are tailored to the specific interests, needs and viewing habits of our
users. We began our operations in the New York Metropolitan area and the bulk of
our key employees still call the New York Metropolitan area home. Our local
presence allows us to better understand the needs of both Internet users and
Internet-based businesses, and our commitment to community helps us build and
maintain strong relationships. While the Chinese communities in North America
represent less than one percent of the world's Chinese population, they have a
disproportionately large share of the total purchasing power. In general, people
of Chinese extraction who live in North America are more affluent, better
educated and more technically proficient than the general population. The
Chinese community is also more insular than many ethnic groups and clearly
identifiable "China-Town" districts, busy centers of commerce, culture and
community, can be found in most major American cities. For these reasons and
others, we believe the Chinese community in North America is a particularly
desirable and cohesive niche market.

     Easy Access to Information. We produce, collect, translate, enhance and
supplement content for our portal network. As online Chinese language content
improves, we expect our portal network to generate increasing traffic and become
a highly desirable forum for directed advertising. Each of our Portals provides
easy access to content, community and e-commerce offerings that appeal to
individual users. We seek to make our Portals the first and most frequent
destination for Chinese language Internet users through Online Communities. We
believe our Online Communities will be a major source of traffic and user
loyalty as the Internet becomes an integral part of the Chinese lifestyle.

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     Proprietary Online Directory. Our Yifan online directory, the centerpiece
of our portal network, was carefully designed and has been continuously refined
to reflect the unique cultural characteristics and thinking and viewing habits
of our users. Our editorial staff reviews and classifies web pages according to
content and integrates that information into a hierarchical directory structure.
As a result, most web pages lie at the end point of at least 3 distinct search
paths. Our directory is highly complex, proprietary and specific, and we believe
it would be very difficult for our competitors to duplicate our directory.

     Superior Search Capabilities. Our proprietary search engine is a unique
Java application that has been written entirely in Chinese and is designed to
meet the challenges posed by the Chinese language and its pictographic
characters. We have found that the use of Java technology for our search engine
results in superior execution speed and more comprehensive searches. At the date
of this Report, we believe our search engine provides one of the fastest Chinese
language search capabilities on the Internet. We have also developed a
proprietary web crawler that is written in Visual C++, and automatically
searches the Web to identify and classify Chinese language web pages.

     Attractive Platform for Advertising and e-Commerce. We believe that our
Portals provide an attractive platform for advertisers and merchants because we
have become a leading Internet brand in North America and provide direct access
to the Chinese community, a user group with a highly desirable demographic
profile. We are currently developing a client service group that will be
dedicated to developing and enhancing relationships with advertisers and
maximizing the effectiveness of their advertising campaigns. We intend to take
advantage of our high visitor traffic by developing a user-friendly e-commerce
platform that will allow a variety of merchants to easily establish B2B and B2C
e-commerce capabilities. We also plan to facilitate e-commerce activity by
providing order tracking and product database management services.

     Unique Chinese Language Web Solutions. We are actively developing Chinese
language software products that facilitate the creation, operation, maintenance
and management of Chinese language Internet sites. These products range from
Chinese language search and translation tools to content provider and e-commerce
shells that contain all the programming modules necessary to develop a web-based
business serving the Chinese community. Our strategy is to differentiate
ourselves based on the breadth of our integrated services, the caliber of our
resources, and our responsiveness to user needs. Through our portal network, we
intend to offer our clients the distribution channels they require for bringing
traffic to their Web site, while also enabling us to track and measure our
success in directing viewers to our clients web sites. Our e-commerce strategy
is conducive to multiple revenue streams, including software sales, professional
services, advertising fees, and e-commerce fees.

Our Target Market

     Our target market could be broadly described as the Chinese speaking
population of the world, but that broad description would be overly simplistic.
We believe that the larger Chinese speaking market actually consists of several
distinct segments:

     o    Chinese communities of North America;

     o    Chinese communities of industrialized Europe;

     o    Chinese exporters in Hong Kong, Taiwan the PRC and developing Asian
          nations;

     o    Chinese consumers in Hong Kong, Taiwan and developing Asian nations;

     o    Chinese business in the PRC; and

     o    Chinese consumers in the PRC.

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     While all segments of our target market share a common language, the
history, culture, demographic characteristics, geographic dispersion, relative
size and near-term commercial potential of the various Chinese market segments
vary considerably. Therefore, we believe each of the principal Chinese market
segments presents a different risk/reward profile and our overall business
strategy has been carefully developed to take these fundamental differences into
account, maximize our potential operating revenue and minimize our exposure to
developing and unpredictable markets. The principal milestones in our overall
growth strategy are:

     o    Enhance North American Leadership. Our current user base includes
          approximately 50,000 registered users and the bulk of these users are
          located in the Northeastern U.S. We are actively seeking to expand our
          user base on the West Coast and enhance our leadership posit ion in
          the North American market. We intend to grow our North American market
          share by acquiring other Chinese language Internet companies that have
          established West Coast appeal and by continuing to emphasize the
          value, utility and functionality of our Online Community. We also
          intend to expand our product and service offerings to more fully
          satisfy the information and e-commerce needs of our users. We believe
          that as our user base and our e-commerce activities expand, we will
          become a particularly attractive platform for advertisers who wish to
          target the Chinese community in North America.

     o    Leverage North American Leadership into Industrialized Europe. We
          believe most of the lessons we have learned with respect to the
          creation and development of an Online Community will be readily
          transferable to industrialized Europe. In general, the Chinese
          communities in Europe are similar to the Chinese communities in North
          America in terms of size, affluence, education, technical
          sophistication and cohesiveness. Therefore, we intend to pursue
          European expansion as the second step in our corporate development.

     o    Leverage Leadership into Import-Export e-Commerce. We believe a
          leadership position in the North American and European markets can be
          readily leveraged across international borders to attract B2B
          e-commerce in the import-export sector. In particular, we believe our
          sophisticated portal network and our affluent and technically
          proficient user base will be particularly attractive to merchants in
          Taiwan, Hong Kong, the PRC and other developing Asian nations that
          want to establish e-commerce facilities for exports directed to
          Chinese communities in North America and Europe.

     o    Leverage Experience with Online Communities and e-Commerce into Asia.
          We believe many of the lessons we have learned with respect to the
          creation and development of Online Communities will also be
          transferable to Chinese communities in Asian countries other than the
          PRC that have adequate communications infrastructure and predictable
          regulatory regimes. While the Chinese communities in Asia are more
          diverse and generally less technically sophisticated than the Chinese
          communities in North America and Europe, these Chinese communities are
          significantly larger and represent a much greater potential for Online
          Community development and B2C e-commerce.

     o    Leverage Leadership into B2B e-Commerce in the PRC. As the final step
          in our development, we will attempt to enter the B2B e-commerce market
          within the PRC itself. Since the PRC presents numerous technical and
          regulatory challenges, there can be no assurance that our efforts to
          establish B2B e-commerce capabilities in this market will ever be
          successful. Moreover, there can also be no assurance that the bulk of
          the B2B e-commerce in the PRC will not ultimately go to other portal
          networks that provide a broader array of Internet services to
          businesses and consumers in the PRC.

     We believe the telecommunications infrastructure in the PRC and other
developing Asian nations will not be adequate for several years. In addition,
since active user involvement and the free and unrestricted flow of information,
ideas and opinions are core features of our Online Communities, we believe the
PRC and other developing Asian nations will present limited opportunities until
there are significant changes in the prevailing regulatory regimes. Therefore,
we do not intend to establish Online Communities or B2C e-commerce facilities in
the PRC and other developing Asian nations for an extended period of time.

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     We do not intend to take one giant leap into the future. Instead, we will
take a series of carefully planned and executed steps to increase our value to
Internet users and business customers in our target market. Most of our
investments will be relatively small and all of our investments will be expected
to generate short-term results. Moreover, all of our investments will be
intended to serve as showcases for business customers who can benefit from the
use of our software and services. While we intend to seek additional capital
from time to time, we anticipate that the bulk of our growth will be financed
from internally generated cash flow.

Recent Developments

     We view our Portal network as a potential source of significant advertising
revenue. More importantly, however, we view our portal network as a foundation
for our software and service marketing activities. Because of the highly
entrepreneurial nature of the Chinese market, a large proportion of our
potential individual users are also potential business customers. We believe the
bulk of our potential business customers will be looking for "concrete proof"
that a modest investment in Internet technology can have a positive and lasting
impact their bottom lines. Therefore, our greatest challenge will be showing our
potential business customers how the use of our software and services can
increase the current profitability of their businesses.

     In January 2001, we established a demonstration B2C e-commerce site in
conjunction with the Hong Kong Supermarket chain. This online grocery store at
www.yifanmall.com uses our proprietary B2C e-commerce software shell in a "real
world" small business setting. Under the terms of our agreement with Hong Kong
Supermarket, we buy items for our on-line store as orders come in, package the
orders in a small space provided by Hong Kong Supermarket and ship the orders by
UPS. In general, our purchase price is between 80% and 90% of the posted shelf
price for the goods and our selling price is between 120% and 130% of the posted
shelf price. We will not incur any fixed expenses for inventory, facilities or
additional staff. Instead, we will run our on-line store in exactly the same
manner as any other small business that expanded into e-commerce.

     In June 2001, we entered into another Internet advertising contract. This
agreement with 247Media, Inc. authorizes 247Media to resell banner advertising
space on certain of our web pages and provides for a per impression fee that
increases as our number of impressions increases. During the year ended December
31, 2001, our total revenue from the 247Media contract was approximately
$126,000. Since we are beginning to place banner advertising space on a larger
number of web pages, we expect future advertising revenues to increase
significantly.

     Since we created our on-line grocery store using our e-commerce shell and
HTML programmers who work from Hong Kong and the PRC, our total cost to develop
and launch the site was approximately $15 per inventory item, a figure that
compares quite favorably to the $150 per item that is common in today's market.
Even after allowing for a reasonable mark-up for overhead and profit, we expect
to be able to offer our business customers a very cost-effective B2C e-commerce
option.

     In addition to our on-line grocery store, we are currently using our
e-commerce shell to develop a demonstration B2B e-commerce site that will be
located at www.grocer2grocer.com. This site will be devoted to a niche market in
the grocery industry known as "grocery diversion." In substance, the grocery
diversion industry specializes in reselling manufacturer's overstocks and
special sale merchandise from sellers who have excess inventory to buyers who
want to save a little on their purchases. While grocery diversion is not a "high
margin" business, it can quite profitable because of the large average
transaction size and the high volume of business conducted. We have hired a
former vice president of a leading national grocery wholesaler to manage our
grocer2grocer business. Except for personnel costs, we will not incur any fixed
expenses for inventory or facilities. In substance, we will run our on-line
grocery diversion business in exactly the same manner as any other grocery
diverter that expanded into e-commerce.

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     We purchased the business plan, Internet domain name, business plan and all
preliminary web-site design elements for www.grocer2grocer.com, In October 2000.
While our grocery diversion web site is not yet completed, we commenced grocery
diversion operations in the fourth quarter and realized approximately $103,000
in revenue from our first three transactions. After deducting the associated
cost of goods sold, our grocery diversion activities contributed approximately
$6,000 in gross profit.

     We expect our on-line grocery store and grocery diversion activities to
contribute to our operating overhead and business expansion from inception. More
importantly, we expect these two operating business units to serve as concrete
examples of how a small business can implement Internet technologies in a
cost-effective manner. These business units, therefore, will serve the dual
purposes of funding our corporate expansion and demonstrating the utility of our
software products in real world settings.

     We will probably enter into other on-line businesses from time to time as
opportunities present themselves. In each case, however, our primary goal will
be to create self-sustaining business units that demonstrate the utility of our
products and services in a real world setting where a modest investment in
technology can make a significant difference in bottom line profitability.

Competition

     There are many companies that distribute online content and services
targeting Chinese users. We compete with distributors of content and services
over the Internet, including Web directories, search engines, content sites,
Internet service providers and sites maintained by government and educational
institutions. These sites compete with us for visitor traffic, advertising
dollars, e-commerce transactions and potential partners. The Chinese language
Internet is new and rapidly evolving. Competition is intense and is expected to
increase significantly in the future because there are no substantial barriers
to entry in our market.

