GROUP LONG DISTANCE INC, 10KSB, 2000-01-27

GROUP LONG DISTANCE INC
10KSB, 2000-01-27
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-KSB
(Mark One)

|X| ANNUAL REPORT UNDER SECTION 13 OR 14(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]

For the fiscal year ended April 30, 1999
OR

|_| TRANSITION REPORT UNDER SECTION 13 OR 15(b) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED].

For the transition period from __________ to __________

Commission file number 0-21913 GROUP

GROUP LONG DISTANCE, INC.
(Name of Small Business Issuer in Its Charter)
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Florida 65-0213198
(State or Other Jurisdiction of Incorporation or Organization) (IRS Employer Identification No.)
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6600 N. Andrews Avenue, Suite 140,
Fort Lauderdale, FL 33309
(Address of Principal Executive Offices)

(954) 771-9696
(Issuer's Telephone Number, Including Area Code)

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

Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Stock, no par value Pink Sheets
Redeemable Warrants No market at present

Securities registered pursuant to Section 12(g) of the Act: None

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 past 90 days. Yes |_| No |X|

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. |_|

Revenues for the fiscal year ended April 30, 1999 were $22,837,340.

The aggregate market value of voting stock held by non-affiliates as of January
24, 2000 was $1,108,619.

The number of shares of Common Stock, no par value, outstanding as of January
24, 2000 was 3,500,402.

The number of Redeemable Warrants outstanding as of January 24, 2000 was
1,437,500.

Transitional Small Business Disclosure Format (check one.): Yes |_| No |X|

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TABLE OF CONTENTS
Page
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Item 1. Description of Business..................................................................1
The Company..............................................................................1
Marketing and Sales......................................................................2
Services and Products....................................................................3
Acquisitions.............................................................................3
Delisting of Securities..................................................................5
Attempted Sale of the Company............................................................5
Industry Background and Government Regulation............................................6
Competition..............................................................................8
Subsequent Events........................................................................9
Employees...............................................................................11

Item 2. Description of Property.................................................................11

Item 3. Legal Proceedings.......................................................................11

Item 4. Submission of Matters to a Vote of Securities Holders...................................13

Item 5. Market for Common Equity and Related Stockholder Matters................................13

Item 6. Management's Discussion and Analysis....................................................14
Overview................................................................................14
Acquisitions............................................................................16
Results of Operations...................................................................17
Liquidity and Capital Resources.........................................................20
Effects of Inflation....................................................................23
Legal Proceedings.......................................................................24
Recent Accounting Pronouncements........................................................24
Subsequent Events.......................................................................24
Factors That Could Affect Operating Results.............................................26

Item 7. Financial Statements....................................................................28

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure....................................................................28

Item 9. Directors and Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.......................................28

Item 10. Executive Compensation..................................................................30

Item 11. Security Ownership of Certain Beneficial Owners and Management..........................34

Item 12. Certain Relationships and Related Transactions..........................................35

Item 13. Exhibits, List and Reports on Form 8-K..................................................37

Signature Page.........................................................................................39

Reports of Independent Public Accountants.............................................................F-1

Financial Statements..................................................................................F-2
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This Annual Report on Form 10-KSB contains forward-looking statements.
Additional written and oral forward-looking statements may be made by the
Company from time to time in Securities and Exchange Commission ("SEC") filings
and otherwise. The Company cautions readers that results predicted by
forward-looking statements, including, without limitation, those relating to the
Company's future business prospects, revenues, working capital, liquidity,
capital needs, interest costs, and income are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
indicated in the forward-looking statements due to risks and factors identified
from time to time in the Company's filings with the SEC including those
discussed in this Report.

