SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

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

                      For the year ended December 31,2000


                        Commission File Number 000-27897


                                IP FACTORY, INC.
                             -----------------------
             (Exact name of registrant as specified in its charter)

        DELAWARE                                        95-4737507
    ----------------------                          -------------------
    (State of organization)                         (I.R.S. Employer
                                                    Identification No.)

               29160 Heathercliff Road, Suite 300, Malibu CA 90265
      -------------------------------------------------------------------
                    (Address of principal executive offices)

       Registrant's telephone number, including area code ((310) 457-8167


       Securities registered pursuant to Section 12(b) of the Act,
                                      None

       Securities registered pursuant to Section 12(g) of the Act:
                                 Title of Class
                    Common Stock, $0.001 par value per share


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months,  and (2) has been subject to such filing  requirements
for the past 90 days. Yes [ ] No [ X ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Issuer's revenues for its most recent fiscal year.               $0.00

<PAGE>

The  aggregate  market value of the Common Stock held by  non-affiliates  of the
registrant,  based on the average of the high and low prices of the Common Stock
on the OTC  Bulletin  Board on June 30,  2001,  was  $0.00  (no  trading  market
exists).  For purposes of this  computation,  all  officers,  directors,  and 5%
beneficial  owners of the  registrant (as indicated in Item 12) are deemed to be
affiliates.  Such  determination  should  not be deemed an  admission  that such
directors,  officers,  or 5% beneficial  owners are, in fact,  affiliates of the
registrant.

Number of shares of Common  Stock,  $0.001  Par Value,  outstanding  at June 30,
2001, was 1,019,000.

                     Documents incorporated by reference: None



                                       2
<PAGE>


                   TABLE OF CONTENTS - 2000 FORM 10-KSB REPORT

                                                                       Page
                                                                     Numbers
                                                                     -------
                                     PART I

Item   1.      Business                                                    4

Item   2.      Properties                                                  5

Item   3.      Legal Proceedings                                           5

Item   4.      Submission of Matters to a Vote of Security Holders         5

                                     PART II

Item   5.      Market for Registrant's Common Equity and Related
               Stockholder Matters                                         5

Item   6       Management's Discussion and Analysis of Financial
               Condition and Results of Operations                         6

Item   7.      Financial Statements                                        6

Item   8.      Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure                         6

                                    PART III

Item  9.       Directors, Executive Officers, Promoters and
               Control Persons; Compliance with Section 16(a)
               of the Exchange Act                                         7

Item  10.      Executive Compensation                                      8

Item  11.      Security Ownership of Certain Beneficial Owners
               and Management                                              8

Item  12.      Certain Relationships and Related Transactions              9

Item  13.      Exhibits and Reports on Form 8-K                            9

Signatures                                                                10


                                       3


<PAGE>
                                     PART I


Item   1.      Business


IP  FACTORY,   Inc.  intends  to  provide  leading  worldwide  enterprises  with
optimizedsolutions for integrating network and Internet design,  implementation,
security,  maintenance and management. IP FACTORY intends to assemble a group of
experts and professionals in areas such as Internet Protocol uniformity, Network
Design, Security, Software Applications,  and System Integration,  each of which
has a strong customer base.

Rapidly Expanding Trillion Dollar Corporate Network Market

The  dominating  trend in today's  global  economy is the ability to communicate
efficiently,  as  industry  leaders  continue  the quest to find  better ways to
deliver  information  in a timely  manner.  A  Business  Research  Group  report
entitled: "Web Server and the Rise of the Corporate Internet" [1997] showed that
an  increasing  number  of  companies  are  now  turning  to the Web as a way to
organize their internal  communications.  The report surveys 170 decision makers
at large  and  medium-size  companies,  and  shows  that 23% of the  sites  have
implemented  or plan to implement the Web  internally,  with an  additional  20%
studying the option.  A study by IDC examining  Intranet  technology  concludes,
"Typical   implementations   (of  Intranets)  are  achieving  ROI's  (Return  on
Investment) well over 1,000 percent."

According to 1999 IBM company reports, The Information Technology industry is on
target to  generate  $1.2  trillion  in  worldwide  revenues  by the year  2001.
Networking  will  contribute 50%, or $600 billion by the year 2001 worldwide and
will  claim a 75% share of the IT market by 2003.  This  market is  expected  to
continue growing at a 25% compounded rate.

The  average  business  maintains  at least  7-10  different  vendors  for their
network/Internet  needs, with each supplying only a piece of the total solution.
The end result has consistently been a technology bottleneck that can often lead
to massive losses in productivity,  customer service deficiencies, and financial
losses in the tens of millions of dollars.