     We have many competitors in the Chinese language Internet market, including
China.com, Netease, Sina.com Sohu.com and Yahoo! China. In addition, a number of
existing or new Internet portals, including those controlled or sponsored by
government entities, may have competitive advantages over us in terms of:

     o    Brand recognition;

     o    Financial and technical resources; and

     o    Access to original content.

     However, we believe we have competitive advantages over our competitors
because of:

     o    Our brand name, which is one of the most recognized among North
          American Chinese language Internet users;

     o    Our exclusive focus on the needs of the Chinese community;

     o    Our ability to offer products and services that are tailored to the
          specific interests, needs and viewing habits of Chinese Internet
          users; and

     o    The experience and quality of our management team.

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     We compete with other Chinese language Internet portals for advertising and
e-commerce revenues primarily on the following basis:

     o    Brand recognition;

     o    Volume of traffic and users;

     o    Quality of Web site and content;

     o    Quality of online advertising and e-commerce services;

     o    Variety of e-commerce service options;

     o    Effectiveness of sales and marketing efforts; and

     o    Price.

     Our competitors may in the future achieve greater market acceptance and
gain additional market share. It is also possible that new competitors may
emerge and acquire significant market share. In particular, our online directory
also faces competition from software and other Internet products and services
incorporating search and retrieval capabilities. In addition, operators of
leading Web sites or Internet service providers, including large corporations
such as Microsoft/MSN, Yahoo!, Terra Lycos and America Online, currently offer,
and could expand, their online products and services targeting the Chinese
community. We also compete with traditional forms of media, like newspapers,
magazines, radio and television for advertisers and advertising revenue. Please
refer to "Risk Factors" for a more detailed discussion of the risks we face from
our competitors.

Intellectual Property and Proprietary Rights

     We regard our copyrights, service marks, trademarks, trade secrets and
other intellectual property as critical to our success. We rely on trademark and
copyright law, trade secret protection, non-competition and confidentiality
and/or license agreements with our employees, customers and others to protect
our intellectual property rights. Despite our precautions, it may be possible
for third parties to obtain and use our intellectual property without
authorization. Furthermore, the validity, enforceability and scope of protection
of intellectual property rights in Internet-related industries is uncertain and
still evolving. The laws of the PRC and certain other countries do not protect
intellectual property to the same extent as the laws of the United States.

     We own the Internet domain names www.yifan.net, www.yifannet.com,
www.gotofind.com, www.yifanmall.com, www.shopsinomall.com, www.planetsino.com.
and www.grocer2grocer.com. We intend to register or purchase additional domain
names as we expand and diversify our business activities.

     Many parties are actively developing chat, homepage, search and related Web
technologies. We expect these parties to continue to take steps to protect these
technologies, including seeking patent protection. There may be patents issued
or pending that are held by others and that cover significant parts of our
technology, business methods or services. For example, we are aware that a
number of patents have been issued in the areas of e-commerce, Web-based
information indexing and retrieval and online direct marketing. Disputes over
rights to these technologies are likely to arise in the future. We cannot be
certain that our products do not or will not infringe valid patents, copyrights
or other intellectual property rights held by third parties. We may be subject
to legal proceedings and claims from time to time relating to the intellectual
property of others in the ordinary course of our business.

      We may license technology from third parties. The market is evolving and
we may need to license additional technologies to remain competitive. We may not
be able to license these technologies on commercially reasonable terms or at
all. In addition, we may fail to successfully integrate any licensed technology
into our services. Our inability to obtain any of these licenses could delay
product and service development until alternative technologies can be
identified, licensed and integrated.

                                       10
<PAGE>

Employees

     As of April 23, 2002, we had 3 full-time employees in the United States. We
also employ a total of 12 consultants, including 7 consultants who telecommute
from Hong Kong and the PRC. This staff supports our software and web site
development efforts, and enables us to provide customized e-commerce solutions
at a very attractive cost. None of our employees or consultants is represented
under collective bargaining agreements. We consider our relations with our
employees and consultants to be good.

     All of our officers have entered into confidentiality, non-competition and
non-solicitation agreements with us. In addition, a significant percentage of
our employees and consultants own shares of our Common Stock, or participate in
our employee stock option plan.

Principal Risk Factors of Our Business

     We have limited financial resources and we will need substantial additional
capital, which we may not be able to obtain.

      Our Company had approximately $186,000 in cash and accounts receivable at
December 31, 2001. We believe these resources will be adequate to provide for
our operating expenses for a period of six to twelve months from the date of
this Report. Thereafter, we will need additional capital to pay our operating
expenses and finance our planned expansion.

     We will need at least $3 to $5 million in additional capital to fund our
current operating expenses and our planned expansion. In addition, long-term
capital requirements are difficult to plan in the rapidly changing Internet
industry. We currently expect that we will need capital to pay our ongoing
operating costs, fund additions to our portal network and computer
infrastructure, pay for the expansion of our sales and marketing activities and
finance the acquisition of complementary assets, technologies and businesses. We
intend to pursue additional financing as opportunities arise.

     Our ability to obtain additional financing in the future will be subject to
a variety of uncertainties, including:

     o    Changes in the demand for online information services;

     o    Changes in the nature of our business resulting from the introduction
          of new services;

     o    Changes in the nature of our business resulting from our entry into
          new markets;

     o    Changes in our future results of operations, financial condition and
          cash flows;

     o    Changes in investors' perceptions of and appetite for Internet-related
          securities;

     o    Changes in capital markets in which we may seek to raise financing;
          and

     o    Changes in general economic, political and other conditions in our
          target markets;

     The inability to raise additional funds on terms favorable to us, or at
all, would have a material adverse effect on our business, financial condition
and results of operations. If we are unable to obtain additional capital when
required, we will be forced to scale back our planned expenditures, which would
adversely affect our growth prospects.

                                       11
<PAGE>

We have a history of losses and we anticipate future losses

     During the year ended December 31, 2000, we received $117,000 in revenue
from grocery diversion activities, which resulted in a gross profit of
approximately $20,000. For the year ended December 31, 2000, our company had a
net loss of ($336,382), including $240,300 in non-cash expenses that were paid
through the issuance of Common Stock. To date, all of our operating losses have
been paid from capital..

     During the year ended December 31, 2001, we had a net loss of ($184,422) on
revenues of $1,227,685 from grocery diversion activities. We anticipate that our
Company will continue to incur operating losses for the foreseeable future due
to a high level of planned operating and capital expenditures, increased sales
and marketing costs, additional personnel costs, greater levels of product
development and our overall expansion strategy. It is likely that our operating
losses will increase in the future and we may never achieve or sustain
profitability.

     The market for our outstanding shares is limited and the current market
price of the Old Common bears no relationship to our assets, earnings or any
other established criteria of value.

     The book value per share of our Common Stock was approximately $.13 per
share at December 31, 2001. Since the completion of the Yifan Transaction,
trading in our Common Stock has been limited and sporadic and the closing prices
were $.12 bid and $.40 asked on April 25, 2002. These trading values bear no
necessary relationship to our assets, earnings or any other established criteria
of value. At this time an investment in our Company must be considered an
investment based on the perceived value of our strategic plan and the track
record of our officers and directors. None of these factors can be quantified.

     There is no active, sustained and liquid public market for our Common Stock
at the date of this Report and there can be no assurance that such a market will
develop in the future. If a market for our Common Stock does develop, the price
of our Common Stock may be highly volatile. Therefore, our stockholders may
experience difficulty in selling their shares should they desire to do so. The
stock markets in general and the OTC Bulletin Board in particular are subject to
periods of extreme volatility during which the market prices of securities can
fluctuate substantially. The price of our securities may be adversely affected
by such volatility notwithstanding our actual operating performance.

We are subject to the SEC's Penny Stock Rules

     The SEC's "Penny Stock Rules" govern trading of our Common Stock. These
rules apply to all Bulletin Board stocks that cost less than $5.00 per share and
are issued by companies having less than $5,000,000 in net tangible assets. We
have approximately $1,185,000 in net tangible assets and the market price of our
Common Stock is currently $.12 bid and $.40 asked. Accordingly, there is no
assurance that the Company will ever be exempt from the Penny Stock Rules. The
Penny Stock Rules impose substantial sales practice burdens and requirements
upon broker-dealers who sell such securities to persons other than established
customers and accredited investors. Before effecting transactions covered by the
Penny Stock Rules, a broker-dealer must make a special suitability determination
for each purchaser and receive the purchaser's written agreement to the
transaction prior to the sale. Consequently, the Penny Stock Rules may affect
the ability of broker-dealers to effect market transactions in our Common Stock.
The Penny Stock Rules may also affect the ability of persons now owning or
subsequently acquiring our securities to resell such securities in any trading
market that may develop. Such factors may have a material adverse impact on the
market price of our Common Stock.

                                       12
<PAGE>

We will probably issue additional equity securities to raise additional capital
and acquire other companies or operating assets.

     We have the authority to issue 100,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock without a vote of the stockholders. A total
of 13,726,951 shares of Common Stock are issued and outstanding at the date of
this Report.

     The Board will have the authority to issue all or any part of our
authorized and unissued capital stock to raise additional capital or finance
acquisitions. The Board will also have the authority to fix the rights,
privileges and preferences of the holders of Preferred Stock, which may be
superior to the rights of holders of the Common Stock. It is likely that we will
seek additional equity capital and attempt to acquire other companies or
operating assets in the future as we develop our business and implement our
growth strategy. A future issuance of additional shares of Common Stock or
Preferred Stock will probably dilute the percentage ownership interest of our
current shareholders and may dilute the book value per share of the Company's
outstanding equity securities.

We have generated limited operating revenue to date.

     During the fourth quarter of the year ended December 31, 2000, we generated
$116,681 in revenue from our grocery diversion operations and after deducting
the associated cost of goods sold, our gross profit in the year ended December
31, 2000 was only $19,763.

     During 2001, we generated revenues of $1,227,685 from our grocery diversion
operations and after deducting the associated cost of goods sold, our gross
profit in the year ended December 31, 2001 was $178,051.

     As a result of our limited operating history, our business model and our
growth strategy are unproven. We cannot be certain that our business model and
our growth strategy will be successful or that we will be able to compete
effectively, achieve market acceptance or otherwise address the risks associated
with our existing and proposed business activities.

Our growth strategy and plans for expansion through acquisitions may not be
effective

     Our growth strategy is expected to place a significant strain on our
managerial, operational and financial resources. To effectively manage our
planned growth and diversification, we must improve our existing operational and
financial control systems, implement additional management control systems,
expand our operating staff and effectively train and manage our employees. We
will probably be required to make substantial additions to our executive staff
within the next 12 months. There can be no assurance that we will be able to
hire suitable executive officers or employees, or that we will be able to
effectively train and manage our staff. There can also be no assurance that our
systems, procedures and internal controls will be adequate to support our future
operations or that our management will be able to fully exploit potential market
opportunities. If we are unable to effectively manage growth, our business,
results of operations and financial condition will be adversely effected.

     As a key component of our growth strategy, we intend to acquire companies
and assets that we feel will enhance our revenue growth, operations and
profitability. Any future acquisitions may require the use of significant
amounts of cash, potentially dilutive issuances of equity securities and
amortization expenses related to goodwill and other intangible assets, each of
which could materially and adversely affect our business. Any future
acquisitions will involve numerous business and financial risks, including:

                                       13
<PAGE>

     o    Difficulties in integrating new operations, technologies, products and
          staff;

     o    Diversion of management attention from other business concerns;

     o    Cost and availability of acquisition financing; and

     o    Potential loss of key employees.

     We will need to be able to successfully integrate any businesses we may
acquire in the future, and the failure to do so could have a material adverse
effect on our business, results of operations and financial condition. Moreover,
our expansion into new markets could result in:

     o    Unexpected changes in regulatory requirements;

     o    Potentially adverse tax and regulatory consequences;

     o    Export  restrictions and controls such as those relating to encryption
          technology;

     o    Tariffs and other trade barriers; and

     o    Political instability and fluctuations in currency exchange rates.

     Any of the above could have a material adverse effect on the success of our
future expansion.