PART I

Item 1. Description of Business

The Company

Group Long Distance, Inc. (the "Company") is a non-facilities-based
reseller of long distance telecommunications services to small and medium-sized
commercial customers and residential subscribers. The Company utilizes special
network service contracts through major national long-distance
telecommunications carriers to provide its customers with products and services
which include basic "1 plus" and "800" long distance services. The Company was
incorporated under the laws of Florida in September 1995 by ITC Integrated
System, Inc. ("ITC"), an unaffiliated third party, under the name Second ITC
Corporation ("Second ITC") as the successor to the business of Group Long
Distance, Inc. ("GLD"), which was incorporated under the laws of Florida in July
1990. In November 1995, GLD was merged into Second ITC and Second ITC
simultaneously changed its name to Group Long Distance, Inc. Unless otherwise
indicated, all references to the Company include GLD, the Company's predecessor,
and the Company's wholly owned subsidiaries. These subsidiaries include Eastern
Telecommunications Incorporated, Adventures-in-Telecom and Gulf Communications
Services, Inc.

For the fiscal years ended April 30, 1999, 1998 and 1997, the Company's
annual revenues were $22.8 million, $54.3 million, and $23.4 million,
respectively. The Company's revenues are currently solely derived from calls
routed through TALK.com, Inc. ("TALK"), formerly Tel-Save, Inc., a nationwide
provider of telecommunications services. Revenues derived from TALK represented
96% and 74% of total revenues for the fiscal years ended April 30, 1998, and
1997, respectively.

As a non-facilities based reseller of long distance telecommunications
services, the Company utilizes service contracts to provide its customers with
switched, dedicated and private line services to long distance
telecommunications networks. The Company does not own or operate any primary
transmission facilities. All of the Company's products and services are
currently provided for by long distance carriers and regional and local
telephone companies. The Company has entered into agreements with TALK to
purchase long distance telephone service at discounted bulk rates. The Company
then resells these discounted services to customers, at rates lower than rates
the Company's customers are able to obtain for themselves due to small call
volume. The Company then provisions the customer onto the carriers' networks,
which provide the actual transmission service. The Company does not own or lease
any telephone equipment at the customer's premises, nor does it provide
telephone cabling or installation services. The customer still maintains its own
existing telephone numbers, and all changes in service are done by the local or
interexchange carriers. The customers

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incur no expense in making the decision to switch to the service of the Company.

The Company's agreements with TALK provided that the Company maintain
certain monthly revenues (as defined in the agreements) to the carrier for
services provided under the agreements during stated periods. For the fiscal
year ended April 30, 1999, the Company had an exposure for a monthly commitment
for such revenues of $3,000,000 (aggregate commitment of $36,000,000). For the
fiscal year ended April 30, 1998, the Company had an exposure for a monthly
commitment for such revenues of $100,000 for the first six months and $3,000,000
for the last six months (aggregate of $18,600,000). The Company had previously
reported in its 10-KSB for the year ended April 30, 1998 and 10-QSBs dated July
31,1998, October 31, 1998 and January 31, 1999 and in certain press releases,
that the exposure for the 1998 commitment was $36,000,000 in the aggregate, when
infact it should have been reported as $18,600,000. For the fiscal year ended
April 30, 1999, based on a settlement agreement ("TALK Agreement") with TALK on
December 8, 1999, the Company agreed to pay $1.1 million to resolve the
shortfall charge and as part of the TALK Agreement, TALK agreed to release
approximately $2.9 million dollars of cash to the Company that was held under a
lockbox arrangement, and release all receivables that were secured pursuant to
the Partition Agreement, and that all future minimum monthly volume commitments
were waived by TALK. In addition, the TALK Agreement provides for an extension
of the current carrier agreement until the later of August 31, 2002, and the
date that all obligations to TALK have been satisfied in full, and the exchange
of mutual releases.

The Company's customers historically have been located principally in
the Southeastern United States. As a result of its marketing efforts and
acquisitions, however, the Company was able to expand its geographical market to
include all of the United States, except Alaska. The Company historically
targeted customers whose telecommunications usage needs generally do not qualify
for major carriers' volume discounts or for the level of support services made
available to higher volume users.

Marketing and Sales

The Company formerly marketed its services and products through two
distinct channels of distribution: independent telemarketing and independent
agents. Historically, the Company has also utilized field service personnel, and
distributors in its marketing efforts, and has sold certain of its
telecommunications services on a wholesale basis to smaller resellers.