A Robust Business Model

Effective communication  management may be the single most important element for
success in business today.  Advances in technology have increased  productivity,
improved performance and enhanced  communications by enabling people to send and
receive messages  quickly and effectively,  when and how they want. As a result,
we are also faced with the daily  challenge  of utilizing  voice mail,  personal
computer, e-mail, cellular phone, PDA, fax and pager messages as tools to assist
in the  efficient  performance  of  business  responsibilities,  as  opposed  to
interruptions that effectively extend the time required to get work done. In our
personal  lives as well,  the efficiency of our  communication  capabilities  is
vital to  fulfilling  our  routine  obligations  in order to allow  the time and
ability to enjoy elective  activities.  IP Factory,  recognizing  the increasing
demand and largely untapped market for integrating  solutions,  will address the
complete  range of customer  needs,  all under a single source of  comprehensive
customer support.

                                       4
<PAGE>


Item   2.      Properties

The  Company's  executive  and  administrative  offices  are  located  at  29160
Heathercliff  Road,  Suite 300,  Malibu,  California  90265.  The Company shares
office  facilities with a stockholder and incurred rent expense of approximately
$8,200 for use of the office  facilities  in fiscal  2000.  The Company does not
believe that it will  require any  additional  office  space in the  foreseeable
future in order to carry out its plan of operations described herein.



Item   3.      Legal Proceedings

IP Factory is not currently a party to any pending legal proceedings.



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

No items were submitted to a vote of the security  holders by the Company during
the year ended December 31, 2000.



                                     PART II

Item   5.      Market for Registrant's Common Equity and Related
               Stockholder Matters

The Company registered its common stock on a Form 10-SB  Registration  Statement
on a  voluntary  basis,  which  became  effective  on January 1, 2000.  There is
currently no market for IP Factory's securities.

IP Factory
has never paid cash dividends on its common stock.  Payment of future  dividends
will be within the discretion of IP Factory's Board of Directors and will depend
on,  among  other  factors,  retained  earnings,  capital  requirements  and the
operating and financial condition of IP Factory.


RECENT SALES OF UNREGISTERED SECURITIES

     None


                                       5
<PAGE>


Item   6       Management's Discussion and Analysis of Financial
               Condition and Results of Operations

     The following  discussion  and analysis below should be read in conjunction
with the financial statements,  including the notes thereto, appearing elsewhere
in this Annual Report.

     As  of  December   31,  2000  the  Company  has  not  yet   commenced   any
revenue-generating  operations  and  activity to date  relates to the  Company's
formation,  proposed fund raising and business plan  development  and activities
related to its status as a reporting  company.  For the period  since  inception
(November 20, 1998) through December 31, 2000, during the Company's  development
stage,  the  Company has a cash  balance of $20 and has  generated a net loss of
$31,969.


FINANCIAL CONDITION AND LIQUIDITY

     The Company has limited  liquidity  and has an ongoing  need to finance its
activities. To date, the Company currently has funded these cash requirements by
offering  and  selling  1,000,000  shares of Common  Stock for net  proceeds  of
$1,000.00 and the  contribution to additional  paid-in capital of a loan payable
of $30,970 from a stockholder.  The Company  expects to fund its immediate needs
through  private  placements of its securities and may seek a suitable  business
combination. Operating costs for the year ended December 31, 2000 were funded by
the stockholder loan referred to above.

PLAN OF OPERATION

     The Company has  registered an internet  domain name and has  determined it
can begin conducting its business with limited financing that it has arranged.



Item   7.      Financial Statements

     The  financial  statements  and  supplemental  data required by this Item 7
follow  the  index of  financial  statements  appearing  at Item 13 of this Form
10-KSB.



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

     Not applicable.


                                       6
<PAGE>


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

The following table sets forth certain information with respect to the directors
and executive officers of IP Factory.

Name                                Age(1)             Position
----                                ------             --------

George Todt                          47            President, Secretary and
                                                    Director

James Walters                        46            Vice President and Treasurer


(1)  The ages of Messrs.  Todt and  Walters and Ms.  Rowbottom  are listed as of
     December 31, 2000.

     Our director and executive  officers  devote such time and attention  tothe
affairs of IP Factory as they believe reasonable and necessary.  Set forth below
is a description of the background of our director and executive officers.

     George  A.  Todt has been the sole  director  and our  President  since the
inception  of IP  Factory.  Since 1996,  Mr. Todt has been a managing  member of
PageOne Business  Productions,  LLC, a Delaware limited liability company.  From
1990 to 1995,  Mr.  Todt was the  chief  executive  officer  of REPCO,  Inc.,  a
worldwide designer and builder of environmental facilities.

     James  Walters has been the Vice  President and the Treasurer of IP Factory
since its inception.  For more than 20 years,  Mr. Walters has been engaged as a
certified  public  accountant  with the Los  Angeles,  California-based  firm of
Kellogg & Andelson.


     Our board of directors currently consists of one member, who serves in such
capacity  for a  one-year  term or until  his  successor  has been  elected  and
qualified,  subject to  earlier  resignation,  removal  or death.  The number of
directors constituting the board of directors may be increased or decreased (but
not below the minimum  number  required by applicable  law) from time to time by
resolution of the board of directors.  Our officers  serve at the  discretion of
the board of directors, subject to any effective contractual arrangements.


               COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires that the Company's
officers  and  directors,  and  persons  who own  more  than  ten  percent  of a
registered class of the Company's equity  securities,  file reports of ownership
and changes in ownership with the Securities and Exchange Commission.

The following were delinquent in filings of required reports in 2000:
Appletree  Investment Company,  Ltd, PageOne Business  Productions,  LLC, George
Todt and James Walters.

                                       7

<PAGE>

Item  10.      Executive Compensation

Consistent  with our present  policy,  no director  or  executive  officer of IP
Factory  receives  compensation for services  rendered to the company.  However,
these  persons are entitled to be  reimbursed  for expenses  incurred by them in
pursuit of our business objectives.


Item  11.      Security Ownership of Certain Beneficial Owners
               and Management

The following table sets forth as of June 30, 2001 certain information  relating
to the ownership of the common stock.

Name and Address of                    Amount and Nature of         Percent of
Beneficial Owner (1)                 Beneficial Ownership (2)        Class (3)
--------------------                 ------------------------       ----------

Appletree Investment Company, Ltd          1,019,000(4)               100.0%

PageOne Business Productions, LLC            109,500                   10.7%

George Todt                                  109,500(5)                10.7%

James Walters                                109,500(5)                10.7%

All officers and directors as a group        109,500(5)                10.7%
(2 persons)


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

(1)  Unless otherwise indicated,  the address of each beneficial owner is in the
     care of IP Factory,  Inc.,  29160  Heathercliff  Road,  Suite 300,  Malibu,
     California 90265.

(2)  Unless otherwise  indicated,  IP Factory believes that all persons named in
     the table have sole voting and investment  power with respect to all shares
     of common  stock  beneficially  owned by them. A person is deemed to be the
     beneficial  owner of securities which may be acquired by such person within
     60 days from the date of this  registration  statement upon the exercise of
     options,  warrants  or  convertible  securities.  Each  beneficial  owner's
     percentage of ownership is determined by assuming all options,  warrants or
     convertible  securities  that are held by such  person (but not held by any
     other person) and which are  exercisable or  convertible  within 60 days of
     this registration statement have been exercised or converted.

(3)  Percent  of Class  assumes  a base of  1,019,000  shares  of  common  stock
     outstanding as of June 30, 2001.

                                       8

<PAGE>

(4)  Consists of 909,500 shares held of record by Appletree  Investment Company,
     Ltd.,  an Isle of Man  corporation,  and  109,500  shares held of record by
     PageOne Business Productions, LLC, a Delaware limited liability company, of
     which Appletree is a managing member.

(5)  Consists solely of 109,500 shares of common stock held by PageOne  Business
     Productions,  LLC, a Delaware limited liability company,  of which Mr. Todt
     and Mr. Walters are managing members.


Item  12.      Certain Relationships and Related Transactions

         None


Item  13.      Exhibits and Reports on Form 8-K

(a)(1)    The  following  financial  statements  are contained on Pages F-1
          through F-9:

          REPORT OF INDEPENDENT  AUDITORS  WEINBERG & COMPANY,  P.A.,  CERTIFIED
          PUBLIC ACCOUNTANTS, DATED MAY 31, 2001

          BALANCE SHEET AS OF DECEMBER 31, 2000

          STATEMENTS  OF  OPERATIONS  FOR THE YEARS ENDED  DECEMBER 31, 2000 AND
          1999 AND FOR THE PERIOD FROM NOVEMBER 20, 1998 (INCEPTION) TO DECEMBER
          31, 2000

          STATEMENTS  OF CHANGES  IN  STOCKHOLDERS'  EQUITY  FOR THE PERIOD FROM
          NOVEMBER 20, 1998 (INCEPTION) TO DECEMBER 31, 2000

          STATEMENTS  OF CASH FLOWS FOR THE YEARS  ENDED  DECEMBER  31, 2000 AND
          1999 AND FOR THE PERIOD FROM NOVEMBER 20, 1998 (INCEPTION) TO DECEMBER
          31, 2000

          NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000

(a)(3)   Exhibits

          The following exhibits are filed with this report.