Although we expect to generate revenue from advertising in the future, such
revenue may not be substantial

     Online advertising is a key component of our business strategy, and we
anticipate that a substantial portion of our future revenues will be derived
from online advertising. We expect to derive an increasingly significant amount
of revenue from hosting online advertising that is directed to the Chinese
communities we serve. Our proposed online advertising activities are unproven.

     The development of software that blocks Internet advertisements before they
appear on a user's screen may hinder the growth of online advertising. The
expansion of ad blocking on the Internet may decrease our revenues because when
an ad is blocked, it is not downloaded from our ad server, which means that such
advertisements are not tracked as a delivered advertisement. In addition,
advertisers may choose not to advertise on the Internet and on our Portal
network because of the use of Internet advertisement blocking software. The use
of software that blocks Internet advertisements may materially and adversely
affect our business. Any reduction in traffic on our Portals or in the frequency
of completed advertising downloads may cause advertisers to withdraw from
advertising relationships, which, in turn, could reduce our future advertising
revenues.

We rely on software and hardware systems that are susceptible to failure

     Any system failure or inadequacy that causes interruptions in the
availability of our services, or increases the response time of our services, as
a result of increased traffic or otherwise, could reduce user satisfaction,
future traffic and our attractiveness to advertisers and consumers. In addition,
as the amount of traffic increases, there can be no assurance that we will be
able to scale our systems proportionately. There also can be no assurance that
our ad serving technology can properly track the number of impressions if
traffic increases substantially. We are also dependent upon Web browsers, ISPs,
and other Web site operators. Therefore we may suffer from system failures
unrelated to our systems and services.

     We have limited backup systems and redundancy and we have experienced
system failures in the past, which have disrupted our operations. We do not
presently have a disaster recovery plan in the event of damage from fire,
floods, earthquakes, power loss, telecommunications failures, break-ins and
similar events. If any of the foregoing occurs, we may experience a complete
system shut-down. To improve performance and to prevent disruption of our
services, we may have to make substantial investments to deploy additional


                                       14
<PAGE>

servers or one or more copies of our Portals to mirror our online resources.
Although we carry property insurance with low coverage limits, our coverage may
not be adequate to compensate us for all losses that may occur. To the extent we
do not address the capacity restraints and redundancy described above, such
constraints could have a material adverse effect on our business, results of
operations and financial condition.

We rely  on  content  provided  by  third  parties  to  attract  viewers  and
advertisers

     We rely on a number of third-party relationships to create traffic and
provide content in order to make our Portals more attractive to advertisers and
consumers. Third party content on our Portals includes stock quotes, news,
essays, games. Most of these arrangements are not exclusive and are short-term
or may be terminated at the convenience of the other party. There can be no
assurance that our existing relationships will result in sustained business
partnerships, successful service offerings, significant traffic on our Portals
or significant revenues for us.

We are controlled by our officers and directors, whose interests may differ from
other shareholders.

     Our current officers and directors own approximately 68% of our outstanding
Common Stock. Accordingly, they will have sufficient voting power to control the
outcome of any corporate transaction or other matter submitted to the
shareholders for approval, including mergers, consolidations and the sale of all
or substantially all of our assets, election of directors and other significant
corporate actions. They will also have the power to prevent or cause a change in
control. In addition, without the consent of these shareholders, we could be
prevented from entering into transactions that could be beneficial to us. The
interests of these shareholders may differ from the interests of the other
shareholders.

The sale or availability for sale of substantial amounts of our Common Stock
could adversely affect its market price.

     Sales of substantial amounts of our Common Stock in the public market, or
the perception that these sales could occur, could adversely affect the market
price of our Common Stock and could materially impair our future ability to
raise capital through offerings of our equity securities. There are 13,726,951
shares of common stock outstanding at the date of this Report. Of this total,
approximately 12,870,000 shares are "restricted securities" as defined in Rule
144 and may not be sold in the absence of registration other than in accordance
of Rule 144. In general, Rule 144 will permit a stockholder to resell, in any
90-day period, up to 1% of the total issued and outstanding common stock of the
Company. All of the shares that were issued in connection with the Yifan
transaction became eligible for resale under Rule 144 commencing on July 31,
2001.

Item 2. Properties

     Until March of 2001, we rented a small office in Stonybrook, New York from
an unaffiliated landlord on a month-to-month basis. We are currently leasing
approximately 2,000 square feet of office space in Flushing, Queens, New York
from an affiliate of Jeffery Wu, a member of our board of our directors. The
proposed lease provides for a monthly rental of $12,000. Our new office space
was ready for occupancy until August 2001. We have no real property and our
tangible personal property, including computers and office equipment, is
limited. We have no material inventories and the bulk of our operating assets
consist of cash and capitalized software development costs.

                                       15
<PAGE>

Item 3. Legal Proceedings

     We are not a party to any pending legal proceeding, nor is our property the
subject of a pending legal proceeding, which is not routine litigation
incidental to our business or in which the amount involved, exclusive of
interest and costs, exceeds ten percent of our current assets.

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

     No matters were submitted for a vote of our security holders during the
fourth quarter of the year ended December 31, 2001 or the subsequent interim
period.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

     Our company had no active business operations between the third quarter of
1997 and July 31, 2000. While our old common remained listed on the NASD's
Electronic Over-the-Counter Bulletin Board for most of this period, trading
activity was limited and sporadic and had no relation to our assets or business
operations.

     Our Common Stock is listed on the NASD's Electronic Over-the-Counter
Bulletin Board (symbol: YIFN). The following table sets forth, for the periods
shown, the high and low trading prices for the Common Stock. The quoted prices
reflect interdealer prices without retail markup, markdown or commissions, and
may not necessarily represent actual transactions. Information for the period
through September 25, 2000 has been restated to give effect to a 1 share for 40
reverse split that became effective on that date. On April 25, 2002, the closing
bid and asked prices for our Common Stock were $0.12 and $0.40, respectively.

                                                         Low             High
                                                         ---             ----
      Year ending December 31, 2000
      August 1 through September 30, 2000              $4.20            $9.20
      Fourth Quarter                                    $.51            $5.13

      Year ending December 31, 2001
      April 1, 2001 through January 31, 2002            $.10            $0.40

      On April 25, 2002, the number of stockholder accounts of record was 164.

Item 6. Plan of Operations.

Prior Operations of Smart Games Interactive

     In 1998, Smart Games Interactive liquidated substantially all its
inventories and other operating assets and used the proceeds to reduce its'
outstanding liabilities. At December 31, 1998, Smart Games Interactive had no
material assets and substantial unpaid liabilities. Smart Games Interactive did
not generate any revenues in 1999. At December 31, 1999, Smart Games Interactive
had no ongoing operations, no material assets and unpaid liabilities of
approximately $700,000.

     In March 2000, Capston presented a plan to restructure Smart Games
Interactive as a "public shell" for the purpose of effecting a business
combination transaction with a suitable privately held company. This plan was
approved on March 30, 2000.

     In connection with the implementation of the restructuring plan proposed by
Capston, Smart Games Interactive sold 15,000,000 shares of Old Common to Tobem
for $75,000 in cash and Capston then commenced discussions to negotiate
settlement of Smart Games Interactive's debts. As a result of these
negotiations, Smart Games Interactive's creditors agreed to accept aggregate
cash payments of $88,107 in full and final settlement of all outstanding debts.
During this same period, Smart Games Interactive incurred aggregate operating
expenses of $35,179, for an aggregate cash outflow of $123,286. Of this amount,
$75,000 was paid from the cash contributed by Tobem. The $48,286 balance was
paid by Capston and accounted for as a purchase of 3,500,000 shares of Old
Common.

                                       16
<PAGE>

     Immediately prior to the closing of the Yifan Transaction, Smart Games
Interactive had no ongoing operations, no material assets and no material
liabilities.

Results of Operations.

     At December 31, 2000, we had $2,130,292 in total assets, including $303,376
in cash, $295,645 in accounts receivable and prepaid expenses, $73,792 in
equipment, $534,799 in capitalized software development costs and $922,500 in
investments and goodwill. At that date, we had $110,468 in current liabilities.,
resulting in a net stockholders' equity of $2,019,824.

     At December 31, 2001, we had $1,830,913 in total assets, including $6,571
in cash, $182,557 in accounts receivable and prepaid expenses, $58,524 in
equipment, $646,261 in capitalized software development costs and $937,000 in
investments and goodwill. At that date, we had $16,120 in current liabilities
resulting in a net stockholders' equity of $1,830,913

     During the fourth quarter of the year ended December 31, 2000, we generated
$13,183 in advertising revenue from our contract with DoubleClick and $102,998
in revenue from three grocery diversion transactions. After deducting the
associated cost of goods sold, our grocery diversion activities contributed
approximately $6,000 in gross profit. We expect that revenue from our contract
with DoubleClick will constitute the bulk of our advertising revenue until
additional sponsorships can be negotiated. We do not anticipate a limited
customer base for our grocery diversion activities.

     During the year ended December 31, 2001, we generated $126,417 in
advertising revenue from our contract with DoubleClick and 247Meida and
$1,089,336 in revenue from grocery diversion transactions. We expect that
revenue from our contract 247media will constitute the bulk of our advertising
revenue until additional sponsorships can be negotiated. We do not anticipate a
limited customer base for our grocery diversion activities.

Plan of Operations for Our Company

     We anticipate that our Company will continue to incur operating losses for
the foreseeable future due to a high level of planned operating and capital
expenditures, increased sales and marketing costs, additional personnel costs,
greater levels of product development and our overall expansion strategy. It is
likely that our operating losses will increase in the future and we may never
achieve or sustain profitability.

     At December 31, 2001, we had $1,830,913 in stockholders' equity and
$189,128 in cash, accounts receivable and prepaid expenses. We believe these
cash resources will be adequate to provide for our operating expenses for a
period of three to six months from the date of this Report. Thereafter, we will
need additional capital to pay our operating expenses and finance our planned
expansion.

     We will need at least $3 to $5 million in additional capital in the
immediate future. In addition, long-term capital requirements are difficult to
plan in the rapidly changing Internet industry. We currently expect that we will
need capital to pay our ongoing operating costs, fund additions to our portal
network and computer infrastructure, pay for the expansion of our sales and
marketing activities and finance the acquisition of complementary assets,
technologies and businesses. We intend to pursue additional financing as
opportunities arise.

     Our ability to obtain additional financing in the future will be subject to
a variety of uncertainties. The inability to raise additional funds on terms
favorable to us, or at all, would have a material adverse effect on our
business, financial condition and results of operations. If we are unable to
obtain additional capital when required, we will be forced to scale back our
planned expenditures, which would adversely affect our growth prospects.

     We have the authority to issue 100,000,000 shares of Common Stock and
10,000,000 shares of preferred stock without a vote of the stockholders. A total
of 13,726,951 shares of Common Stock were issued and outstanding on December 31,
2001 and at the date of this Report.

                                       17
<PAGE>

     The Board will have the authority to issue all or any part of our
authorized and unissued capital stock to raise additional capital or finance
acquisitions. The Board will also have the authority to fix the rights,
privileges and preferences of the holders of Preferred Stock, which may be
superior to the rights of holders of the Common Stock. It is likely that we will
seek additional equity capital and attempt to acquire other companies or
operating assets in the future as we develop our business and implement our
growth strategy. A future issuance of additional shares of Common Stock or
Preferred Stock will probably dilute the percentage ownership interest of our
current shareholders and may dilute the book value per share of the Company's
outstanding equity securities.

     As a result of our limited operating history, our business model and our
growth strategy are unproven. We cannot be certain that our business model and
our growth strategy will be successful or that we will be able to compete
effectively, achieve market acceptance or otherwise address the risks associated
with our existing and proposed business activities.

Item 7. Financial Statements.

      As noted in Item 1 to this Report, the Company acquired 100% of the issued
and outstanding common stock of Yifan.com, Inc. on July 31, 2000 in a
transaction structured as a reverse takeover. In accordance with Item 310 of
Regulation SB, this financial statements provided in this report include: (a)
audited consolidated financial statements of the Company and its wholly-owned
subsidiary Yifan.com, Inc. at December 31, 2001, and (b) audited financial
statements of the Company and its wholly-owned subsidiary Yifan.com, Inc at
December 31, 2000.