As a result of the economic efficiencies afforded by using independent
telemarketers, the Company had significantly increased its use of telemarketers
during the fiscal 1998 year. In June 1997, the Company began a telemarketing
campaign to promote its long distance services to small and medium sized
businesses throughout the United States. The telemarketing campaign was
curtailed at the end of October 1997. During the first quarter of the fiscal
year ending April 30, 1999, the Company entered into a new marketing campaign to
sign up customers using independent agents, aligned with affinity based
marketing programs. This campaign was discontinued during the second quarter of
the fiscal year ending April 30, 1999. The Company is no longer conducting, nor
does it have any plans to conduct any marketing campaigns to attract new
customers, since the Company has determined that it is currently unable to both
procure new customers, and achieve positive earnings after amortization of
acquisition costs for these new customers. This is due to the competitive
advantage held by facilities based carriers and Internet marketing enterprises.
Many of these services and products are marketed by

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companies, which are well established, have reputations for success in the
development and sale of services and products and have significantly greater
financial, marketing, distribution, personnel and other resources than the
Company. These resources permit such companies to implement extensive
advertising and promotional campaigns, both generally and in response to efforts
by additional competitors to enter into new markets and introduce new services
and products. Certain of these competitors, including AT&T, MCI/WorldCom and
Sprint, dominate the industry and have the financial resources to enable them to
withstand substantial price competition which has continued to increase.

Services and Products

The Company's principal services which have historically accounted for
all of the Company's revenues, are its basic "1 plus" and "800" long distance
services that the Company currently provides in forty-nine states.

The Company had applied to various state regulatory authorities for
permission to offer local or intrastate telecommunication services. To date, the
Company has not entered into any interconnection agreements with any Local
Exchange Carrier to resell local service in any state. The Company has no
current intentions to provide local service in any state.

The Company has historically experienced delays in provisioning
(activating new customers) by its carriers. In an effort to improve provisioning
efficiencies, beginning in the fourth quarter of its 1997 fiscal year, new
customers of domestic switched, basic "1 plus" and "800" services have been
provisioned through TALK's own nationwide telecommunications network, One Better
Net ("TALK's OBN"). This network enables the Company to provide the quality of
AT&T (now Lucent Technologies, Inc.) switches and AT&T-provided transmission
facilities and billing services.

In a further effort to improve efficiencies, the Company commenced "LEC
billing" arrangements with the Regional Bell Operating Companies and local
exchange carriers ("LEC") during the second quarter of fiscal year 1998. These
LEC billing arrangements have improved billing efficiencies, increased
collections and assisted in lowering customer attrition, however, there can be
no assurance that such efficiencies will improve or collections and customer
retention will continue in the future.

Acquisitions

The Company operates in a highly fragmented segment of the
telecommunications industry and historically expanded its operations through the
acquisition of customer bases. The Company has no plans, agreements,
commitments, understandings or arrangements with respect to any acquisition. For
the four-year period ended April 30, 1999, the Company made the following
acquisitions:

In August 1997, the Company acquired Eastern Telecommunications
Incorporated ("ETI") which consisted of a customer base with monthly revenues
exceeding $100,000 and two warrants to purchase 1,347,000 shares of TALK common
stock, at $4.08 per share (the "Warrants"). The $8.313 million purchase price
for ETI consisted of two $3.5 million notes, and the assumption of

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approximately $1.2 million of certain of ETI's liabilities and the payment of
closing costs in the amount of $113,000. On August 11, 1997, the Company
exercised one of the Warrants and purchased 600,000 shares of common stock of
TALK at the aggregate exercise price of $2,448,000. In October 1997, the Company
exercised the remaining Warrant for $747,000 and sold the TALK common stock for
approximately $26.6 million with a gain on sale of approximately $13.4 million.

Proceeds from the sale of the TALK shares were used to retire the
aggregate principal amount of $7,000,000 in notes (plus accrued interest) due in
connection with the ETI acquisition, together with certain related closing
costs. The balance of the proceeds from the sale of the TALK shares was used to
pay down debt and accounts payable owed to TALK, including payment of the
balance of the loan outstanding to TALK in connection with the July 1996
acquisition of all of the common stock of Adventures-in-Telecom ("AIT") and
marketing expenses incurred in connection with the Company's telemarketing
efforts during the first half of fiscal year 1998.

In January 1997, the Company purchased from Great Lakes
Telecommunications Corp. ("Great Lakes") (i) a customer base consisting of
approximately 7,000 customers that were subject to an agreement between Great
Lakes and TALK and (ii) a warrant to purchase 200,000 shares of common stock of
TALK in consideration of $1,200,000 in cash. In connection with the acquisition,
the Company borrowed $1,200,000 from TALK. In January 1997, TALK repurchased the
warrant from the Company in consideration of $1,800,000 and credited the Company
with such amount ($1,200,000 to repay the loan made in January 1997 and $600,000
to reduce the outstanding principal balance under the Acquisition Loan,
described below).

In July 1996, the Company acquired all of the issued and outstanding
capital stock of AIT, a non-facilities based reseller of long distance
communications services. The purchase price was comprised of $5,271,230 in cash
and 200,000 restricted shares of Common Stock of the Company. AIT consisted of a
customer base of 30,000 small businesses. In December 1996, the Company agreed
with the former shareholders of AIT to cancel 45,000 of the 50,000 shares that
were subject to certain holdback provisions, in settlement of certain claims by
the Company against the AIT shareholders. In July 1996, in connection with the
AIT acquisition, the Company entered into an agreement with TALK pursuant to
which it borrowed an aggregate of $5,521,230, primarily to finance the purchase
price of the acquisition (the "Acquisition Loan"). As amended, the loan
agreement provides for the repayment of the Acquisition Loan in monthly payments
of $125,000 plus interest beginning after September 1997. To induce TALK to
provide the financing for the purchase of AIT, the Company issued a warrant to
purchase 300,000 shares of Common Stock of the Company at $5.75 per share and a
warrant to purchase 50,000 shares of Common Stock of the Company at $5.00 per
share. In June 1997, these warrants were returned to the Company from TALK for
no consideration.

In May 1996, the Company acquired all of the issued and outstanding
capital stock of Gulf Communications Services, Inc. ("Gulf") in consideration of
$25,000 in cash and the assumption of a promissory note in the principal amount
of $182,000. The note was payable in equal monthly installments of $10,000 and
was repaid in full in May 1998. The acquired company operated switching
equipment, which allowed it to act as an international call back and call
through provider, and offered prepaid calling cards. Its customer base included
approximately 200 commercial customers. This business was discontinued in July
1997.

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Delisting of Securities

On September 3, 1998, the Nasdaq Stock Market ("Nasdaq") notified the
Company of its intention to delist the Common Stock and Redeemable Warrants of
the Company at the close of business on September 10, 1998, for the Company's
failure to be in compliance with the maintenance requirements. The Company was
also notified by the Boston Stock Exchange on September 4, 1998 that the Company
was no longer in compliance with the minimum shareholders' equity requirements
of this exchange. The Company was then notified that it had been delisted by the
Boston Stock Exchange on October 30, 1998, a decision the Company did not
appeal. The Company attended an oral hearing in Washington, DC to appeal the
decision by Nasdaq on October 30, 1998 and the Company's application for a
hearing resulted in an automatic stay in the delisting process. On December 2,
1998, the Company was notified by Nasdaq, that they had decided to delist the
Company's securities from the Nasdaq Stock Market effective close of business on
December 2, 1998. The Company appealed this decision, which did not result in an
additional stay, and the Nasdaq decision was affirmed. The Company's Common
Stock was traded on the OTC Bulletin Board from December 3,1998 until December
2, 1999 before being taken off for failing to fulfill all reporting
requirements, pursuant to the Exchange Act of 1934, as amended. The Company
anticipates filing its outstanding Quarterly Reports for the first and second
quarters of fiscal year 2000 and holding the Annual Shareholders Meeting in the
first quarter of calendar year 2000. The Company's Common Stock is currently
traded on the pink sheets and the redeemable warrants while quoted on the pink
sheets are not traded. The Company anticipates re-applying to trade on the OTC
Bulletin Board once all the reporting forms have been filed.

On December 3, 1998 the Company filed a Form 8-K with the Securities and
Exchange Commission in connection with the delisting from Nasdaq.

Attempted Sale of the Company

On November 12, 1998, the Company and STAR Telecommunications, Inc.
("STAR") executed a Letter of Intent, which provided, amongst other things, for
the acquisition by STAR of all or substantially all of the outstanding
securities of the Company at a purchase price of $3,700,000, plus an amount
equal to 85 percent of the Company's accounts receivable, net of billing costs,
aged less than sixty days, less certain liabilities and/or payables
(approximately $1.2 million). The transaction was also subject to approval by
both the Company and STAR's board of directors. In December 1998, the Letter of
Intent expired and no further discussions have taken place.

On November 17, 1998, the Company filed a Form 8-K with the Securities
Exchange Commission in connection with the STAR Letter of Intent to acquire the
Company.

In July 1998, the Company engaged Gerard Klauer Mattison & Co., Inc. to
act as its financial advisor in exploring its strategic options including the
potential sale of the Company. On January 23, 1999 the agreement expired between
the Company and Gerard Klauer Mattison & Co., Inc.

The Company continues to explore strategic opportunities, partnerships and
business combinations. Certain of these options could involve the Company
selling all or substantially all of its assets or capital stock. The Company has
no current understandings, talks or agreements to sell all or any part of the
Company.

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In the event management decides to pursue a sale of the Company, the
Company cannot at this time assess the likelihood that a sale of the Company
will occur or predict what the terms of such sale, if any, might be.

Industry Background and Government Regulation

The Company's telecommunications services are subject to government
regulation. Federal law regulates domestic interstate and international
telecommunications, and state law regulates telecommunications that originate
and terminate within the same state.

The telecommunications industry's structure has until recently been
formed by a 1982 court decree (the "Consent Decree") between AT&T and the United
States Department of Justice which required the divestiture by AT&T of its Bell
operating companies and divided the country into 201 Local Areas and Transport
Areas ("LATAs"). The 22 Bell operating companies, which were combined into seven
Regional Bell Operating Companies ("RBOCs"), were allowed to provide local
telephone service, local access service to long distance carriers and service
within LATAs ("intraLATA service"). However, the right to provide service
between LATAs ("InterLATA service") was restricted to AT&T and other long
distance carriers.

To encourage competition in the long distance market, the Consent
Decree and certain FCC regulations require most RBOCs and other local exchange
carriers ("LECs") to provide access to local exchange services that is "equal in
type, quality and price" to that provided to AT&T and with the opportunity to be
selected by customers as their preferred long distance carrier. These "equal
access" provisions are intended to prevent preferential treatment of AT&T by
LECs and, with other regulatory, judicial and technological factors, have helped
smaller companies to become competitive alternatives to AT&T, MCI/WorldCom
("MCI") and Sprint Corporation ("Sprint") for long distance services. Recently,
Bell Atlantic, a RBOC, has received permission from the FCC to begin offering
long distance service in the New York area.

The long distance industry has been significantly altered by two
regulatory enactments. First, in October 1995, the FCC terminated AT&T's
previous price cap regulations regarding service to residences and small
businesses and now allows AT&T to file effective rate schedules on one day's
notice, thereby limiting competitors' previous ability to protest such tariffs.
These changes give AT&T increased flexibility that may permit it to compete more
effectively with smaller long distance service providers, such as the Company,
particularly in regard to the small business customers which compose the vast
majority of the Company's customer base. Second, on February 8, 1996, the
President signed the Telecommunications Act of 1996, designed to introduce more
competition into U.S. telecommunications markets. This Act increases the
potential for competition in both the long distance services market, by removing
the prohibitions against RBOCs providing long distance services, and in the
local services market by requiring LECs to permit interconnection to their
networks, thus allowing long distance and regional carriers to compete in local
markets. Due to these changes, the Company may be forced to compete with both
RBOCs and long distance carriers to a greater degree than in the past.

In the wake of widespread adverse publicity, federal and state
regulatory authorities have

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introduced more stringent rules governing changes in long distance
telecommunication service providers. These new rules are a result of increased
consumer complaints throughout the industry regarding "slamming" (the
unauthorized switching of a customer's preselected telecommunication provider)
and "cramming" (the unauthorized billing of additional telecommunication
services not requested by the customer). In addition, both the Senate and
Congress have passed legislation that would significantly increase the penalties
and fines that are levied against telephone service providers for "slamming" and
"cramming." Such rules may inhibit the ability of the Company to grow its
business. The Company may be required to submit to more vigorous screening of
customers before switching their long distance service, which may make customers
less likely to change carriers.

The telephone service providers themselves are taking action against
those resellers of their services whom knowingly and intentionally perpetrate
these illegal actions. Several states are requiring that each carrier assign to
an individual reseller its own Carrier Identification Code ("CIC") thereby
making the reseller rather than the long distance carrier responsible for any
illegal changes in service provider. Most local exchange carriers, through which
any changes in service must be initiated, have actively pushed a preferred
presubscribed interexchange carrier ("PIC") freeze on all changes of a long
distance carrier. This PIC freeze would now require the consumer to directly
contact and authorize the local exchange carrier to change its distance carrier
before any switch in carrier is made.

Any changes in the regulations may have detrimental effect on the
Company's ability to attract new customers, since these new PIC freeze
regulations have the effect of locking customers into their existing long
distance service provider.

Federal Regulation. International non-dominant carriers must maintain
tariffs on file with the FCC. The tariffs of non-dominant carriers, such as the
Company, are presumed lawful and are seldom contested, although those tariffs
and the rates and charges they specify are subject to FCC review.

In October 1996, the FCC adopted an order that required nondominant,
interstate, interexchange carriers, such as the Company, to withdraw their
tariffs, insofar as such tariffs apply to interstate services (the "Detariffing
Order"). Recently, the United States Court of Appeals for the District of
Columbia Circuit granted motions for stay of the Detariffing Order, pending
judicial review. According to an FCC Public Notice, the result of this stay is
that the tariffing rules in place prior to the effectiveness of the Detariffing
Order are in effect, and nondominant carriers providing interstate, domestic
interexchange services continue to be required to file tariffs pursuant to the
FCC's Rules.

Among domestic local carriers, only the current LECs are presently
classified by the FCC as dominant carriers for the provision of interstate
access services. This means that the FCC regulates many of the LECs' rates,
charges and services to a larger degree than the Company's. The FCC's regulation
of LECs is expected to decrease over time, especially given the 1996
Telecommunications Act. The FCC has proposed that RBOCs that provide
out-of-region long distance services be regulated as non-dominant carriers.

RBOC entry into the long distance market may mean that the Company will
be faced with new competition from well-entrenched, well-capitalized and
marketable companies, that consumers have had prior dealings with for local
access service. This may allow these RBOCs due to their name

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recognition and established service practices to have a significant advantage in
their ability to attract long distance customers and to offer long distance
service as an adjunct to local service access.

However, the entry of a RBOC into the long distance telecommunication
market is dependent on the RBOC fully opening its local exchange market to
outside competitors and primarily the long distance carriers. To date no RBOC
has been successful in its bid to offer long distance service as long as they
fail to satisfactorily open their local exchange market. This situation may
change in the near future and the Company will be faced with further competition
for customers.

State Regulation. The intrastate long distance operations of the
Company are also subject to various state law and regulations, including prior
certification, notification and registration requirements. The vast majority of
states require the Company to apply for certification to provide intrastate
telecommunications services, or at least to register or be found exempt from
regulation, before commencing intrastate services. Most states also require the
Company to file and maintain detailed tariffs listing their rates for intrastate
service. Many states also impose various reporting requirements and/or require
prior approval for transfers of control of certified carriers, assignment of
carrier assets, including customer bases, carrier stock offerings and incurrence
by carriers of significant debt obligations. Certificates of authority can
generally be conditioned, modified, canceled, terminated or revoked by state
regulatory authorities for failure to comply with state law and/or the rules,
regulations and policies of the state regulatory authorities. Fines and other
penalties may also be imposed for such violations.

The Company provides interstate and international long distance service
in all or some portions of 49 states for which the Company has filed a tariff
with the FCC. The Company is authorized, pursuant to state regulations,
certifications, tariffs or notifications or on an unregulated basis, to provide
intrastate service to all of the United States, except Alaska.

Competition

The Company faces intense competition in the marketing and sale of its
services and products. Many of these services and products are marketed by
companies, which are well established, have reputations for success in the
development and sale of services and products and have significantly greater
financial, marketing, distribution, personnel and other resources than the
Company. This competition is increased as a result of the fact that the Company
has not engaged in any marketing activities since the second quarter of fiscal
year 1999, and has no plans or arrangements to engage in any marketing
activities. These resources permit such companies to implement extensive
advertising and promotional campaigns, both generally and in response to efforts
by additional competitors to enter into new markets and introduce new services
and products. This is due to the competitive advantage held by facilities based
carriers and Internet marketing enterprises. Certain of these competitors,
including AT&T, MCI/WorldCom and Sprint, dominate the industry and have the
financial resources to enable them to withstand substantial price competition
which has continued to increase. These and other large telephone companies have
also entered or have announced their intention to enter into the prepaid phone
card and Internet segments of the telecommunications industry. Because the
reseller segment of the telecommunications industry has no substantial barriers
to entry, competition from smaller resellers in the Company's target markets is
also expected to continue to increase significantly.

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The markets for telecommunications services and products are also characterized
by rapidly changing technology and evolving industry standards, often resulting
in product obsolescence or short product life cycles. The proliferation of new
telecommunications technologies, including personal communication services,
cellular telephone services and products and prepaid phone cards employing
alternative "smart" card technologies, may reduce demand for traditional
land-line long distance telephone services generally and the Company's services
in particular. The Company's success will depend on the Company's ability to
anticipate and respond to these and other factors affecting the industry,
including changes in customer preferences, business and demographic trends,
unfavorable general economic conditions and discount pricing strategies by
competitors.

Regulatory changes may also result in significantly increased
competition. In October 1995, the FCC terminated AT&T's designation as a
dominant carrier, which made it easier for AT&T to compete directly with the
Company for low volume commercial long distance customers. Also, the 1996
Telecommunications Act is designed to introduce increased competition in
domestic telecommunications markets by facilitating the entry of any entity
(including cable television companies and utilities) into both the long distance
and local telecommunications markets. Consequently, this act increases the
potential for increased competition by permitting long distance and regional
carriers in local markets and the well-capitalized RBOCs and local exchange
carriers in long distance markets.

Recently, Bell Atlantic, a RBOC, has received permission from the FCC
to begin offering long distance service in the New York area.

Subsequent Events

Effective December 21, 1999, the Company appointed Mr. Jack Kanfer as a
Director of the Company. Since 1987, Mr. Kanfer has been CEO and Director of
Telecom Consulting Group and B&D Telecom Corp., both privately held
telecommunication companies located in Pompano Beach, Florida. From 1976 to
1987, Mr. Kanfer was a consultant specializing in turnarounds, mergers and
acquisitions. Prior to 1976, Mr. Kanfer was a Senior Vice President of SCA
Services a New York Stock Exchange listed company that was acquired by Waste
Management.

On December 8th, 1999, based on a settlement agreement ("TALK
Agreement") with TALK, the Company agreed to pay $1.1 million to resolve the
shortfall charge and as part of the TALK Agreement, TALK agreed to release
approximately $2.9 million dollars of cash to the Company that was held under a
lockbox arrangement, and the release of all receivables that were secured
pursuant to the Partition Agreement, and that all future minimum monthly volume
commitments were waived by TALK. In addition, the TALK Agreement provides for an
extension of the current carrier agreement until the later of August 31, 2002,
and the date that all obligations to TALK have been satisfied in full, and the
exchange of mutual releases.

On November 18, 1999, Mr. Sam Hitner was confirmed as Chief Financial
Officer of the Company by the Company's Board of Directors. Mr. Hitner had been
appointed Acting Chief Financial

9
<PAGE>

Officer of the Company on September 11, 1999, following the resignation of Mr.
Peter Russo.

On October 13, 1999, Mr. Gerald M. Dunne, Jr. ("Dunne") resigned as
President, Chief Executive Officer and a Director of the Company and it
subsidiaries. On October 13, 1999, Mr. Glenn Koach, Vice President of the
Company was appointed as President assuming the responsibilities of Mr. Dunne in
such capacity. On August 1, 1999, Mr. Koach, a former director of the Company
had rejoined the Company as Executive Vice-President and on September 11, 1999
had been named a director of the Company, filling a void created by the
resignation of Mr. Peter J. Russo.

In connection with Dunne's resignation, on October 13, 1999, the
Company and Dunne entered into a Separation Agreement (the "Separation
Agreement") pursuant to which the Company agreed to pay Dunne severance pay of
$190,000, less all applicable employment withholding taxes. The remaining
$133,000, is to be paid by the Company in such amounts, to such parties, at such
dates and upon the satisfaction of certain conditions as set forth in the
Separation Agreement. Pursuant to the Separation Agreement, Dunne is also
subject to confidentiality and non-compete provisions. Pursuant to the
Separation Agreement, Dunne is also to receive (1) health insurance benefits for
two years, (2) coverage under the Company's Directors and Officers insurance
policy for two years and (3) a car allowance for one year effective September 1,
1999. Pursuant to the Separation Agreement, Dunne and the Company have also
released each other against any and all claims that either may have against each
other in connection with Dunne's employment by the Company. As at January 24,
2000 the Company has paid out $184,468 pursuant to the Separation Agreement.

Pursuant to the Separation Agreement, the Company may engage Dunne as a
consultant from time to time and Dunne will be compensated at the rate of $250
per hour for such services. As at January 24, 2000 the Company had paid out $500
to Mr. Dunne as consultant.

On September 11, 1999, Mr. Peter J. Russo resigned as Chief Financial
Officer and a Director of the Company and each of its subsidiaries. Effective on
September 11, 1999, Mr. Sam Hitner, Controller of the Company, was appointed
Acting Chief Financial Officer of the Company, assuming the responsibilities of
Mr. Russo in such capacity

On September 11, 1999 the Company and Mr. Russo entered into a
Separation Agreement (the "Russo Separation Agreement") pursuant to which the
Company agreed to pay to Mr. Russo severance pay of $120,000, $60,000 of which
was paid on September 11, 1999 and $60,000 of which is payable in $10,000
monthly payments thereafter from an escrow account established by the Company in
connection with the Separation Agreement. Pursuant to the Russo Separation
Agreement, Russo has agreed not to compete with the Company and to maintain the
confidentiality of certain information involving the Company. Russo has agreed
to pay the Company any amount that may be due to Russo by an acquirer of the
Company to offset payments made to Russo under the Russo Separation Agreement.
Russo and the Company have also released each other against any and all claims
that either may have against the other in connection with Russo's employment
with the Company. The Separation Agreement also provides that the Company shall
maintain its director and officer insurance policy with benefits provided
currently under its policy for a two-year period from the date of this
Agreement, with an additional three-year period thereafter, as long as it is
commercially reasonable. As at January 24, 2000, the Company had paid $100,000
pursuant to the Separation Agreement.

10
<PAGE>

On September 11, 1999 the Company entered into a Consulting Agreement
with Torbay Management Services, Inc., a corporation controlled by Mr. Peter J.
Russo ("Torbay"), pursuant to which Torbay will provide consulting services to
the Company. Torbay will receive a monthly consulting fee of $6,000 for the
four-month term of the agreement. The Company may extend the term for an
additional two months, resulting in an additional $6,000 in monthly consulting
fees. The Company can offset payments due to Torbay by any amount received by
Russo by an acquirer of the Company that are in excess of the amount due to
Russo under the Separation Agreement. As at January 24, 2000, the Company had
paid Torbay $24,000 in consulting fees. The Consulting Agreement was not
extended after the expiration of the initial four-month term.

In May 1999, