Edgar Filing: YP NET INC

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB/A

Amendment No. 1

(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2003

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ________ to ____________

Commission File Number: 0-24217

YP.NET, INC.
(Name of Small Business Issuer in its Charter)

NEVADA 85-0206668
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)

4840 EAST JASMINE STREET, SUITE 105, MESA, ARIZONA 85205
(Address of principal executive offices) (Zip Code)

(480) 654-9646
(Issuer's telephone number)

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

Securities registered under Section 12(g) of the Exchange Act:

COMMON STOCK, $.001 PAR VALUE
(Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ].

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X].

Registrant's revenues for its most recent fiscal year were $30,767,444.

The aggregate market value of the common stock held by non-affiliates computed
based on the closing price of such stock on December 26, 2003 was approximately
$29,600,000.

The number of shares outstanding of the registrant's classes of common stock, as
of December 26, 2003 was 48,560,802.

Transitional Small Business Disclosure Format: Yes [ ] No [X]

DOCUMENTS INCORPORATED BY REFERENCE: None.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-KSB/A (this "Amendment") amends the Company's
Annual Report on Form 10-KSB for the fiscal year ended September 30, 2003,
originally filed on December 31, 2003 (the "Original Filing"). The Company is
refiling a portion of Part III to include the information required by Items 9,
10, 11, and 12 to Part III because the Company's definitive proxy statement will
not be filed within 120 days of the end of the Company's fiscal year ended
September 30, 2003. In addition, in connection with the filing of this
Amendment and pursuant to the rules of the Securities and Exchange Commission,
the Company is including with this Amendment certain currently dated
certifications.

Except as described above, no other changes have been made to the Original
Filing. This Amendment continues to speak as of the date of the Original
Filing, and the registrant has not updated the disclosures contained therein to
reflect any events that occurred at a date subsequent to the filing of the
Original Filing. The filing of this Form 10-KSB/A is not a representation that
any statements contained in items of Form 10-KSB other than Part III Items 9
through 12 are true or complete as of any date subsequent to the date of the
original filing of Form 10-KSB.

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS

DIRECTORS

The Company's Board of Directors currently consists of five members with each
member serving for a one year term. In connection with an Annual Meeting of
Stockholders scheduled for April 2, 2004, we are asking our stockholders to
approve a proposal that would create a classified board consisting of three
different classes of directors serving for staggered terms. There are no
arrangements or understandings between any of the directors or any other persons
pursuant to which any of the directors have been selected as directors, other
than as described below. There are no "family relationships" among the
directors, as that term is defined by the Securities and Exchange Commission
("SEC"). Set forth below is our current Board of Directors, including their age
and positions with the Company, each as of September 30, 2003, as well as the
anticipated class in which they would serve and the length of their term should
the proposal be approved by the stockholders.

NAME OF NOMINEE CLASS TERM AGE TITLE
-------------------- ----- ---- --- -----

Angelo Tullo I 2007 47 Chairman of the Board of Directors, Chief
Executive Officer and President
DeVal Johnson I 2007 37 Director and Secretary
Peter Bergmann II 2006 54 Director
Daniel L. Coury, Sr. II 2006 49 Director
Gregory B. Crane III 2005 39 Director

ANGELO TULLO. Mr. Tullo has served as the Chairman of the Board of YP.Net since
February 2000. Mr. Tullo was hired as Chief Executive Officer and President on
September 10, 2000. Mr. Tullo is the president of Sunbelt Financial Solutions,
Inc., an investment banking and consulting firm in Scottsdale, Arizona. From
January 1997 to December 1999, Mr. Tullo was President and a director of
American Business Funding Corp., which was in the business of accounts
receivable factoring for small and medium sized businesses. For over twenty
years, Mr. Tullo has been active as a business consultant. Mr. Tullo has
actively worked in the areas of commercial financing and factoring for the past
ten years. He has owned and operated factoring companies, leasing companies,
consulting companies, wholesale companies, professional employment
organizations, insurance agencies, heating and air conditioning contractors,
retail oil companies, real estate companies and restaurants. He is a former
member of the CEO Club in New York, and currently is a member and honorary Mesa
Chairman of the Presidential Business Roundtable Committee and the Turnaround
Management Association.

Mr. Tullo has been involved with a number of corporate turnaround situations in
which the companies he was associated with faced difficult financial
circumstances. He has been successful with most of these difficult situations.
However, in February 2000, after Mr. Tullo had departed, American Business
Funding Corp. filed for protection under Chapter 11 of the Bankruptcy Code in
the Federal District Court of Arizona. Mr. Tullo had previously been a director,
officer and shareholder of American Business Funding Corp. prior to the time of
its bankruptcy filing. American Business Funding has successfully emerged from
Chapter 11 bankruptcy with an approved plan that fully repays all creditors.

DEVAL JOHNSON. Mr. Johnson has served as a director since October 1999.
Currently, Mr. Johnson serves as Corporate Secretary and Vice President. Prior
to the acquisition of Telco Billing, Inc., our wholly owned subsidiary, Mr.
Johnson was part of the team that created what is now the YP.Com concept. When
Telco Billing was acquired in June 1999, Mr. Johnson left to create Simple.Net,
an Internet service provider. In October 1999, Mr. Johnson was asked to return
to serve as a Director of the Company, whereupon he was instrumental in
refocusing the Company on its newly acquired business, which resulted in the
corporate name change to YP.Net, Inc. Since that time, Mr. Johnson has been the
art director responsible for the design of the in-house sales presentations,
creation of the corporate logo(s) and image for YP.Net and directs the team that
creates and manages our web presence. In 2001, Mr. Johnson consolidated his
other business interests, GraffitiWorx, a graphic design firm and SiteForce, a
web site design firm, into Advanced Internet Marketing, Inc. to provide design
and marketing services to a variety of companies. Mr. Johnson continues to
offer these services to the Company. Prior to 1997, Mr. Johnson created the
PrintPro franchise concept for Design Concept Printing & Signs, Inc. and headed
up their graphic design department. Mr. Johnson is actively involved with web
site promotion, interactive design, Internet advertising and public relations.
Mr. Johnson continues his business Simple.Net where he serves as an officer and
director.

GREGORY B. CRANE. Mr. Crane has been a director of YP.Net since February 2000.
He currently serves as Chief Operating Officer of Telco Billing, our wholly
owned subsidiary and the entity out of which we conduct most of our operations.
Mr. Crane served as the Company's Director of Operations from February 2000 to
September 2000. Mr. Crane has served as President of Advertising Management and
Consulting Services, Inc. ("AMCS") since January 29, 2001. AMCS provides
marketing and administrative services, as well as personnel, to

the Company. From mid-1997 to December 2002, Mr. Crane served as a marketing
consultant to Business Executive Services, Inc. ("BESI"), a direct mail
management and processing company. From September 1998 to June 1999, Mr. Crane
was the General Manager of Telco Billing. Mr. Crane has owned and operated
several businesses, including residential and commercial builders, multi-state
mail order, and document-preparation companies, and also was the creator of the
Yellow-Page.Net concept. Mr. Crane is a former member of the Young
Entrepreneur's Organization.

In connection with a former business of Mr. Crane, which provided homestead
declaration document preparation and filing services, Mr. Crane and that
business were subject to injunctive actions brought by the state of Florida as a
result of complaints relating to the presentation of solicitation mailers. Mr.
Crane voluntarily entered into a consent order with the State of Florida that
required him to supply a copy of the mailer to be printed within 14 days prior
to its mailing, as well as the payment of civil penalties, restitution, and
attorneys' fees if he were to violate the order in the future. The order was
violated due to an error in type size made by a printing company hired by Mr.
Crane's business. The printing company has admitted its responsibility for this
error. Despite the printing company's admission, Mr. Crane was subject to a
judgment, dated February 1998, in the amount of approximately $1.4 million, plus
accrued interest. However, because of the printing company's admission, the
State of Florida took no action on this matter, which was finally vacated in
June 2003.

Because Mr. Crane had been an employee of Telco Billing, Inc. prior to its
acquisition by the Company, Mr. Crane was named in an action filed by the United
States Federal Trade Commission ("FTC") against the Company in June 2000
concerning actions taken by prior management of the Company. None of the
Company's current management was either present for or involved with the actions
that were the basis for the FTC's complaint. The actions of the prior
management involved the presentation of direct mail solicitations. Mr. Crane
has been included in the Stipulated Preliminary Order entered into by the FTC
and the Company and approved by the FTC. The Stipulated Final Judgment and Order
for Permanent Injunction and Other Equitable Relief by and between the FTC, Mr.
Crane, Telco Billing, the Company and others (the "Order") places certain
restrictions on the way mail solicitations will appear. The U.S. District Court
has approved the Order and the matter is closed with no findings of wrong doing
on the part of Mr. Crane, the Company, or its officers and directors.

DANIEL L. COURY, SR. Mr. Coury has served as a director of YP.Net since February
2000. For the last twelve years, Mr. Coury has served as President and Chairman
of Mesa Cold Storage, Ltd., which owns and operates the largest cold storage
facilities in Arizona. Between 1990 and the present, Mr. Coury has developed an
additional 4.6 million cubic feet of modern, state of the art cold storage
facilities in Mesa and Tolleson, Arizona. Before Mr. Coury purchased Mesa Cold
Storage, he had experience in international trade, real estate development, real
estate exchanges and serving as a consultant to the family businesses, which
include five General Motors dealerships, numerous commercial and residential
developments and mortuary services.

PETER BERGMANN. Mr. Bergmann has served as a director of the Company since May
2002. Since January 1999, Mr. Bergmann has served as the President of Perfect
Timing Media, Inc., a television development and production company, which he
founded. From 1994 to 1999, Mr. Bergmann was a member of the faculty at
Fairleigh Dickinson University, where he inaugurated the electronic Filmmaking
and Digital Video Design program, which is a distinctive program in video and
computer-generated graphics technologies offering students an opportunity to
study commerce and art. In 1988, Mr. Bergmann joined Major Arts, Inc., a
division of Paramount Communications, Inc., as the head of its television
division where he was responsible for developing projects for television
production. In 1987, Mr. Bergmann served as the President of Odyssey
Entertainment, Inc. where he engineered the purchase of Coast Productions, Inc.,
which subsequently became Odyssey Filmmakers, Inc. From 1984 through 1987, Mr.
Bergmann served as President of The Film Company, where he had directorial and
production responsibilities for theatrical releases and projects for television.
During the 14 years prior to 1984, Mr. Bergmann was employed in various
capacities by the American Broadcasting Company. These positions

included line producer, division head, and assistant to the President, Executive
Vice President and Special Assistant to the Chairman of the Board. Mr. Bergmann
received his PhD from New York University.

EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

Our management consists of the following personnel, in addition to Angelo Tullo,
our Chief Executive Officer and President and DeVal Johnson, our Secretary, both
of whom are named above as Directors.

NAME AGE POSITION
---- --- --------

David J. Iannini 44 Chief Financial Officer
John Raven 39 Chief Technology Officer

DAVID J. IANNINI. Mr. Iannini has served as our Chief Financial Officer since
August 2002. Mr. Iannini was employed as Treasurer and Vice President of
Corporate Development of Viad Corp, a publicly held company with over $1.5
billion in annual sales and over $7 billion in assets, from July 1999 to June
2002. Viad Corp. is a diversified service business with operating companies
involved in the financial services, convention, travel and other businesses. Mr.
Iannini was an investment banker from August 1986 to July 1999, primarily with
Salomon Brothers, Inc. Mr. Iannini received his Masters in Business
Administration, Summa Cum Laude, from the Anderson Graduate School of Management
at U.C.L.A. Prior to his graduate studies, he worked with a Big Five accounting
firm and is a certified public accountant. Mr. Iannini received his Bachelors of
Science degree, Magna Cum Laude, in Accounting from Boston College in 1981.

JOHN RAVEN. Mr. Raven was appointed Chief Technology Officer for YP.Net, Inc. in
September 2003. Mr. Raven has over ten years experience in the technology arena
and 16 years of overall leadership experience working with companies such as
Perot Systems (PER) where he managed 640 staff members and a $170 million annual
IT budget, Read-Rite Corp (RDRT) where he oversaw a $30 million dollars IT
budget with operations throughout Asia, as well as Cap Gemini Ernst & Young
(CAPMF) where he managed accounts for this division of a Big 5 auditing firm
maintaining $4.8 million in revenue. Mr. Raven also served as Director of
Information Technology at Viacom's ENG Network division. Most recently, as a
member of senior account management for Perot Systems he directed the
development of information security strategy for its client Catholic Healthcare
West. Mr. Raven has experience in software engineering, data and process
architecture, systems development, and database management systems. At NASA's
Jet Propulsion Laboratory, Mr. Raven was a team member and information systems
engineer for the historic 1997 mission to Mars conducted with the Pathfinder
space vehicle and the Sojourner surface rover. Mr. Raven received his Bachelors
of Science in Computer Science from the California Institute of Technology in
1991. His certifications include; Cisco Internetwork Engineer, Project
Management from the Project Management Institute, Certified Project Manager from
Perot Management Methodology Institute, Microsoft Certified System Engineer,
Certified Novel Engineer and others.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
executive officers, directors, and persons who own more than ten percent of a
registered class of our equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors, and greater than ten percent stockholders are
required by SEC regulation to furnish us with copies of all Section 16(a) forms
they file. Based solely on our review of the copies of such forms received by it
during the year ended September 30, 2003, we believe that, during such year our
executive officers, directors and ten percent stockholders complied with all
such filing requirements except that Mr. Bergmann filed a late Form 4 relating
to the purchase of 1,000 shares of the Company's common stock and the receipt of
150,000 shares of restricted stock

pursuant to the 2003 Stock Plan and Mr. Coury filed a late Form 4 relating to
the receipt of 150,000 shares of restricted stock pursuant to the 2003 Stock
Plan. The required filings were eventually filed to reflect these transactions.

CODE OF ETHICS

We have not yet adopted a corporate code of ethics. Our board of directors is
considering, over the next year, establishing a code of ethics to deter
wrongdoing and promote honest and ethical conduct; provide full, fair, accurate,
timely and understandable disclosure in public reports; comply with applicable
laws; ensure prompt internal reporting of code violations; and provide
accountability for adherence to the code

ITEM 10. EXECUTIVE COMPENSATION

Executive Compensation Summary

The following table sets forth the total compensation for the fiscal years ended
September 30, 2003, 2002 and 2001 paid to or accrued for our chief executive
officer and our four other executive officers who provided services to us at
September 30, 2003, excluding executive officers paid less than $100,000
annually. These executive officers are collectively referred to as the "Named
Executive Officers."

LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------

NAME AND PRINCIPAL
------------------ OTHER ANNUAL RESTRICTED STOCK ALL OTHER
POSITION YEAR SALARY ($)(6) BONUS ($) COMPENSATION ($)(7) AWARDS ($)(8) COMPENSATION ($)
-------- ---- ------------- --------- ------------------- ------------- ----------------

Angelo Tullo (1) 2003 612,000 300,000 100,844 303,750 410,054(9)
Chairman, Chief Executive 2002 282,000 208,000 - - -
Officer, President 2001 218,000 48,000 - - -

David J. Iannini (2) 2003 199,808 43,750 - 607,500 -
Chief Financial Officer 2002 11,538 - - - -
2001 - - - - -

DeVal Johnson (3) 2003 269,750 95,000 - 405,000 -
Director, Secretary 2002 125,800 20,000 - - -
and Subsidiary Officer 2001 8,000 5,618 - - -

Gregory Crane (4) 2003 442,000 110,000 - 405,000 -
Director and Subsidiary 2002 249,000 35,000 - - -
Officer 2001 122,000 - - - -

John Raven (5) 2003 8,654 - - 150,000 -
Chief Technology Officer 2002 - - - - -
of Subsidiary 2001 - - - - -
_______________

(1) Mr. Tullo is not directly compensated by the Company. The amounts shown herein as compensation to Mr. Tullo
are the total amounts paid by the Company to Sunbelt Financial Concepts, Inc. ("Sunbelt") for services provided
to the Company by Mr. Tullo and his staff, pursuant to an Executive Consulting Agreement dated September 20,
2002. This agreement replaced a prior agreement between the Company and Sunbelt. These

amounts may not reflect Mr. Tullo's actual compensation from Sunbelt, which may be greater or less than the
amount shown. The amounts set forth under the Bonus column for Mr. Tullo include 200,000 shares of YP.Net
stock valued by the Company at $.24 per share in fiscal 2001 and 4,000,000 shares valued by the Company at
$.075 per share in fiscal 2003 issued to Sunbelt.

(2) The amounts shown herein as compensation to Mr. Iannini are the total amounts paid by the Company either to
Mr. Iannini directly or to Mar & Associates, Inc., an entity owned by Mr. Iannini, ("Mar") for services provided
To the Company pursuant to an Executive Consulting Agreement dated May 1, 2003. These amounts may not reflect Mr.
Iannini's actual compensation from Mar, which may be greater or less than what is shown. The amounts set forth
Under the Bonus column include 50,000 shares of Common Stock valued by the Company at $.075 per share and 250,000
shares of Common Stock valued by the Company at $.10 per share issued to Mr. Iannini in fiscal 2003. Mr. Iannini
joined the Company in August 2002.

(3) Mr. Johnson is not compensated directly by the Company. The amounts shown herein as compensation are the
total amounts paid by the Company to Advanced Internet Marketing, Inc. ("AIM"), for services provided to the
Company by Mr. Johnson and his staff, pursuant to an Executive Consulting Agreement dated September 20, 2002.
These amounts may not reflect Mr. Johnson's actual compensation from AIM, which may be greater or less than what
is shown. The amounts set forth under the Bonus column include 1,000,000 shares of YP.Net stock valued by the
Company at $.075 per share issued to Mr. Johnson in fiscal 2003.

(4) Mr. Crane is not compensated directly by the Company. The amounts shown herein as compensation to Mr. Crane
are the total amounts paid by the Company to Advertising Management and Consulting Services, Inc. ("AMCS") for
services provided to the Company by Mr. Crane and his staff pursuant to an Executive Consulting Agreement dated
September 20, 2002. These amounts may not reflect Mr. Crane's actual compensation from AMCS, which may be greater
or less than what is shown. Mr. Crane is the President of AMCS, which provides marketing and administrative
services and personnel to the Company. The amounts set forth under the Bonus column include 1,000,000 shares of
YP.Net stock valued by the Company at $.075 per share issued to Mr. Crane in fiscal 2003.

(5) Mr. Raven joined the Company in August, 2003. His annual salary is $150,000.

(6) The amounts set forth under the Salary column include base salary paid to the consulting entities with which
the Named Executive Officers are associated, unless otherwise specified. These amounts also include payments
made under the Flex Compensation program pursuant to their Executive Consulting Agreements. The Named Executive
Officers' relationships with these consulting firms and the descriptions of the Executive Consulting Agreements
are more fully discussed under "Certain Relationships and Related Transactions - Agreements with Executive
Officers."

(7) The amounts set forth under this column include reimbursed taxes on bonus and other compensation paid
pursuant to certain Executive Consulting Agreements between the Company and the Named Executive Officer.
Those Executive Consulting Agreements are more fully described at "Certain Relationships and Related
Transactions - Agreements with Executive Officers."

(8) The amounts under the Restricted Stock Awards column include the dollar value of shares of restricted stock
issued to the Named Executive Officers under our 2003 Stock Plan.

(9) This amount reflects the reimbursement of legal fees in connection with a legal matter involving Mr. Tullo
and a former business with which he was involved. This matter has been settled and all claims against Mr.
Tullo in connection with this matter have been dismissed.

COMPENSATION PURSUANT TO STOCK OPTIONS.

No options were granted to any of the Named Executive Officers during the fiscal
year ended September 30, 2003.

During the fiscal year ended September 30, 2003, there were no outstanding stock
options. Also during such fiscal year, no long-term incentive plans or pension
plans were in effect with respect to any of the Company's officers, directors or
employees.

COMPENSATION OF DIRECTORS.

The directors receive $2,000 per meeting or per quarter, whichever is greater,
for their service on the Board and may receive $250 per hour for services
related to any Board Committees, standing, temporary or otherwise, on which they
serve. Upon appointment to the Board, Mr. Tullo was awarded 100,000 shares of
our common stock. All other directors were awarded 50,000 shares upon their
appointment to the Board. The shares awarded were earned monthly for director
services performed.

The Company has an arrangement with one of its outside directors, Mr. Coury,
whereby the Company has agreed to pay $10,000 per month for Board and
Compensation committee services to DLC Consulting, Inc., an entity owned by Mr.
Coury, instead of paying Mr. Coury directly.

In compliance with the new rules implemented by the Sarbanes-Oxley Act of 2002,
the Company has established a hotline in order to receive anonymous calls and
complaints concerning accounting, internal accounting controls, or auditing
matters. Mr. Bergmann receives an additional monthly fee of $3,000 for
monitoring this hotline.

In fiscal 2003, our directors received the following compensation for their
service as directors:

DIRECTOR CASH
-------- ----

Angelo Tullo $ 8,000
DeVal Johnson $ 8,000
Gregory B. Crane $ 8,000
Daniel L. Coury, Sr. $128,000
Peter Bergmann $ 21,000

For information concerning employment contracts involving the Named Executive
Officers See "Item 12 - Certain Relationships and Related Transactions," below

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of
our common stock as of February 1, 2004, with respect to (i) each person known
to the Company to be the beneficial owner of more than 5% of the Company's
common stock; (ii) each Named Executive Officer; (iii) each director of the
Company; and (iv) all Named Executive Officers and directors of the Company as a
group. The information as to beneficial ownership was furnished to us by or on
behalf of the persons named. Unless otherwise indicated, the business address of
each person listed is 4840 East Jasmine Street, Suite 105, Mesa, Arizona 85205.

Shares Percentage of
Name Beneficially Owned Shares Outstanding (1)
---- ------------------ ----------------------

Angelo Tullo (2) 4,325,000 8.9%
Gregory B. Crane (3) 1,277,500 2.6%
DeVal Johnson (4) 1,329,000 2.7%
David J. Iannini (5) 600,000 1.2%
John Raven 100,000 *
Daniel L. Coury, Sr. 200,000 *
Peter Bergmann 201,000 *
Mathew and Markson Ltd. (6) (7) 10,575,062 21.8%
Morris & Miller Ltd. (6) 10,350,000 21.3%
Sunbelt Financial Concepts, Inc. (8)(9) 4,325,000 8.9%

All executive officers and
directors as a group
(7 persons). 7,982,500 16%

* Represents less than one percent (1%) of our issued and outstanding common stock.
_______________

(1) Based on approximately 48,860,802 shares outstanding as of February 1,
2004. This amount includes 2,000,000 shares issued and held as collateral for
obligations of the Company under two promissory notes. Upon timely payment of
the notes, the shares will be returned to the Company for cancellation.

(2) Of the number shown, 3,875,000 shares are owned by Sunbelt Financial
Concepts, Inc., which are also shown separately in this table. While Mr. Tullo
Is the President of Sunbelt, he has no ownership interest in Sunbelt. Mr. Tullo
does, however, have dispositive power over the shares of Common Stock owned by
Sunbelt. Mr. Tullo disclaims beneficial ownership of the shares owned by Sunbelt
except to the extent of any proportionate interest therein.

(3) Of the number shown, 1,000,000 shares are owned by Advertising Management
and Consulting Services, Inc. ("AMCS"). While Mr. Crane is the President of AMCS,
he has no ownership interest in AMCS. As President of AMCS, however, he shares
dispositive power over the stock owned by AMCS. Mr. Crane disclaims beneficial
ownership of the shares owned by AMCS except to the extent of any proportionate
interest therein.

(4) Of the number shown, 1,004,000 shares are owned by Advanced Internet
Marketing, Inc. ("AIM") Mr. Johnson is President of AIM and his minor children
Are the beneficiaries of the trust that owns AIM. Mr. Johnson disclaims beneficial
ownership of the shares owned by AIM except to the extent of any proportionate
interest therein.

(5) Of the number shown, 250,000 shares are owned by Mar & Associates ("Mar").

(6) Address is Woods Centre, Friar's Road, P.O. Box 1407, St. John's, Antigua,
West Indies.

(7) The number of shares held by Mathew and Markson, Ltd. includes 2,000,000
shares issued as collateral for a debt owed by the Company. Mathew and Markson
has voting control of these shares. These shares will be returned to the Company
and cancelled upon timely payment of the debt. Ilse Cooper, is the control person
for Mathew and Markson.

(8) Of the number shown, 3,875,000 are owned by Sunbelt and 450,000 shares are
owned directly by Mr. Tullo. Of the 450,000 shares owned directly by Mr. Tullo,
150,000 shares were granted as restricted stock under our 2003 Stock Plan.
Hickory Management is the owner of Sunbelt and J.C. McDaniel, Esq. is the control
person.

(9) Address is 4710 E. Falcon Drive, #204A, Mesa, Arizona, 85215.

EQUITY COMPENSATION PLAN INFORMATION

We maintain the 2003 Stock Plan pursuant to which we may grant equity awards to
eligible persons. The following table gives information about equity awards
under the Company's Plan.

(a) (b) (c)

Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation
exercise of exercise price of plans (excluding
outstanding options, outstanding options, securities reflected in
-------------
Plan category warrants and rights warrants and rights column (a))
------------- ------------------- ------------------- -----------

Equity
compensation plans
approved by
security holders (1) 2,269,000 (2) N/A 731,000

Equity
compensation plans
not approved by
security holders 0 N/A 0

Total 2,269,000 N/A 731,000

(1) The 2003 Stock Plan was approved by written consent of a majority of the Company's
stockholders on July 21, 2003.

(2) This number represents the number of shares of restricted stock granted to eligible
persons under the Plan.

Our 2003 Stock Plan

During the year ended September 30, 2002, our stockholders approved the 2002
Employees, Officers & Directors Stock Option Plan (the "2002 Plan"), which was
intended to replace our 1998 Stock Option Plan (the "1998 Plan"). The 2002 Plan
was never implemented, however, and no options, shares or any other securities
were issued or granted under the 2002 Plan. There were 3,000,000 shares of our
common stock authorized under the 2002 Plan, which were to come from our
authorized but unissued common stock. On June 30, 2003 and July 21, 2003,
respectively, our Board of Directors and a majority of our stockholders
terminated both the 1998 Plan and the 2002 Plan and approved our 2003 Stock
Plan. The 3,000,000 shares of common stock previously allocated to the 2002 Plan
were re-allocated to the 2003 Plan.

In December, 2003, our Board of Directors approved, subject to stockholder
approval, an amendment to the Plan to increase the aggregate number of shares
available thereunder by 2,000,000 shares in order to have an adequate number of
shares available for future grants. As of February 1, 2004, a total of 2,259,000
shares of restricted stock had been issued under the Plan and were no longer
available for grant, and a total of 741,000 shares remained available for
additional grants, prior to giving effect to the proposed increase. The Board of
Directors believes that

it is in the Company's best interests to be able to continue to create equity
incentives to assist in attracting, retaining, and motivating the key
executives, service providers and consultants.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

AGREEMENTS WITH EXECUTIVE OFFICERS

We have entered into the following Executive Consulting Agreements with entities
controlled or owned by Messrs. Tullo, Crane, Johnson and Iannini. Each of these
agreements is dated as of September 20, 2002 and has a five year term, with the
exception of the agreement entered into with Mar & Associates, Inc., the entity
controlled by Mr. Iannini, which was dated as of May 1, 2003 and has a term of
55 months.

These agreements are not personal service contracts to the respective executive
officers. The amounts paid to these entities support multiple personnel employed
by the consulting entities, as well as costs associated with the provision of
the specified services. The individuals deployed by the consulting entities
include skilled support staff with many years of experience working as a team,
both within their own entities, as well as between entities. The Named Executive
Officers and their respective consulting entities provide a wealth of experience
in turnaround and restructuring situations, as well as solid track records of
operating successful companies. Our Board of Directors believes that these
arrangements are beneficial to the Company and in the best interests of our
stockholders given the breadth of support and depth of knowledge and expertise
that each consulting entity brings to bear through its respective support teams.

Sunbelt Financial Concepts, Inc.

Mr. Tullo, our Chief Executive Officer, is the President of Sunbelt Financial
Concepts, Inc. ("Sunbelt"). The Sunbelt agreement provides that Mr. Tullo,
through Sunbelt, will provide us with the services of Chief Executive Officer,
Chairman and President among other administrative services and personnel.
Pursuant to the Sunbelt agreement, Sunbelt originally received $32,000 per month
during the first year of the agreement with a 10% annual increase in each
succeeding year, as well as Board of Director fees, an annual bonus, and fees
and reimbursements for certain ancillary items. The Sunbelt agreement also
awarded Sunbelt 4,000,000 shares of the Company's common stock, grossed-up for
taxes, subject to achieving certain performance goals for the Company in fiscal
2003, which were achieved.

As part of the Sunbelt agreement, a Flex Compensation program was instituted.
This program provides Sunbelt with the ability to be paid up to $220,000
annually (increased by 10% on each anniversary date of the agreement) as
additional compensation, subject to sufficient cash on hand at the Company. The
taxes on the Flex Compensation, bonus and stock that is not issued under our
2003 Stock Plan are paid by the Company. In addition, the agreement contains a
Due on Sale clause whereby, if there is a change of control of the Company, as
defined, Sunbelt will receive the greater of 30% of the amounts due under the
agreement or 12 months' worth of fees.

In fiscal 2003, Sunbelt was paid approximately $384,000 in fees, $220,000 in
Flex compensation under the Flex Compensation program, $8,000 in director fees
and $300,000 in common stock for services rendered by it through Mr. Tullo and
his support staff. The Company also reimbursed Sunbelt $100,844 for income
taxes pursuant to the agreement.

Sunbelt also was compensated approximately $410,054 in fiscal 2003 as reimbursed
legal fees in connection with certain legal matters involving Mr. Tullo, as more
fully described in our Annual Report accompanying this Proxy Statement.

We have has also entered into an agreement with Sunbelt, dated January 2002,
wherein we lease two vehicles in the Company's name for the benefit of Sunbelt.
Sunbelt pays the lease payments on the vehicles, which are $1,079 and $1,111
respectively. This agreement remains in effect until the conclusion of the
respective leases, which expire in January 2005 and February 2005 respectively.
This arrangement was structured in this manner in an effort to assist the
Company in establishing credit for future equipment purchases.

Advertising Management & Consulting Services, Inc.

Mr. Crane, our Executive Vice President of Marketing, Chief Operating Officer
and a director, is the President of Advertising Management & Consulting
Services, Inc. ("AMCS"). The AMCS agreement provides that Mr. Crane, through
AMCS, will provide the Company with the services of director and Executive Vice
President of Marketing, among other administrative services and personnel.
Under the AMCS agreement, we outsource the design and testing of our many direct
mail pieces to AMCS. As part of the AMCS agreement, AMCS originally received
$32,000 per month with a 10% annual increase in each succeeding year, as well as
Board of Director fees, an annual bonus, and fees and reimbursements for certain
ancillary items. In addition, the AMCS agreement also awarded AMCS with
1,000,000 shares of the Company's common stock, grossed-up for taxes, subject to
achieving certain performance goals for the Company in fiscal 2003, which were
achieved.

As part of the agreement with AMCS, a Flex Compensation program was instituted.
This program provides AMCS with the ability to be paid up to $50,000 per year
(increased by 10% on each anniversary date of the agreement) as additional
compensation, subject to sufficient cash on hand at the Company. The taxes on
the Flex Compensation, bonus and stock that is not issued under our 2003 Stock
Plan are paid by the Company. In addition, the agreement contains a Due on Sale
clause whereby, if there is a change of control of the Company, as defined, AMCS
will receive the greater of 30% of the amounts due under the agreement or 12
months' worth of fees.

In fiscal 2003, AMCS was paid approximately $384,000 in fees, $35,000 as an
annual bonus, $50,000 in Flex compensation under the Flex Compensation program,
$8,000 in directors fees and $75,000 in common stock for services rendered by it
through Mr. Crane and his support staff. AMCS was also granted approximately
$405,000 in restricted stock in fiscal 2003 as additional compensation.

Advanced Internet Marketing, Inc.

Mr. Johnson, our Executive Vice President of Corporate Image, is the President
of Advanced Internet Marketing, Inc. ("AIM"). The AIM agreement provides that
Mr. Johnson, through AIM, will provide the Company with the services of
director, Corporate Secretary and Executive Vice President of Corporate Image,
among other administrative and marketing services and personnel. In addition to
the services discussed above, under the AIM agreement, we also outsource the
design and some of the marketing of our website to AIM. All of these services
are included under the agreement and for the fees described below. As part of
the AIM agreement, AIM originally received $18,000 per month with a 10% annual
increase in each succeeding year, as well as Board of Director fees, an annual
bonus, and fees and reimbursements for certain ancillary items. In addition, the
agreement also awarded AIM with 1,000,000 shares of Company common stock,
grossed-up for taxes, subject to achieving certain performance goals for the
Company in fiscal 2003, which were achieved.

As part of the agreement, a Flex Compensation program was instituted. This
program provides AIM with the ability to be paid up to $30,000 annually
(increased by 10% on each anniversary date of the agreement) as additional
compensation, subject to sufficient cash on hand at the Company. The taxes on
the Flex Compensation, bonus and stock that is not issued under our 2003 Stock
Plan are paid by the Company. In addition, the agreement contains a Due on Sale
clause whereby, if there is a change of control of the Company, as defined, AIM
will receive the greater of 30% of the amounts due under the Agreement or 12
months' worth of fees.

In fiscal 2003, AIM was paid approximately $274,750 in fees, $35,000 as an
annual bonus, $30,000 in Flex compensation under the Flex Compensation program,
$8,000 in directors fees and $75,000 in common stock for services rendered by it
through Mr. Johnson and his support staff. AIM was also granted approximately
$405,000 in restricted stock in fiscal 2003 as additional compensation.

Mar & Associates, Inc.

Mr. Iannini, our Chief Financial Officer, is the President of Mar & Associates,
Inc. ("MAR"). The MAR Agreement provides that Mr. Iannini, through MAR, will
provide the Company with the services of Chief Financial Officer, among other
administrative services. As part of the MAR Agreement, MAR originally received
$17,500 per month with a 10% annual increase in each succeeding year, as well as
fees and reimbursements for certain ancillary items. In addition, the agreement
also awarded MAR with 250,000 shares of Company common stock, grossed-up for
taxes, subject to achieving certain performance goals for the Company by January
1, 2004, which were achieved.

As part of the agreement, a Flex Compensation program was instituted. This
program provides MAR with the ability to be paid up to $15,000 annually
(increased by 10% on each anniversary date of the agreement) as additional
compensation, subject to sufficient cash on hand at the Company. The taxes on
the Flex Compensation, bonus and stock that is not issued under our 2003 Stock
Plan are paid by the Company. In addition, the agreement contains a Due on Sale
clause whereby, if there is a change of control of the Company, as defined, then
MAR will receive the greater of 30% of the amounts due under the agreement or 12
months worth of fees.

The agreement also awards bonuses of $15,000 to MAR relating to performance in
fiscal 2003, $21,000 relating to performance for fiscal 2004, and 10% of annual
salary for each fiscal year thereafter for the term of the agreement.

In fiscal 2003, MAR was paid approximately $199,808 in fees, $15,000 in annual
bonus, $15,000 in Flex compensation under the Flex Compensation program and
$28,750 in common stock for services rendered by Mr. Iannini. MAR was also
granted approximately $607,500 in restricted stock in fiscal 2003 as additional
compensation.

OTHER RELATED TRANSACTIONS

Revolving Loan Agreements with Mathew and Markson Ltd. and Morris & Miller, Ltd.

In December 2003, we entered into an agreement with Mathew and Markson, Ltd. and
Morris & Miller, Ltd. (the "M&Ms"), both Antiguan corporations and, currently,
our two largest stockholders, to terminate the revolving loan agreement
previously provided to them in connection with our original acquisition from
them of Telco Billing.

Messrs. Crane and Johnson were employees of and primarily involved in the
start-up of Telco Billing. Mr. Crane negotiated the acquisition of Telco Billing
by the Company on behalf of the M&Ms and continues to serve as a liaison for the
Company to the M&Ms.

As part of the original acquisition of Telco Billing from the M&Ms, we provided
them with the right to "put" back to us, under certain circumstances, the shares
of Company common stock that they received in exchange for the shares of Telco
Billing. We subsequently entered into a new arrangement with the M&Ms, whereby
their "put" rights were terminated in exchange for the establishment of the
revolving lines of credit. Under these lines of credit, we agreed to lend up to
$10,000,000 to each of the M&Ms, collateralized by the Company stock held by the
M&Ms and subject to certain limitations. All advances made under these lines of
credit carried an interest rate at least 0.25 points higher than the Company's
average cost of borrowing but in no event lower than eight percent.

No more than $1 million could be advanced at any point in time and no advances
could be made unless, after such advance, the Company had at least 30 days
operating cash reserves or if the Company was in an uncured default with any of
its lenders. At September 30, 2003, the Company had advanced an aggregate
$2,126,204 to the M&Ms under this agreement. The M&Ms have been making interest
payments on the advances but, as allowed under the agreement, have not made any
principal repayments.

Under our new agreement with the M&Ms, dated December 22, 2003 and memorialized
in a Third Amendment to the original Stock Purchase Agreement, the revolving
lines of credit are terminated effective April 9, 2004, upon the payment of the
following final specific advances to each of the M&Ms:

Morris & Miller, Ltd.

$275,000 on January 30, 2004
$300,000 on February 27, 2004
$500,000 on March 31, 2004
Sufficient funds to pay 3 years' interest on April 9, 2004

Mathew and Markson, Ltd.

$50,000 on January 30, 2004
$100,000 on February 27, 2004
$75,000 on March 31, 2004
Sufficient funds to pay 3 years' interest on April 9, 2004

Within ten days after April 9, 2004, the M&Ms will prepay all of the interest on
their loans for the next 36 months. We will continue to retain pledged stock as
collateral for the repayment of all such loans, which mature in December 2006.

As part of this new agreement, we have also agreed to pay a quarterly dividend
of not less than $.01 per share to all holders of our Common Stock beginning
April 30, 2004 for the period ended March 31, 2004.

Sale of URL and Lease Arrangements

In connection with the original acquisition of our wholly owned subsidiary,
Telco Billing, from Morris & Miller, Ltd. and Mathew and Markson Ltd., both
Antiguan corporations (the "M&Ms") and, currently, our largest stockholders, the
Company agreed to pay Mathew and Markson $5,000,000 as a discounted accelerated
royalty payment for a 20-year license of the URL "Yellow-Page.Net," which
triggered the sale of this URL. The consideration was rendered under the terms
of an Exclusive Licensing Agreement dated September 21, 1998, between Telco
Billing and Mathew and Markson. The payment was originally to be paid in full
upon the acquisition of Telco Billing. However, the Company was unable to pay
the entire consideration in cash. As a result, the Company instead negotiated to
pay the $5,000,000 due in cash at closing with a $3,000,000 down payment and
also executed a $2,000,000 promissory note (the "Note") to Mathew and Markson,
which was due on August 15, 1999. In addition, as a result of our failure to pay
the entire $5,000,000 in cash at the original closing, we agreed to a $2,000,000
extension fee.

On August 15, 1999, we defaulted on the payment of the Note. To extend this
payment obligation to November 15, 1999, we agreed to provide, for the benefit
of Mathew and Markson, $250,000 in tenant improvements for approximately
one-half of our Mesa facility. The premises were leased to Mathew and Markson
for $1.00 per year throughout the term of the five-year lease. The annual fair
rental value of the lease premises is $4,500 per month.

Business Executive Services, Inc. purchased this lease from Mathew and Markson
for a one-time payment of $75,000.

At the due date of the extension (November 15, 1999), we still had not paid the
Note. Therefore, on November 15, 1999, we further extended the payment of the
Note to January 15, 2000 by paying an extension fee of $200,000. On January 15,
2000, we again defaulted on the extension and the Note was renegotiated to a
demand note with monthly installments of $100,000 per month. Under the terms of
the renegotiated Note, the payments may have been suspended if we had did not
have certain cash reserves or were otherwise in default under other obligations.
The renegotiated Note was secured by 2,000,000 shares of our common stock held
in escrow, to be returned for cancellation upon payment of the Note. The Note
has been paid in full but the collateral shares are still held by Mathew and
Markson to secure payment of the penalty fee discussed below.

In July 2001, we were informed by Mathew and Markson that an additional
$2,000,000 penalty fee was due on the original acquisition agreement as a result
of the Company's failure to pay the entire $5,000,000 due in cash at the
original closing. On September 25, 2001, in settlement thereof, we agreed to pay
Mathew and Markson $550,000 and issued to Mathew and Markson 4,000,000 shares of
our common stock valued at $0.09. The $550,000 is to be paid over a 36-month
period at an annual interest rate of 10.5%. The balance as of September 30, 2002
was $115,868 due and payable September 25, 2004.

Simple.Net.

We previously used Dial-Up Services, Inc., d/b/a Simple.Net, Inc., an Internet
service provider beneficially owned by DeVal Johnson, our Executive Vice
President of Corporate Image and a director, to provide Internet dial up
services and other services to our customers. These services included customer
service support for Simple.Net's customers and technology support and billing
assistance. At the time our agreement with Simple.Net was entered into, this was
beneficial to us because we did not have sufficient dial-up customers to avoid a
minimum fee to the backbone providers, which are companies that own the cable
and copper wire cables necessary to provide the service. As our customer base
has grown, we are now able to economically enter into our own wholesale contract
and in fact have done so with GlobalPOPs, Inc., an unrelated third party.

On December 29, 2003, we entered into a separation agreement with Simple.Net,
which becomes effective January 31, 2004. Under this agreement, Simple.Net will
no longer provide any services to us. Although the Separation Agreement provides
for a 30-day extension until March 2, 2004, neither Simple.Net nor we believe
that this time period will be needed.

RELATED PARTY TRANSACTION POLICY.

Our general policy requires adherence to Nevada corporate law regarding
transactions between the Company and a director, officer or affiliate of the
Company. Transactions in which such persons have a financial interest are not
void or voidable if the interest is disclosed and approved by disinterested
directors or stockholders or if the transaction is otherwise fair to the
Company. It is the policy of the Company that transactions with related parties
are conducted on terms no less favorable to the Company than if they were
conducted with unaffiliated third parties. During the fiscal year ended
September 30, 2003, there have been no related party transactions except as
shown above.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits are either attached hereto or incorporated herein by
reference as indicated:

Exhibit Description
------- -----------
Number
------

31 Certification pursuant to SEC Release No. 33-8238, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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.

YP.NET, INC.

Dated: January 30, 2004 /s/ Angelo Tullo
-----------------------------------------------
Angelo Tullo, Chairman of the Board and Chief
Executive Officer (Principal Executive Officer)

Dated: January 30, 2004 /s/ David Iannini
-----------------------------------------------
Chief Financial Officer
(Principal Accounting Officer)