                                       18
<PAGE>

(A)   Audited Consolidated Financial Statements

                          Independent Auditors' Report


To the Board of Directors of
Yifan Communications, Inc.

     We have audited the accompanying consolidated balance sheet of Yifan
Communications, Inc. and its wholly-owned subsidiary Yifan.com, Inc. at December
31, 2001, and the related statements of income, retained earnings and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

     We have conducted our audit in accordance with generally accepted auditing
standards. These 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 our audit provides a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Yifan Communications, Inc.
at December 31, 2001, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.

                                                Martin Ender
                                                Want & Ender CPA, P.C.
                                                Certified Public Accountants

New York, New York
April 25, 2002


                                       19
<PAGE>

                           Yifan Communications, Inc.
                           Consolidated Balance Sheet
                             As at December 31, 2001


                                     Assets
------------------------------------------------------------------------------
Current Assets

   Cash in banks .........................................          $     6,571
   Accounts receivable ...................................              179,881
   Prepaid expenses ......................................                2,676
                                                                    -----------

Total Current Assets .....................................              189,128
                                                                    -----------

Fixed Assets

   Computer and software equipment .......................               91,028
   Accumulated depreciation ..............................              (32,504)
                                                                    -----------

Total Fixed Assets .......................................               58,524
                                                                    -----------

Other Assets

   Capitalized Software ..................................              646,261
   Goodwill ..............................................              937,000
                                                                    -----------

Total other assets .......................................            1,583,261
                                                                    -----------

Total assets .............................................          $ 1,830,913
                                                                    ===========

                      Liabilities and Stockholders' Equity
------------------------------------------------------------------------------
Current liabilities

   Accounts payable ........................................        $     1,198
   Wages payable ...........................................             14,922
                                                                    -----------

Total Current Liabilities ..................................             16,120

Long Term Liabilities ......................................                  0
                                                                    -----------

Total liabilities ..........................................             16,120
                                                                    -----------

Stockholders Equity

   Common Stock, $.008 par value,
     Authorized 100,000,000 shares,
     Issued and outstanding 13,726,951 shares ..............            109,815
   Additional paid-in capital ..............................          2,246,391
   Retained earnings .......................................           (541,413)
                                                                    -----------
Total Stockholders' Equity .................................        $ 1,814,793
                                                                    -----------

Total Liabilities and Equity ...............................        $ 1,830,913
                                                                    ===========


  The accompanying notes are an integral part of these financial statements.

                                       20
<PAGE>

                           Yifan Communications, Inc.
                   Consolidated Statement of Income (Loss)
                      For the Year Ended December 31, 2001



------------------------------------------------------------------------------
Income
   Revenues .................................................      $  1,227,685
   Cost of Goods Sold .......................................         1,049,634
                                                                   ------------

Gross Profit ................................................           178,051
                                                                   ------------

Operating Expenses
   Network Expenses .........................................            46,171
   Outside Contracting ......................................            19,943
   Professional Fees ........................................           165,291
   Rent .....................................................             1,369
   Telephone expenses .......................................             3,889
   Consulting services ......................................            20,645
   Administrative Expenses ..................................            84,224
   Travel & Entertainment ...................................               779
   Auto Expense .............................................             8,230
   Advertising ..............................................             2,225
   Repairs ..................................................               325
   Outside Services .........................................             4,500


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

Total Operating Expense .....................................           362,473
                                                                   ------------

Net Operating Income (Loss) .................................      ($   184,422)
                                                                   ------------

Total Taxes .................................................                 0
                                                                   ------------

Net Income (loss) after taxes ...............................      ($   184,422)
                                                                   ------------

Other deductions
   Depreciation .............................................            20,598
                                                                   ------------

Total other deductions ......................................            20,598
                                                                   ------------

Other Income
   Interest income ..........................................                 0
                                                                   ------------

Net Income (loss) for the period ............................      ($   205,021)
                                                                   ============

Net Income (loss) per common share ..........................      ($       .02)
                                                                   ============

Weighted average number of common shares outstanding ........        12,711,500
                                                                   ============


  The accompanying notes are an integral part of these financial statements.

                                       21
<PAGE>

                           Yifan Communications, Inc.
                Consolidated Statement of Stockholders' Equity
                             As at December 31, 2001



------------------------------------------------------------------------------
Common Stock issued during the year
13,726,951 shares par value $.008 ........................          $   109,815

Additional paid-in capital ...............................            2,246,391

Net income (loss) for the year ...........................             (541,413)
                                                                    -----------

Balance December 31, 2000 ................................          $ 1,830,913
                                                                    ===========






  The accompanying notes are an integral part of these financial statements.

                                       22
<PAGE>

                           Yifan Communications, Inc.
                      Consolidated Statement of Cash Flows
                      For the Year Ended December 31, 2001



------------------------------------------------------------------------------
Cash flow from operating activities
   Net income (loss) ...................................   ($  205,021)

Adjustments to reconcile net income to net cash provided
 by operating activities

   Depreciation and amortization .......................        20,598
   (Increase) decrease in accounts receivable ..........      (125,051)
   (Increase) decrease in other assets .................       (81,663)
   (Increase) decrease in Accounts Payable .............        96,270
   (increase) decrease in Accrues Liabilities ..........         1,922
                                                           ------------

Total adjustments ......................................       (87,924)
                                                           ------------

Net cash provided (used) by operating activities .......     ($292,945)
                                                           ------------

Cash flows from investing activities

   Cash payments for computer equipment ................        (5,150)
                                                           ------------

Net cash provided (used) by investing activities .......        (5,150)
                                                           ------------

Cash Flows from Financing activities

   Proceeds from issuance of common stock ..............             0
                                                           ------------

Net cash provided (used) by financing activities .......             0
                                                           ------------

Net increase (decrease) in cash ........................      (298,095)
Cash at beginning of period ............................       303,375
                                                           ------------

Cash at end of period ..................................   $     6,571
                                                           ============


  The accompanying notes are an integral part of these financial statements.

                                       23
<PAGE>

                           Yifan Communications, Inc.
                  Notes to Consolidated Financial Statements

1    Nature of Business

     Yifan Communications, Inc. (the "Company") is an Internet communications
and software development company that delivers content, community and commerce
targeted to the needs of the Chinese community in North America. The Company
provides a free service that gives its registered users access to a variety of
online features. The Company also provides Internet advertising and value-added
business services designed to enhance the Internet presence of its clients. The
Company currently operates under five principal Internet domain names
"yifan.com," "yifan.net," "yifannet.com," "gotofind.com" and "yifanmall.com."
All of the Company's Internet products and services are written in the Chinese
language. The Company's business goal is to capitalize on the growth of the
Internet among Chinese users and become a worldwide leader in the Chinese
language market.

2    Organization and History

(a)  Creation of yifan.com web site.

     Yifan He created the Internet web site "yifan.com" in May 1997. Mr. He
operated the yifan.com web site as a sole proprietorship and personal hobby
until January 1999.

(b)  Organization and operation of Yifan, LLC.

     Yifan LLC, a New York limited liability company was organized on January
22, 1999 to finance the further development and expansion of the "yifan.com,"
web site. In connection with the formation of Yifan LLC, Mr. Yifan He
contributed all his right title and interest in the yifan.com web site to Yifan
LLC, in exchange for a membership interest. During 1999, two individuals
contributed $145,298 in cash to Yifan LLC, in exchange for membership interests.
During 1999, three individuals contributed consulting services valued at $18,170
and five individuals contributed software development services valued at $18,020
to Yifan LLC, in exchange for membership interests. The valuation of these
personal service contributions is based on the cash consideration paid for
similar interests at the time the services were rendered.

(c)  Organization and operation of Yifan.com, Inc.

     On December 20, 1999, all of Yifan LLC, members executed an "Agreement
Respecting Allocation of Limited Liability Company Interests and Conversion to
Corporation" that authorized the creation of a successor corporation named
Yifan.com, Inc. and the transfer of Yifan LLC's assets and operations to such
corporation. The Articles of Incorporation of Yifan.com, Inc. were filed with
the Division of Corporations and State Records of the Department of State of the
State of New York on January 5, 2000. In connection with the organization of
Yifan.com, Inc. Yifan LLC conveyed all of its properties and business operations
to Yifan.com, Inc. and the members of Yifan LLC received a total of 4,750,000
shares of Yifan.com, Inc.'s $.01 par value common stock. Concurrently, the
pre-incorporation subscriptions were accepted and 115,500 shares were issued to
the subscribers.

     Between January 1 and July 30, 2000, Yifan.com, Inc. accepted subscriptions
to purchase 465,500 shares of its common stock at a price of $2 per share from
private placement investors. The net cash proceeds associated with these private
sales of securities were $931,000.

     As of July 30, 2000, Yifan.com, Inc. had received and accepted fully paid
subscriptions for 313,500 shares of common stock more than the limits authorized
by its charter. In connection with the acceptance of these subscriptions, the
holders of a majority of the issued and outstanding common stock consented to an
amendment to the Articles of Incorporation of Yifan.com, Inc. This Amendment
became unnecessary when the Company entered into a business combination with
Yifan Communications, Inc.

                                       24
<PAGE>

                           Yifan Communications, Inc.
                  Notes to Consolidated Financial Statements

2    Organization and History --continued

 (d)  Business combination with the Company

     On July 30, 2000, Yifan.com, Inc. and all its stockholders and subscribers,
entered into a business combination agreement with the Company, a Delaware
corporation formerly known as Smart Games Interactive, Inc. In connection with
this Agreement:

     (i)  The Company effected a 1 for 40 reverse split of its issued and
          outstanding $.0002 par value common stock, and increased its
          authorized capital to 100,000,000 shares of $.008 par value common
          stock and 10,000,000 shares of $.008 par value preferred stock.

     (ii) The stockholders and subscribers of Yifan.com, Inc. contributed all of
          their interest in Yifan.com, Inc. to the Company solely in exchange
          for 11,994,750 shares of $.008 par value common stock of the Company;

     (iii) The Company issued 179,921 shares of of $.008 par value common stock
          to certain finders who assisted in the negotiation of the transaction;
          and (iv) A principal stockholder of the Company agreed to transfer
          89,961 shares of $.008 par value common stock to such finders.

     Yifan.com, Inc. paid a $350,000 merger and acquisition fee to Capston
Network Company in connection with the business combination transaction. This
merger and acquisition fee has been capitalized and is reflected in goodwill.

(e)  Acquisition of "grocer2grocer.com"

     In October 2000, the Company agreed to issue 200,000 shares of its $.008
par value common stock to purchase the business plan and preliminary software
source code for Grocer2Grocer.com, a proposed Internet web-site that will
provide members with a convenient and cost effective nationwide information
clearinghouse for available grocery diversion transactions. The assets acquired
in connection with this transaction included the Internet domain name
"grocer2grocer.com," together with all of the preliminary web-site design
elements, software source code, computer programs, business processes,
trademarks, copyrights and other intellectual property necessary for the
operation thereof. Since we did not acquire a material amount of tangible assets
in connection with the grocer2grocer.com transaction, the entire acquisition
price has been included in goodwill.

3.   Summary of Significant Accounting Policies

(a)  Reverse merger method of accounting

     Following the acquisition, the former management of Yifan.com, Inc. became
the management of the Company and the former stockholders of Yifan.com were
issued approximately 92% of the outstanding shares of the Company's $.008 par
value common stock.

     In accordance with generally accepted accounting principles, the Company's
acquisition of Yifan.com has been accounted for as a reverse merger. As a
result, Yifan.com has been treated as the acquiring entity and the Company has
been treated as the acquired entity for accounting purposes, even though the
Company is the acquiring entity for legal purposes.

     The historical financial information of Yifan.com, Inc. has become the
historical financial information of the Company in connection with the
acquisition. Similarly, the historical equity and earnings of Yifan.com, Inc.
prior to the acquisition have been retroactively restated for the equivalent
number of shares to be received in connection with the acquisition.

     The balance sheet reflects the financial position of the Company as of
December 31, 2001. The related statements of operations, cash flow and
stockholders' equity reflect the operations of the Company for the year ended
December 31, 2001.

                                       25
<PAGE>

                           Yifan Communications, Inc.
                  Notes to Consolidated Financial Statements

3.   Summary of Significant Accounting Policies--continued

(b)  Use of estimates

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

(c)  Cash and cash equivalents

     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The Company
maintains cash balances in bank deposit accounts that may at times exceed
federally insured limits. The Company has not experienced any losses in such
accounts.

(d)  Property and equipment

     Property and equipment are recorded at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the assets, which
range from two to seven years. Expenditures for major renewals and betterments
that extend the original estimated economic useful lives of the applicable
assets are capitalized. Expenditures for normal repairs and maintenance are
charged to expense as incurred. The principal annual depreciation rates used are
as follows:

      Furniture and fixtures        20.0%
      Office equipment              20.0%
      Computer equipment            33.3%

(e)  Revenue recognition

     For the year ended December 31, 2001, the Company realized approximately
$126,000 in advertising revenue and approximately $1,089,000 in revenue from
grocery diversion transactions. After deducting the associated cost of goods
sold, the Company's grocery diversion activities contributed approximately
$42,000 in gross profit. Advertising revenues are recognized when earned and
grocery diversion revenues are recognized when the products are shipped to the
purchaser.

     In future periods, the Company expects to generate revenues from a variety
of sources including:

     o    Retail sales from its yifanmall.com web site

     o    Wholesale grocery sales from its grocer2grocer web site

     o    Web solutions including software sales and web site development,

     o    Hosting and maintenance service fees, and

     o Advertising service fees..

(f)  Non-cash compensation and legal fees

     During 2000, the Company issued 180,000 shares of Common Stock as
compensation under an administrative services agreement and 360,000 shares of
Common Stock as compensation under a legal services agreement. For accounting
purposes, all such transactions were recorded at a value of $.89 per share. A
total of $240,300 in non-cash administrative and legal fees were charged to
expense in the current year. The $240,300 balance was carried as a prepaid
expense at 2000 year end and was amortized during the first six months of the
year ended December 31, 2001.


                                       26
<PAGE>

                           Yifan Communications, Inc.
                  Notes to Consolidated Financial Statements

3.   Summary of Significant Accounting Policies--continued

(g)  Software Development Costs

     The Company accounts for software development costs in compliance with the
requirements of FASB 86, which requires the capitalization of software
development costs once the technological feasibility of a software product is
established. During the year ended December 31, 2001, the Company capitalized a
total of $111,462 in software development costs. Capitalized software
development costs will be amortized in future periods in accordance with the
requirements of FASB 86.

(h)  Net loss per share

     The Company computes earnings per share in accordance with SFAS No. 128,
"Earnings per Share". Under the provisions of SFAS No. 128, basic net income or
loss per share is computed by dividing the net income or loss available to
common shareholders for the period by the weighted average number of common
shares outstanding during the period. Diluted net income or loss per share is
computed by dividing the net income or loss for the period by the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares, composed of incremental common shares issuable
upon the exercise of stock options, are included in diluted net income or loss
per share to the extent such shares are dilutive.

(i)  Employee's Incentive Stock Plan

     Full-time employees of the Company and its subsidiaries, including officers
and employee directors, are eligible to participate in the Company's Incentive
Stock Plan (the "Plan"), which provides for the grant of incentive equity awards
covering up to 1,500,000 shares of common stock. The Plan provides for the grant
of (i) non-qualified stock options, (ii) incentive stock options, (iii) shares
of restricted stock, (iv) shares of phantom stock and (v) stock bonuses
(collectively, "Incentive Awards'). In addition, the Plan permits the grant of
cash bonuses payable when a participant is required to recognize income for
federal income tax purposes in connection with the vesting of shares of
restricted stock or the grant of a stock bonus. A committee of the Board of
Directors administers the Plan and has the power to determine, in its
discretion, the number of shares subject to each incentive grant and the terms
of the incentive grant. No employee options were granted during the year ended
December 31, 2001.

(j)  Director's Stock Option Plan

     The Directors' Option Plan provides for the annual grant of an option to
purchase 25,000 shares of common stock to each member of the Board of Directors
who is not a full-time employee of the Company. Options granted under the
Directors' Option Plan are subject to forfeiture if the holder resigns from the
Board or is removed for cause before the date of the next annual meeting of the
stockholders. Options granted under the Directors' Option Plan become fully
vested on the date of the first annual meeting of the stockholders following the
date of grant. The total number of shares available for grant under the
Director's Plan is 500,000. Of the initial authorization, options to purchase an
aggregate of 100,000 shares at a price of $6 per share were granted to four
non-employee members of the Board of Directors during the year ended December
31, 2000.

4.   Concentration of Risks

     During the year ended December 31, 2000, the Company generated
approximately $126,400 in advertising revenue from contracts with
247Media, Inc and DoubleClick, Inc. It also generated approximately $1,089,000
in revenue from grocery diversion transactions involving two retail grocers.

     It is impossible to predict whether there will be significant
concentrations of risk in the grocery division transactions in future periods.
The Company expects the revenue from its 247Media and DoubleClick contracts to
comprise the bulk of its advertising revenue until additional advertising
sponsorships can be negotiated. The Company does not anticipate a limited
customer base for its future grocery diversion activities.


                                       27
<PAGE>

(B)   Audited Financial Statements of Yifan LLC at December 31, 2000


                          Independent Auditors' Report


To the Board of Directors of
Yifan Communications, Inc.

     We have audited the accompanying consolidated balance sheet of Yifan
Communications, Inc. and its wholly-owned subsidiary Yifan.com, Inc. at December
31, 2000, and the related statements of income, retained earnings and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

     We have conducted our audit in accordance with generally accepted auditing
standards. These 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 our audit provides a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Yifan Communications, Inc.
at December 31, 2000, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.

                                                Martin Ender
                                                Want & Ender CPA, P.C.
                                                Certified Public Accountants

New York, New York
May 1, 2001


                                       28
<PAGE>

                           Yifan Communications, Inc.
                           Consolidated Balance Sheet
                             As at December 31, 2000


                                     Assets
------------------------------------------------------------------------------
Current Assets

   Cash in banks .........................................          $   303,376
   Accounts receivable ...................................               54,830
   Prepaid expenses ......................................              240,815
                                                                    -----------

Total Current Assets .....................................              599,021
                                                                    -----------

Fixed Assets

   Computer and software equipment .......................               85,878
   Accumulated depreciation ..............................              (11,906)
                                                                    -----------

Total Fixed Assets .......................................               73,972
                                                                    -----------

Other Assets

   Capitalized Software ..................................              534,799
   Goodwill ..............................................              922,500
                                                                    -----------

Total other assets .......................................            1,457,299
                                                                    -----------

Total assets .............................................          $ 2,130,292
                                                                    ===========

                      Liabilities and Stockholders' Equity
------------------------------------------------------------------------------
Current liabilities

   Accounts payable ........................................        $    97,468
   Wages payable ...........................................             13,000
                                                                    -----------

Total Current Liabilities ..................................            110,468

Long Term Liabilities ......................................                  0
                                                                    -----------

Total liabilities ..........................................            110,468
                                                                    -----------

Stockholders Equity

   Common Stock, $.008 par value,
     Authorized 100,000,000 shares,
     Issued and outstanding 13,726,951 shares ..............            109,815
   Additional paid-in capital ..............................          2,246,391
   Retained earnings .......................................           (336,382)
                                                                    -----------
Total Stockholders' Equity .................................        $ 2,019,824
                                                                    -----------

Total Liabilities and Equity ...............................        $ 2,130,292
                                                                    ===========


  The accompanying notes are an integral part of these financial statements.

                                       29
<PAGE>

                           Yifan Communications, Inc.
                   Consolidated Statement of Income (Loss)
                      For the Year Ended December 31, 2000



------------------------------------------------------------------------------
Income
   Revenues .................................................      $    116,681
   Cost of Goods Sold .......................................            96,918
                                                                   ------------

Gross Profit ................................................            19,763
                                                                   ------------

Operating Expenses
   Network Expenses .........................................            46,555
   Outside Contracting ......................................            13,000
   Professional Fees ........................................           163,625
   Rent .....................................................             2,959
   Telephone expenses .......................................             5,574
   Consulting services ......................................            18,837
   Administrative Expenses ..................................            77,853
   Travel & Entertainment ...................................             7,266
   Board Meeting Expense ....................................             2,302
   Auto Expense .............................................            10,968
   Advertising ..............................................             1,980
                                                                   ------------

Total Operating Expense .....................................           350,919
                                                                   ------------

Net Operating Income (Loss) .................................      ($   331,156)
                                                                   ------------

Total Taxes .................................................                 0
                                                                   ------------

Net Income (loss) after taxes ...............................      ($   331,156)
                                                                   ------------

Other deductions
   Depreciation .............................................             8,576
                                                                   ------------

Total other deductions ......................................             8,576
                                                                   ------------

Other Income
   Interest income ..........................................             3,350
                                                                   ------------

Net Income (loss) for the period ............................      ($   336,382)
                                                                   ============

Net Income (loss) per common share ..........................      ($       .03)
                                                                   ============

Weighted average number of common shares outstanding ........        12,711,500
                                                                   ============



  The accompanying notes are an integral part of these financial statements.

                                       30
<PAGE>


                           Yifan Communications, Inc.
                Consolidated Statement of Stockholders' Equity
                             As at December 31, 2000



------------------------------------------------------------------------------
Common Stock issued during the year
13,726,951 shares par value $.008 ........................          $   109,815

Additional paid-in capital ...............................            2,246,391

Net income (loss) for the year ...........................             (336,382)
                                                                    -----------

Balance December 31, 2000 ................................          $ 2,019,824
                                                                    ===========




  The accompanying notes are an integral part of these financial statements.

                                       31
<PAGE>


                           Yifan Communications, Inc.
                      Consolidated Statement of Cash Flows
                      For the Year Ended December 31, 2000



------------------------------------------------------------------------------
Cash flow from operating activities
   Net income (loss) ...................................   ($  336,382)

Adjustments to reconcile net income to net cash provided
 by operating activities

   Depreciation and amortization .......................         8,576
   (Increase) decrease in accounts receivable ..........       (54,830)
   (Increase) decrease in other assets .................    (1,396,661)
   (Increase) decrease in Accounts Payable .............        97,468
   (increase) decrease in Accrues Liabilities ..........        13,000
                                                           -----------

Total adjustments ......................................    (1,332,447)
                                                           -----------

Net cash provided (used) by operating activities .......   ($1,668,829)
                                                           -----------

Cash flows from investing activities

   Cash payments for computer equipment ................       (52,576)
                                                           -----------

Net cash provided (used) by investing activities .......       (52,576)
                                                           -----------

Cash Flows from Financing activities

   Proceeds from issuance of common stock ..............     1,885,639
                                                           -----------

Net cash provided (used) by financing activities .......     1,885,639
                                                           -----------

Net increase (decrease) in cash ........................       164,234
Cash at beginning of period ............................       139,141
                                                           -----------

Cash at end of period ..................................   $   303,375
                                                           ===========



  The accompanying notes are an integral part of these financial statements.

                                       32
<PAGE>


                           Yifan Communications, Inc.
                  Notes to Consolidated Financial Statements

1    Nature of Business

     Yifan Communications, Inc. (the "Company") is an Internet communications
and software development company that delivers content, community and commerce
targeted to the needs of the Chinese community in North America. The Company
provides a free service that gives its registered users access to a variety of
online features. The Company also provides Internet advertising and value-added
business services designed to enhance the Internet presence of its clients. The
Company currently operates under five principal Internet domain names
"yifan.com," "yifan.net," "yifannet.com," "gotofind.com" and "yifanmall.com."
All of the Company's Internet products and services are written in the Chinese
language. The Company's business goal is to capitalize on the growth of the
Internet among Chinese users and become a worldwide leader in the Chinese
language market.

2    Organization and History

(a)  Creation of yifan.com web site.

     Yifan He created the Internet web site "yifan.com" in May 1997. Mr. He
operated the yifan.com web site as a sole proprietorship and personal hobby
until January 1999.

(b)  Organization and operation of Yifan, LLC.

     Yifan LLC, a New York limited liability company was organized on January
22, 1999 to finance the further development and expansion of the "yifan.com,"
web site. In connection with the formation of Yifan LLC, Mr. Yifan He
contributed all his right title and interest in the yifan.com web site to Yifan
LLC, in exchange for a membership interest. During 1999, two individuals
contributed $145,298 in cash to Yifan LLC, in exchange for membership interests.
During 1999, three individuals contributed consulting services valued at $18,170
and five individuals contributed software development services valued at $18,020
to Yifan LLC, in exchange for membership interests. The valuation of these
personal service contributions is based on the cash consideration paid for
similar interests at the time the services were rendered.

(c)  Organization and operation of Yifan.com, Inc.

     On December 20, 1999, all of Yifan LLC, members executed an "Agreement
Respecting Allocation of Limited Liability Company Interests and Conversion to
Corporation" that authorized the creation of a successor corporation named
Yifan.com, Inc. and the transfer of Yifan LLC's assets and operations to such
corporation. The Articles of Incorporation of Yifan.com, Inc. were filed with
the Division of Corporations and State Records of the Department of State of the
State of New York on January 5, 2000. In connection with the organization of
Yifan.com, Inc. Yifan LLC conveyed all of its properties and business operations
to Yifan.com, Inc. and the members of Yifan LLC received a total of 4,750,000
shares of Yifan.com, Inc.'s $.01 par value common stock. Concurrently, the
pre-incorporation subscriptions were accepted and 115,500 shares were issued to
the subscribers.

     Between January 1 and July 30, 2000, Yifan.com, Inc. accepted subscriptions
to purchase 465,500 shares of its common stock at a price of $2 per share from
private placement investors. The net cash proceeds associated with these private
sales of securities were $931,000.

     As of July 30, 2000, Yifan.com, Inc. had received and accepted fully paid
subscriptions for 313,500 shares of common stock more than the limits authorized
by its charter. In connection with the acceptance of these subscriptions, the
holders of a majority of the issued and outstanding common stock consented to an
amendment to the Articles of Incorporation of Yifan.com, Inc. This Amendment
became unnecessary when the Company entered into a business combination with
Yifan Communications, Inc.


                                       33
<PAGE>


                           Yifan Communications, Inc.
                  Notes to Consolidated Financial Statements

2    Organization and History --continued

(d)  Business combination with the Company

     On July 30, 2000, Yifan.com, Inc. and all its stockholders and subscribers,
entered into a business combination agreement with the Company, a Delaware
corporation formerly known as Smart Games Interactive, Inc. In connection with
this Agreement:

     (i)  The Company effected a 1 for 40 reverse split of its issued and
          outstanding $.0002 par value common stock, and increased its
          authorized capital to 100,000,000 shares of $.008 par value common
          stock and 10,000,000 shares of $.008 par value preferred stock.

     (ii) The stockholders and subscribers of Yifan.com, Inc. contributed all of
          their interest in Yifan.com, Inc. to the Company solely in exchange
          for 11,994,750 shares of $.008 par value common stock of the Company;

     (iii) The Company issued 179,921 shares of of $.008 par value common stock
          to certain finders who assisted in the negotiation of the transaction;
          and (iv) A principal stockholder of the Company agreed to transfer
          89,961 shares of $.008 par value common stock to such finders.

     Yifan.com, Inc. paid a $350,000 merger and acquisition fee to Capston
Network Company in connection with the business combination transaction. This
merger and acquisition fee has been capitalized and is reflected in goodwill.

(e)  Acquisition of "grocer2grocer.com"

     In October 2000, the Company agreed to issue 200,000 shares of its $.008
par value common stock to purchase the business plan and preliminary software
source code for Grocer2Grocer.com, a proposed Internet web-site that will
provide members with a convenient and cost effective nationwide information
clearinghouse for available grocery diversion transactions. The assets acquired
in connection with this transaction included the Internet domain name
"grocer2grocer.com," together with all of the preliminary web-site design
elements, software source code, computer programs, business processes,
trademarks, copyrights and other intellectual property necessary for the
operation thereof. Since we did not acquire a material amount of tangible assets
in connection with the grocer2grocer.com transaction, the entire acquisition
price has been included in goodwill.

3.   Summary of Significant Accounting Policies

(a)  Reverse merger method of accounting

     Following the acquisition, the former management of Yifan.com, Inc. became
the management of the Company and the former stockholders of Yifan.com were
issued approximately 92% of the outstanding shares of the Company's $.008 par
value common stock.

     In accordance with generally accepted accounting principles, the Company's
acquisition of Yifan.com has been accounted for as a reverse merger. As a
result, Yifan.com has been treated as the acquiring entity and the Company has
been treated as the acquired entity for accounting purposes, even though the
Company is the acquiring entity for legal purposes.

     The historical financial information of Yifan.com, Inc. has become the
historical financial information of the Company in connection with the
acquisition. Similarly, the historical equity and earnings of Yifan.com, Inc.
prior to the acquisition have been retroactively restated for the equivalent
number of shares to be received in connection with the acquisition.

     The balance sheet reflects the financial position of the Company as of
December 31, 2000. The related statements of operations, cash flow and
stockholders' equity reflect the operations of the Company for the year ended
December 31, 2000


                                       34
<PAGE>

                           Yifan Communications, Inc.
                  Notes to Consolidated Financial Statements

3.   Summary of Significant Accounting Policies--continued

(b)  Use of estimates

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

(c)  Cash and cash equivalents

     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The Company
maintains cash balances in bank deposit accounts that may at times exceed
federally insured limits. The Company has not experienced any losses in such
accounts.

(d)  Property and equipment

     Property and equipment are recorded at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the assets, which
range from two to seven years. Expenditures for major renewals and betterments
that extend the original estimated economic useful lives of the applicable
assets are capitalized. Expenditures for normal repairs and maintenance are
charged to expense as incurred. The principal annual depreciation rates used are
as follows:

      Furniture and fixtures        20.0%
      Office equipment              20.0%
      Computer equipment            33.3%

(e)  Revenue recognition

     For the year ended December 31, 2000, the Company realized approximately
$13,200 in advertising revenue and approximately $103,000 in revenue from three
grocery diversion transactions. After deducting the associated cost of goods
sold, the Company's grocery diversion activities contributed approximately
$6,000 in gross profit. Advertising revenues are recognized when earned and
grocery diversion revenues are recognized when the products are shipped to the
purchaser.

     In future periods, the Company expects to generate revenues from a variety
of sources including:

     o    Retail sales from its yifanmall.com web site

     o    Wholesale grocery sales from its grocer2grocer web site

     o    Web solutions including software sales and web site development,

     o    Hosting and maintenance service fees, and

     o    Advertising service fees.

(f)  Non-cash compensation and legal fees

     During 2000, the Company issued 180,000 shares of Common Stock as
compensation under an administrative services agreement and 360,000 shares of
Common Stock as compensation under a legal services agreement. For accounting
purposes, all such transactions were recorded at a value of $.89 per share. A
total of $240,300 in non-cash administrative and legal fees were charged to
expense in the current year. The $240,300 balance is carried as a prepaid
expense at year end and will be amortized during the first six months of the
year ended December 31, 2001.


                                       35
<PAGE>

                           Yifan Communications, Inc.
                  Notes to Consolidated Financial Statements

3.   Summary of Significant Accounting Policies--continued

(g)  Software Development Costs

     The Company accounts for software development costs in compliance with the
requirements of FASB 86, which requires the capitalization of software
development costs once the technological feasibility of a software product is
established. During the year ended December 31, 2000, the Company capitalized a
total of $352,479 in software development costs. Capitalized software
development costs will be amortized in future periods in accordance with the
requirements of FASB 86.

(h)  Net loss per share

     The Company computes earnings per share in accordance with SFAS No. 128,
"Earnings per Share". Under the provisions of SFAS No. 128, basic net income or
loss per share is computed by dividing the net income or loss available to
common shareholders for the period by the weighted average number of common
shares outstanding during the period. Diluted net income or loss per share is
computed by dividing the net income or loss for the period by the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares, composed of incremental common shares issuable
upon the exercise of stock options, are included in diluted net income or loss
per share to the extent such shares are dilutive.

(i)  Employee's Incentive Stock Plan

     Full-time employees of the Company and its subsidiaries, including officers
and employee directors, are eligible to participate in the Company's Incentive
Stock Plan (the "Plan"), which provides for the grant of incentive equity awards
covering up to 1,500,000 shares of common stock. The Plan provides for the grant
of (i) non-qualified stock options, (ii) incentive stock options, (iii) shares
of restricted stock, (iv) shares of phantom stock and (v) stock bonuses
(collectively, "Incentive Awards'). In addition, the Plan permits the grant of
cash bonuses payable when a participant is required to recognize income for
federal income tax purposes in connection with the vesting of shares of
restricted stock or the grant of a stock bonus. A committee of the Board of
Directors administers the Plan and has the power to determine, in its
discretion, the number of shares subject to each incentive grant and the terms
of the incentive grant. No employee options were granted during the year ended
December 31, 2000.

(j)  Director's Stock Option Plan

     The Directors' Option Plan provides for the annual grant of an option to
purchase 25,000 shares of common stock to each member of the Board of Directors
who is not a full-time employee of the Company. Options granted under the
Directors' Option Plan are subject to forfeiture if the holder resigns from the
Board or is removed for cause before the date of the next annual meeting of the
stockholders. Options granted under the Directors' Option Plan become fully
vested on the date of the first annual meeting of the stockholders following the
date of grant. The total number of shares available for grant under the
Director's Plan is 500,000. Of the initial authorization, options to purchase an
aggregate of 100,000 shares at a price of $6 per share were granted to four
non-employee members of the Board of Directors during the year ended December
31, 2000.

4.   Concentration of Risks

     During the fourth quarter of the year ended December 31, 2000, the Company
generated approximately $13,200 in advertising revenue from a contract with
DoubleClick, Inc. It also generated approximately $103,000 in revenue from three
grocery diversion transactions involving two retail grocers.

     Since the Company's advertising and grocery diversion activities did not
commence until the fourth quarter of the year ended December 31, 2000, it is
impossible to predict whether there will be significant concentrations of risk
in future periods. The Company expects the revenue from its DoubleClick contract
to comprise the bulk of its advertising revenue until additional advertising
sponsorships can be negotiated. The Company does not anticipate a limited
customer base for its future grocery diversion activities.


                                       36
<PAGE>

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

     The financial statements of Smart Games Interactive for the years ended
December 31, 1998 and 1999 were audited by Harmon & Company, Certified Public
Accountants, Dublin, Ohio. The financial statements of Yifan.com, Inc. for the
years ended December 31, 1998 and 1999 were audited by Want & Ender, Certified
Public Accountants, New York, New York.

     In connection with the Yifan Transaction, the Board of Directors voted to
dismiss the firm of Harmon & Company effective July 31, 2000. Concurrently, the
Board of Directors elected to retain the accounting firm of Want & Ender to
serve as the Company's auditor for the fiscal year ended December 31, 2000.

     During the fiscal years December 31, 1998 and 1999, and the subsequent
interim periods, there were no reportable disagreements between Smart Games
Interactive and Harmon & Company on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.

     The report of Harmon & Company on the financial statements of Smart Games
Interactive for the years ended December 31, 1998 and 1999 contained an
explanatory paragraph that the financial statements had been prepared assuming
that Smart Games Interactive would continue as a going concern and that the
company's history of operating losses raised substantial doubt about its ability
to continue as a going concern.

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

DIRECTORS AND EXECUTIVE OFFICERS

     Our Company's directors and executive officers are identified in the
following table:

       Name              Age             Positions
       ----              ---             ---------
      Yifan He            24     President, Chief Technical Officer and Director
      Liming Yung         36     Director
      Jeffery Wu          36     Director
      Ahn Tran            48     Director

     While we have no executive officers other than Mr. He, we rely extensively
on the experience and abilities of the other members of our board of directors.
Biographical information on our officers and directors is set forth below.

     Mr. Yifan He was the creator of the Yifan.com web site in 1997 and
previously served as Manager of Yifan, LLC, and as president of Yifan.com, Inc.
Mr. He has served as our President, Chief Technology Officer and a member of our
board of directors since August 17, 2000. For the last four years, Mr. He has
been responsible for day-to-day technical operations, strategy development,
technical design, product development and quality assurance. Mr. He has managed
the growth of the Company from a sole proprietorship through the formation of an
LLC, a reorganization of the LLC into Yifan, Inc. and the subsequent combination
of Yifan, Inc. with the Company. During this development period, Mr. He
supervised the expansion of the Company's staff to over 30 consultants and
employees, including a total of 7 PhDs. Mr. He's education includes a Major in
International Business with a Minor in Computer Science from Northwestern
Polytechnic University in Xi'an, China. Mr. He was born in Xi'an, China, and has
been a U.S. resident since 1996.

                                       37
<PAGE>

     Mr. Liming Yung has served as a part-time consultant to our Company and as
a member of our board of directors since August 17, 2000. Previously, Mr. Yung
served as a director of Yifan.com, Inc. and Yifan LLC. In addition to his duties
as a director of our Company, Mr. Yung is employed full-time as Senior Vice
President, Asian Markets for PaineWebber Inc., a position he has held since
1997. Mr. Yung's duties at Paine Webber include developing Asian markets in the
United States and overseas for that Company. Before joining PaineWebber, Mr.
Yung held a similar position with Citigroup as Vice President, Asia Development.
Prior to Citigroup, Michael held positions in sales and marketing, including two
years as Vice President, International Marketing, with Highfu International, a
producer and marketer of police equipment, where he was in charge of developing
and marketing new products. Mr. Yung holds investment licenses Series 7, 24 and
63, and is a graduate of The New York Institute of Technology, where he earned a
Bachelor of Science Degree in Marketing. Mr. Yung was born in Taipei, Taiwan and
relocated to the U.S. as a teenager in 1977.

     Mr. Jeffery Wu has served as a part-time consultant to our Company and as a
member of our board of directors since August 17, 2000. Previously, Mr. Wu
served as a director of Yifan.com, Inc. and Yifan LLC. In addition to his duties
as a director of our Company, Mr. Wu is a principal stockholder Officer of Hong
Kong Supermarket and has served as Chief Executive Officer of that company since
1994. During Mr. Wu's term as Chief Executive Officer, Hong Kong Supermarket has
become the largest Chinese specialty supermarket in the Northeastern U.S. Mr. Wu
is also a principal stockholder and Chief Executive Officer of Moo Chung Loong
(MCL) Trading, Inc., a $50 million wholesale food distributor that services Hong
Kong Supermarket and other retail grocery outlets. MCL is currently the largest
Asian food distributor in the Northeast. Mr. Wu is also actively involved in
real estate investments and has expanded his holdings from 3 thousand square
feet in 1985 to over 2 million square feet.

     Mr. Ahn Tran has served as a part-time consultant to our Company and as a
member of our board of directors since August 17, 2000. Mr. Tran is a principal
stockholder of Hong Kong Supermarket and has served as president of that company
since 1994. In this position, Mr. Tran is responsible for the daily operations
of six supermarkets averaging nearly $20 million in annual revenue each. During
Mr. Tran's term as President, Hong Kong Supermarket has become the largest
Chinese specialty supermarket in the Northeastern U.S. Mr. Tran is also a
stockholder of MCL Trading. Mr. Tran brings additional key strategic and
partnership expertise to the Company. Mr. Tran relocated to the U.S. 1980 with
his family and has quickly adapted to the entrepreneurial environment.

INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES

     The Company has no compensation committee, no audit committee, and no
nominating committee. Decisions concerning nominees for Director and executive
officer compensation for fiscal 2000 were made by the full Board of Directors.

     The Board of Directors held regular meetings and took action by unanimous
written consent on six occasions during the fiscal year ended December 31, 2000,
in which all members of the board of directors took part.

     Our Directors are elected annually and hold office until the next annual
meeting of our stockholders or until their successors are elected and qualified.
Officers are elected annually and serve at the discretion of the Board of
Directors. There is no family relationship between any of our directors and
executive officers. Board vacancies are filled by a majority vote of the Board.

SECTION 16(a) BENEFICIAL OWNERSHIP AND REPORTING COMPLIANCE

     The Company believes that all of its principal stockholders, officers and
directors failed to comply on a timely basis with the requirements of Section
16(a) of the Exchange Act during the year ended December 31, 2000. The following
schedule identifies each person who was required to file one or more reports
pursuant to Section 16(a) of the Exchange Act and either failed to file the
required report, or failed to file the required report on a timely basis. For
purposes of the table, all transactions prior to September 25, 2000 have been
restated to give pro forma effect to a 1 share for 40 reverse split that was
effected on that date.

                                       38
<PAGE>

<TABLE>
<S>                                <C>               <C>           <C>               <C>             <C>
Tobem Investments Limited           Number of         Required      Reportable         Report            Report
10% Stockholder                      Shares           Form Type     Event Date        Due Date         Filing Date
       Stock Acquisition              375,000          Form 3       31-Mar-2000      10-Apr-2000       12-Sep-2000
       Annual Statement               375,000          Form 5                        14-Feb-2001       15-May-2001

Sally A. Fonner
Officer, Director and               Number of         Required      Reportable         Report            Report
10% Stockholder                      Shares           Form Type     Event Date        Due Date         Filing Date
       Stock Acquisition              375,000          Form 3       31-Mar-2000      10-Apr-2000       12-Sep-2000
       Stock Acquisition               87,500          Form 4       25-Jul-2000      10-Aug-2000       12-Sep-2000
       Stock Acquisition              180,000          Form 4       1-Aug-2000       10-Sep-2000       12-Sep-2000
       Option Acquisition              25,000          Form 4       25-Sep-2000      10-Oct-2000       15-May-2001
       Annual Statement               667,500          Form 5                        14-Feb-2001       15-May-2001

Yifan He
Officer, Director and               Number of         Required      Reportable         Report            Report
10% Stockholder                      Shares           Form Type     Event Date        Due Date         Filing Date
       Stock Acquisition            3,094,313          Form 3       25-Sep-2000      10-Oct-2000       24-Oct-2000
       Annual Statement             3,094,313          Form 5                        14-Feb-2001       15-May-2001

Jeffery Wu
Director and                        Number of         Required      Reportable         Report            Report
10% Stockholder                      Shares           Form Type     Event Date        Due Date         Filing Date
       Stock Acquisition            3,293,100          Form 3       25-Sep-2000      10-Oct-2000       24-Oct-2000
       Option Acquisition              25,000          Form 4       25-Sep-2000      10-Oct-2000       15-May-2001
       Annual Statement             3,318,100          Form 5                        14-Feb-2001       15-May-2001

Liming Yung
Director and                        Number of         Required      Reportable         Report            Report
10% Stockholder                      Shares           Form Type     Event Date        Due Date         Filing Date
       Stock Acquisition            2,167,088          Form 3       25-Sep-2000      10-Oct-2000       24-Oct-2000
       Option Acquisition              25,000          Form 4       25-Sep-2000      10-Oct-2000       15-May-2001
       Annual Statement             2,192,088          Form 5                        14-Feb-2001       15-May-2001

Ahn Tran
Director and                        Number of         Required      Reportable         Report            Report
10% Stockholder                      Shares           Form Type     Event Date        Due Date         Filing Date
       Stock Acquisition              585,000          Form 3       25-Sep-2000      10-Oct-2000       24-Oct-2000
       Option Acquisition              25,000          Form 4       25-Sep-2000      10-Oct-2000       15-May-2001
       Annual Statement               610,000          Form 5                        14-Feb-2001       15-May-2001
</TABLE>

Item 10. Executive Compensation.

      Our Company was inactive and had no paid employees in 1998 and 1999. The
following sets forth all forms of compensation we paid our executive officers
during the year ended December 31, 2000. No executive officer of our company
received cash compensation that exceeded $100,000 during the year ended December
31, 2000.

                                       39
<PAGE>

                           SUMMARY COMPENSATION TABLE


     1.   We issued 180,000 shares of common stock to Ms. Fonner during the year
          ended December 31, 2000 as compensation under an administrative
          services agreement. In connection therewith, we amortized $81,100 in
          non-cash compensation during the current year and amortized an
          additional $81,100 in 2001.

     2.   Ms. Fonner agreed to assign 20,000 shares of common stock to Mr. Kraft
          as  compensation  for his  services  as our  Interim  Chief  Financial
          Officer  during the  period  ended  December  31,  2000.  Accordingly,
          $17,800 in non-cash  compensation  has been allocated to Mr. Kraft and
          the balance has been allocated to Ms. Fonner.

DIRECTOR COMPENSATION

     We do not currently pay any cash fees to our Directors, but we pay
Directors' expenses in attending board meetings. During the year ended December
31, 2000, we reimbursed $2,302 in expenses to our Directors. In the year ended
December 31, 2001 no expenses were reimbursed.

DIRECTORS' OPTION PLAN

     On September 22, 2000, certain consenting stockholders ratified the
adoption of a Directors' Option Plan for the benefit of our non-employee
directors. The plan provides for the annual grant of an option to purchase
25,000 shares of our common stock to each member of the Board of Directors who
is not a full-time employee of our Company. The purpose of the plan is to
encourage the service of our outside directors and to provide them with
additional incentive to assist the Company in achieving its growth objectives.
Options will be granted to our non-employee directors each time (i) a new
director is appointed to serve as a member of the Board until the next annual
meeting of the stockholders, (ii) a new director is elected to the Board at an
annual meeting of the stockholders, and (iii) an existing director is re-elected
to the Board at an annual meeting of the stockholders. Options granted under the
plan are subject to forfeiture if the holder resigns from the Board or is
removed for cause before the date of the next annual meeting of the
stockholders. Options granted under the plan become fully vested on the date of
the first annual meeting of the stockholders following the date of grant.
Options issued under the plan may be exercised regardless of whether the
individual continues to serve as a director. Options granted under the plan are
not transferable except by will or by operation of law. The total number of
shares available for grant under the plan is 500,000. Of this initial
authorization, options to purchase an aggregate of 100,000 shares at a price of
$6 per share were granted to four non-employee members of the Board of Directors
during the year ended December 31, 2000. No additional shares or options were
issued in the year ended December 31, 2001.

EMPLOYEES' INCENTIVE STOCK PLAN

     On September 22, 2000, certain consenting stockholders ratified the
adoption of an incentive stock plan for the benefit of our employees. The plan
will permit the grant of incentive equity awards covering up to 1,500,000 shares
of common stock. The plan provides for the grant of (i) non-qualified stock
options, (ii) incentive stock options, (iii) shares of restricted stock, (iv)
shares of phantom stock and (v) stock bonuses (collectively, "Incentive
Awards'). In addition, the plan permits the grant of cash bonuses payable when a
participant is required to recognize income for federal income tax purposes in
connection with the vesting of shares of restricted stock or the grant of a
stock bonus. Full-time employees of the Company and its subsidiaries, including
officers and employee directors, are eligible to participate in the plan. We
believe the plan will give us the ability to emphasize equity-based compensation
in structuring compensation packages for our employees. We also believe that an
emphasis on equity-based compensation will yield the greatest benefit for our
shareholders, as employee compensation will be directly dependent on the value
of our stockholders' investments. As of April 26, 2002, no Incentive Awards have
been granted under the plan.

                                       40
<PAGE>

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

      The following describes as of April 25, 2002, the beneficial ownership of
our outstanding common stock of:

     o    Each  person  known to us who  beneficially  owns  more than 5% of the
          common stock

     o    Each of our Directors

     o    Each of our executive officers

     o    All of our executive officers and directors as a group

                                                  Amount and
                                                   Nature of
   Name and Address                               Beneficial           Percent
 of Beneficial Owner                               Ownership          of Class
==============================================================================
Yifan He (1)                                     3,094,313            22.54%
Jeffery Wu (1)(3)(4)                             3,318,100            24.13%
Liming Yung (1)(3)(5)                            2,112,088            15.36%
Ahn Tran (1)(3)(7)                                 610,000             4.44%
Sally A. Fonner (2)(3)(7)                          253,115             1.84%
Executive Officers and Directors
as a Group (5 persons)                           9,387,616            68.31%

     (1)  41-60 Main Street, Suite 210, Flushing, Queens, New York 11355.

     (2)  1268 Bayshore Blvd., Dunedin, Florida 34698

     (3)  Options to purchase 25,000 shares of common stock at a price of $6 per
          share were issued to each of our four non-employee directors on
          September 25, 2000. The option granted to Ms. Fonner became
          exercisable on March 15, 2001 when she resigned from the board of
          directors to accommodate the appointment of Mr. Iglesias. The
          remaining 75,000 directors' options will become exercisable on the
          date of the annual meeting.

     (4)  Includes 2,843,100 shares owned by Mr. Wu, 450,000 shares owned by Mr.
          Wu as custodian for his minor child, and 25,000 shares underlying
          options that Mr. Wu received pursuant to the Directors' Option Plan.

     (5)  Includes 1,074,588 shares owned by Mr. Yung's wife Michelle Yung,
          1,012,500 shares owned by Michelle Yung as custodian for their minor
          children, and 25,000 shares underlying options that Mr. Yung received
          pursuant to the Directors' Option Plan.

     (6)  Includes 585,000 shares owned by Mr. Tran and 25,000 shares underlying
          options that Mr. Tran received pursuant to the Directors' Option Plan.

     (7)  Includes 228,115 shares owned by Ms. Fonner and 25,000 shares
          underlying presently exercisable options that Ms. Fonner received
          pursuant to the Directors' Option Plan.

      Except as otherwise noted, each of these principal stockholders has sole
voting and investment power for the shares each owns. We know of no arrangements
that will result in a change in control of our Company.

Item 12. Certain Relationships and Related Transactions.

      Our Board of Directors has adopted a policy that all of our affairs will
be conducted by standards applicable to publicly-held corporations and that we
will not enter into any transactions or loans between us and our officers,
directors and 5% shareholders, unless the terms are no less favorable than we
could obtain from independent, third parties, and that these types of
transactions must be approved by our disinterested directors.

                                       41
<PAGE>

Smart Games Interactive, Inc. Before July 30, 2000

     On March 30, 2000, the board of directors of our company unanimously
approved the sale of 15,000,000 shares of our $.0002 par value common stock
("Old Common") to Tobem Investments Limited ("Tobem") for $75,000 in cash.
Concurrently, the board of directors appointed Tobem's nominee, Sally A. Fonner,
to serve as a member of the board of directors until the next annual meeting of
the stockholders. After appointing Ms. Fonner to the board of directors, all of
the former directors of our company resigned and Ms. Fonner became the sole
Director.

     On March 31, 2000, our company and Tobem entered into a Project Management
Agreement (the "PMA") with Capston Network Company, a corporation owned by Ms.
Fonner ("Capston"). Under the PMA, Capston was authorized to restructure our
company as a "public shell" for the purpose of effecting a business combination
with a suitable privately company. Capston was also authorized to negotiate the
compromise of our debts, and to purchase additional shares of our Old Common for
its own account if such necessary to provide sufficient cash for the settlement
of our debts.

     Between March 30, 2000 and July 28, 2000, Capston and Ms. Fonner devoted
substantial time and effort to negotiations with our creditors. As a result of
these negotiations, our creditors agreed to accept aggregate cash payments of
$88,107 in full and final settlement of all outstanding debts. During this same
period, our company incurred aggregate operating expenses of $35,179, for an
aggregate cash outflow of $123,286. Of this amount, $75,000 was paid from the
cash contributed by Tobem. The $48,286 balance was paid by Capston and accounted
for as a purchase of 3,500,000 shares of our Old Common. Except for the stock
purchase transactions and the PMA, there were no material transactions between
our company and any of our executive officers or directors during the year ended
December 31, 1999 or the subsequent interim period ended July 30, 2000.

Yifan.com, Inc. Before July 30, 2000

     Yifan He created the Internet web site "yifan.com" in May 1997. In January
1999, in connection with the formation of Yifan, LLC, a New York limited
liability company, Mr. He contributed all his right, title and interest in the
yifan.com web site to Yifan LLC in exchange for membership interests. Over the
next several months, Liming Yung and Jeffery Wu contributed approximately
$145,300 in cash to the LLC in exchange for membership interests and eight other
individuals, including Ahn Tran, contributed services in exchange for additional
membership interests. At January 5, 2000, the membership interests in Yifan LLC
were owned in the following percentages:

      Jeffery Wu                                                 31.865%
      Yifan He                                                   28.953%
      Liming Yung                                                25.014%
      Ahn Tran                                                    4.211%
      Employees and others (7 persons)                            9.958%

     In connection with the organization of Yifan.com, Inc., a New York
corporation, in January 2000, the members of Yifan LLC contributed all their
membership interests to Yifan.com in exchange for an aggregate of 4,750,000
shares of Yifan.com's common stock. On January 5, 2000, the common stock of
Yifan.com was distributed to the former members of Yifan LLC as follows:

      Jeffery Wu                                               1,513,600
      Yifan He                                                 1,375,250
      Liming Yung                                              1,188,150
      Ahn Tran                                                   200,000
      Employees and others (7 persons)                           473,000

     In January 2000, Liming Yung transferred 225,000 shares to certain family
members and others who do not share his residence, 513,150 shares to his wife
and 450,000 shares to his wife, as custodian for their minor children under the
New York Uniform Gifts to Minors Act. Mr. Yung's transferees subsequently
exchanged their shares of Yifan.com common stock for the right to receive an
aggregate of 2,655,338 shares of our Company's New Common. Mr. Yung has no legal


                                       42
<PAGE>

or equitable interest in the shares transferred to family members who do not
share his residence. For disclosure purposes, Mr. Yung is treated as the owner
of all shares held by his wife and children. Notwithstanding the foregoing, Mr.
Yung disclaims beneficial ownership of those shares.

     In January 2000, Jeffery Wu transferred 50,000 shares of Yifan.com common
stock to certain of his key employees and 200,000 shares of Yifan.com common
stock to his minor child under the New York Uniform Gifts to Minors Act. Mr. Wu
has no legal or equitable interest in the shares transferred to his employee,
but remains the custodian of the shares transferred to his child. Mr. Wu and his
transferees subsequently exchanged their shares of Yifan.com common stock for
the right to receive 3,405,600 shares of our Company's common stock. Since Mr.
Wu remains the custodian of 450,000 shares held for the benefit of his child,
Mr. Wu is treated as the beneficial owner those shares for disclosure purposes.
Notwithstanding the foregoing, Mr. Wu disclaims beneficial ownership of the
450,000 shares he holds as custodian for his child.

     Between December 21, 1999 and July 31, 2000 Yifan.com received and accepted
subscriptions to purchase 581,000 shares of common stock at a price of $2 per
share, including 60,000 shares purchased by Mr. Tran. The aggregate net proceeds
of the offering were approximately $1,162,000. The offering was conducted as a
private placement and all of the subscriptions were received from suitable
investors who had a pre-existing relationship with Yifan.com or its officers and
directors.

     When the prior issuances of stock by Yifan.com were aggregated with the
subscriptions received in the private placement transactions, it was discovered
that Yifan.com had accepted subscriptions for 331,000 more shares than were
authorized by its Articles of Incorporation. Yifan.com was in the process of
amending its Articles of Incorporation on July 30, 2000 but had not yet done so.
Accordingly, the agreements relating to our business combination with Yifan.com
treat the excess subscriptions as representing rights to receive shares of
Yifan.com common stock on the effective date of a pending amendment to
Yifan.com's Articles of Incorporation and provide for the exchange of such
rights for the right to receive shares of our common stock.

Business Combination and Subsequent Transactions

     On July 27, 2000, Tobem and Capston executed written consents to a proposed
amendment to our Certificate of Incorporation (the "Amendment"). The Amendment
was a negotiated element of the business combination transaction described
below. This amendment (a) implemented a 1 for 40 reverse split of our Old Common
and (b) increased our authorized capitalization to 100,000,000 shares of $0.008
par value common stock ("New Common") and 10,000,000 shares of $0.008 par value
preferred stock ("New Preferred"). The amendment became effective on September
25, 2000.

     On July 30, 2000, the stockholders of Yifan.com contributed 5,000,000
shares of Yifan common to our company in exchange for the right to receive
11,250,000 shares of New Common on the effective date of the amendment.
Concurrently, the persons who had subscribed for, but not yet received, an
additional 331,000 shares of Yifan common contributed their subscription rights
to the Company in exchange for the right to receive 744,750 shares of New Common
on the effective date of the amendment. These shares were ultimately issued on
September 25, 2000 in accordance with the applicable agreements.

     In July 2000, Yifan.com entered into an agreement with its legal counsel
that provided for the issuance of 360,000 shares of New Common, valued at $0.89
per share, as compensation for legal services to be rendered on behalf of our
company during the first year after the closing of the Yifan Transaction. The
agreement specified the services to be performed by such counsel and provided
for partial reimbursement of any fees that our company is required to pay to
other law firms during its term. We recognized non-cash compensation expense of
$160,200 in connection with this agreement in the year ended December 31, 2000
and will recognize the $160,200 balance during the first two quarters of 2001.

                                       43
<PAGE>

     On August 1, 2000, Ms. Fonner agreed to serve as our company's manager of
administrative affairs for a one-year term commencing on August 1, 2000. In this
capacity, Ms. Fonner managed, operated and maintained all required internal
accounting and external financial reporting systems on behalf of our company
until such operations have expanded to a point where it is economically feasible
for our company to retain its own in-house accounting and financial reporting
staff. Ms. Fonner also managed the preparation and filing of all required
reports and registration statements with the SEC, the NASD and other regulatory
authorities, and managed all of our company's relationships with its transfer
agents, financial printers, public relations firms and investor communications
firms. Under the terms of her employment agreement, Ms. Fonner was obligated to
pay all expenses associated with the operation and maintenance of her office,
including the cost of any required support staff, and our company had no
obligation to make any contribution to such costs. Ms. Fonner's sole
compensation will be 180,000 shares of New Common that were issued to her on the
effective date of the Amendment. Under the terms of her Employment Agreement,
Ms. Fonner was not required to devote full-time to our company's affairs and
will only devote such time as may be reasonably required under the
circumstances.

     Jeff Craft, a full-time employee of Capston, served as our company's
Interim Chief Financial Officer until December 31, 2000. Mr. Kraft's salary was
paid by Capston and he did not receive any cash compensation from the Company in
connection with his services as Interim Chief Financial Officer. Nevertheless,
Capston has transferred 20,000 shares of New Common to Mr. Kraft as compensation
for his services to the Company. The Company has no obligation with respect to
the arrangement between Capston and Mr. Kraft.

     Capston received a $350,000 merger and acquisition fee from Yifan.com in
connection with the business combination transaction. Capston agreed to refund
this merger and acquisition fee if, on the first anniversary of the business
combination transaction:

     (a)  the New  Common is listed on the  Nasdaq  Stock  Market or a  national
          securities exchange; and

     (b)  the average closing bid price of the New Common has been at least $10
          per share for a period of 45 consecutive trading days.

     Since the company does not currently qualify for a Nasdaq listing and the
stock price is significantly below $10 per share, the company is not expected to
satisfy the conditions of the refund agreement.

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

Exhibits

      None.

Reports on Form 8-K

      None.


                                       44
<PAGE>

                                   SIGNATURES

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

April 26, 2002
                                          Yifan Communications, Inc.


                                        By:  /s/ Yifan He
                                            ----------------------------
                                          Yifan He, Principal Executive
                                          Officer,
                                          Principal Financial Officer,
                                          Principal Accounting 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/ Yifan He
                                            ----------------------------
                                          Yifan He, Director
                                          Dated: May 7, 2001


                                        By: /s/ Jeffery Wu
                                            ----------------------------
                                          Jeffery Wu, Director
                                          Dated: May 7, 2001


                                        By: /s/ Liming Yung
                                            ----------------------------
                                          Liming Yung, Director
                                          Dated: May 7, 2001


                                        By: /s/ Ahn Tran
                                            ----------------------------
                                          Ahn Tran, Director
                                          Dated: May 7, 2001


                                       45