3.1.1     Amended  and  Restated   Articles  of   Incorporation   of  Registrant
          (incorporated  herein  by  reference  to  the  Company's  Registration
          Statement on Form 10-SB 12(g), File No. 000-27897)

3.2.1     ByLaws  of  Registrant   (incorporated  herein  by  reference  to  the
          Company's  Registration  Statement  on  Form  10-SB  12(g),  File  No.
          000-27897)

(b)      Reports on Form 8-K

         None

                                       9
<PAGE>



                                IP FACTORY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                              FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 2000


                                      INDEX

                                                                          Page

    INDEPENDENT AUDITORS' REPORT                                           F-2

    BALANCE SHEET AS OF DECEMBER 31, 2000                                  F-3

    STATEMENTS OF OPERATIONS  FOR THE YEARS ENDED  DECEMBER 31, 2000
    AND 1999 AND FOR THE PERIOD FROM NOVEMBER 20, 1998 (INCEPTION) TO
    DECEMBER 31, 2000                                                      F-4

    STATEMENT OF CHANGES IN  STOCKHOLDERS'  EQUITY FOR THE PERIOD FROM
    NOVEMBER 20, 1998 (INCEPTION) TO DECEMBER 31, 2000                     F-5

    STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000
    AND 1999 AND FOR THE PERIOD FROM NOVEMBER 20, 1998 (INCEPTION)
    TO DECEMBER 31, 2000                                                   F-6

    NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000                  F-7





                                      F-1

<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors of:
  IP Factory, Inc.
  (A Development Stage Company)

We  have  audited  the  accompanying  balance  sheet  of  IP  Factory,  Inc.  (a
development stage company) as of December 31, 2000 and the related statements of
operations,  changes in stockholders'  equity and cash flows for the years ended
December  31,  2000  and  1999,  and for  the  period  from  November  20,  1998
(inception)  to  December  31,  2000.   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 conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain  reasonable  assurance  about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly in all
material  respects,  the financial  position of IP Factory,  Inc. (a development
stage  company) as of December 31, 2000,  and the results of its  operations and
its cash  flows for the years  ended  December  31,  2000 and 1999,  and for the
period from  November 20, 1998  (inception)  to December 31, 2000, in conformity
with accounting principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial  statements,  the  Company  is a  development  stage  company  without
operations  and has had  accumulated  losses of $31,969 since  inception.  These
factors  raise  substantial  doubt  about its  ability  to  continue  as a going
concern.  The  financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.


WEINBERG & COMPANY, P.A.


Boca Raton, Florida
May 31, 2001

                                      F-2

<PAGE>


                                IP FACTORY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET
                             AS OF DECEMBER 31, 2000




                                     ASSETS

Cash                                                           $            20
                                                               ---------------
TOTAL ASSETS                                                   $            20
------------                                                   ===============


                      LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES                                                    $          -
                                                               ---------------

STOCKHOLDERS' EQUITY

  Preferred stock, $.001 par value, 8,000,000 shares
   authorized, none issued and outstanding                                 -
  Common stock, $.001 par value, 100,000,000 shares
   authorized, 1,019,000 issued and outstanding                          1,019
  Additional paid-in capital                                            30,970
  Accumulated deficit during development stage                         (31,969)
                                                               ---------------
     TOTAL STOCKHOLDERS' EQUITY                                             20
                                                               ---------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $            20
------------------------------------------                     ===============









                 See accompanying notes to financial statements.



                                      F-3

<PAGE>

<TABLE>
<CAPTION>
                                IP FACTORY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF OPERATIONS


                                                                               November 20, 1998
                                       For the Year Ended  For the Year Ended    (Inception) to
                                       December 31, 2000   December 31, 1999   December 31, 2000
                                       ------------------  ------------------  -----------------
<S>                                    <C>                 <C>                 <C>
INCOME                                 $          -        $         -         $         -
                                       ------------------  ------------------  -----------------

EXPENSES

   Accounting fees                               6,200                500               6,700
   Bank service charge                             180                120                 300
   Consulting fees                                -                   750                 769
   Legal fees                                    8,500              5,000              13,500
   Office Supplies                               2,500               -                  2,500
   Rent                                          8,200               -                  8,200
                                       ------------------  ------------------  -----------------

NET LOSS                               $       (25,580)    $       (6,370)     $      (31,969)
--------                               =================   ==================  =================

NET LOSS PER SHARE

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING DURING THE
PERIOD BASIC AND DILUTED                     1,019,000            753,247             839,181

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




                 See accompanying notes to financial statements.




                                      F-4

<PAGE>

<TABLE>
<CAPTION>
                                IP FACTORY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
     FOR THE PERIOD FROM NOVEMBER 20, 1998 (INCEPTION) TO DECEMBER 31, 2000



                                                                                                   Deficit
                                                                                                 Accumulated
                                                         Common Stock           Additional          During
                                                   -----------------------       Paid-In         Development
                                                   Shares         Amount         Capital            Stage         Total
                                                  ---------     -----------     ----------      -----------    -----------
<S>                                               <C>           <C>             <C>              <C>            <C>
Common stock issued for services                    19,000      $      19       $     -          $     -        $       19

Net loss for the year ended December 31, 1998         -              -                -                 (19)           (19)
                                                 ----------     -----------     ----------       -----------    -----------

Balance at December 31, 1998                        19,000             19             -                 (19)            -

Common stock issued for cash                     1,000,000          1,000             -                -             1,000

Net loss for the year ended December 31, 1999         -              -                -              (6,370)        (6,370)
                                                 ----------     -----------     ----------       -----------    -----------

Balance at December 31, 1999                     1,019,000          1,019             -              (6,389)        (5,370)

Contribution of loan payable - stockholder            -              -              30,970             -            30,970

Net loss for the year ended December 31, 2000         -              -                -             (25,580)       (25,580)
                                                 ----------     -----------     ----------       -----------    -----------

BALANCE AT DECEMBER 31, 2000                     1,019,000     $    1,019       $   30,970       $  (31,969)    $       20
----------------------------                     ==========    ============     ==========       ===========    ===========
</TABLE>



                 See accompanying notes to financial statements.




                                      F-5

<PAGE>

<TABLE>
<CAPTION>
                                IP FACTORY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS

                                                                                                  For the Period from
                                                                                                   November 20, 1998
                                                  For the Year Ended      For the Year Ended        (Inception) to
                                                  December 31, 2000       December 31, 1999       December 31, 2000
                                                  ------------------      ------------------      ------------------
<S>                                               <C>                     <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                       $        (25,580)       $          (6,370)      $        (31,969)
   Adjustments to reconcile net loss to net
    cash used in operating activities:
    Stock issued for services                                 -                        -                        19
                                                  ------------------      ------------------      ------------------

       Net Cash Used In Operating Activities               (25,580)                  (6,370)               (31,950)
                                                  ------------------      ------------------      ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of common stock                     -                       1,000                  1,000
   Loan payable - stockholder                               25,400                    5,570                 30,970
                                                  ------------------      ------------------      ------------------

       Net Cash Provided By Financing Activities            25,400                    6,570                 31,970
                                                  ------------------      ------------------      ------------------

INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS                                            ( 180)                     200                     20

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                200                     -                      -
                                                  ------------------      ------------------      ------------------

CASH AND CASH EQUIVALENTS - END OF PERIOD         $             20        $             200       $             20
-----------------------------------------         =================       ==================      ==================

NON-CASH FINANCING ACTIVITIES

Conversion of loan payable - stockholder into additional paid-in capital                          $         30,970
                                                                                                  ================
</TABLE>


                 See accompanying notes to financial statements.

                                       F-6


<PAGE>

                                IP FACTORY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 2000

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        (A) Organization and Business Operations

        IP Factory,  Inc. (a  development  stage  company)  ("the  Company") was
        incorporated   in  Delaware  on  November  20,  1998  to  engage  in  an
        internet-based  business.  At December 31, 2000, the Company had not yet
        commenced  any  revenue-generating  operations,  and  activity  to  date
        relates to the Company's  formation,  proposed fund raising and business
        plan development.

        The  Company's  ability to  commence  revenue-generating  operations  is
        contingent upon its ability to implement its business plan and raise the
        capital it will require through the issuance of equity securities,  debt
        securities, bank borrowings or a combination thereof.

        (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 reported  amounts of assets and liabilities
        and disclosure of contingent  assets and  liabilities at the date of the
        financial  statements and the reported  amounts of revenues and expenses
        during the  reporting  period.  Actual  results  could differ from those
        estimates.

        (C) Cash and Cash Equivalents

        For  purposes of the cash flow  statements,  the Company  considers  all
        highly liquid  investments  with original  maturities of three months or
        less at the time of purchase to be cash equivalents.

        (D) Income Taxes

        The Company  accounts  for income taxes under the  Financial  Accounting
        Standards  Board  Statement of Financial  Accounting  Standards No. 109,
        "Accounting for Income Taxes"  ("Statement  109").  Under Statement 109,
        deferred tax assets and  liabilities  are  recognized for the future tax
        consequences attributable to differences between the financial statement
        carrying amounts of existing assets and liabilities and their respective
        tax basis.  Deferred  tax  assets and  liabilities  are  measured  using
        enacted tax rates  expected  to apply to taxable  income in the years in
        which  those  temporary  differences  are  expected to be  recovered  or
        settled.  Under  Statement  109,  the effect on deferred  tax assets and
        liabilities  of a change  in tax  rates is  recognized  in income in the
        period  that  includes  the  enactment  date.  There  were no current or
        deferred  income tax expense or  benefits  due to the Company not having
        any  material  operations  for the year  ended  December  31,  2000.  At
        December  31,  2000,  the Company has a potential  deferred tax asset of
        approximately $10,900,  which has been fully reserved,  arising from net
        operating loss carryforwards aggregating $32,000.

                                      F-7
<PAGE>

                                IP FACTORY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 2000

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        (E) Loss Per Share

        Net loss per common share for the years ended December 31, 2000 and 1999
        and for the period from  November 20, 1998  (inception)  to December 31,
        2000  is  computed  based  upon  the  weighted   average  common  shares
        outstanding  as  defined  by  Financial  Accounting  Standards  No.  128
        "Earnings Per Share". There were no common stock equivalents outstanding
        at December 31, 2000.

NOTE 2  STOCKHOLDERS' EQUITY

        The  Company  was  originally  authorized  to issue  100,000  shares  of
        preferred stock at $.01 par value, with such designations,  preferences,
        limitations  and relative  rights as may be determined from time to time
        by the Board of  Directors.  In  addition,  the Company  was  originally
        authorized  to issue  10,000,000  shares  of  common  stock at $.001 par
        value.  The  Company  issued  909,500 and  109,500  shares to  Appletree
        Investments  Company,  Ltd.  and  PageOne  Business   Productions,   LC,
        respectively. No preferred shares were issued as of December 31, 2000.

        Management filed a restated  certificate of incorporation with the State
        of Delaware  which  increased the number of authorized  common shares to
        100,000,000,  increased  the number of  authorized  preferred  shares to
        8,000,000 and  decreased the par value of the preferred  shares to $.001
        per share.

        The  financial  statements  at December 31, 2000 and 1999 give effect to
        common and  preferred  stock  amounts and par values  enumerated  in the
        restated certificate of incorporation.

        The Company's Board of Directors  authorized the conversion of a $30,970
        non-interest bearing loan payable to PageOne Business Productions,  LLC,
        which arose from funds advanced to the Company,  into additional paid-in
        capital.

                                      F-8
<PAGE>

                                IP FACTORY, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 2000

NOTE 3  GOING CONCERN

        As reflected in the accompanying  financial statements,  the Company has
        had accumulated  losses of $31,969 since inception and has not generated
        any revenues  since it has not yet  implemented  its business  plan. The
        ability of the Company to continue as a going  concern is  dependent  on
        the  Company's  ability to raise  additional  capital and  implement its
        business plan. The financial  statements do not include any  adjustments
        that might be  necessary if the Company is unable to continue as a going
        concern.

        The Company  intends to  implement  its   business  plan  and is seeking
        funding  through the private placement of its  equity or debt securities
        or may seek a  combination  with another company  already engaged in its
        proposed   business.  Management  believes that actions  presently being
        taken  provide the  opportunity  for the Company  to continue as a going
        concern.











                                      F-9

<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.

                                   IP FACTORY, INC.


                                   /s/ George A. Todt
                               By: -----------------------
                                   George A. Todt
                                   President 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.

     Signature                          Title               Date

/s/ George A. Todt            Director, Chief Executive     August 3, 2001
                              Officer


/s/ James Walters             Chief Financial Officer,     August 3, 2001
                              Treasurer, Vice President


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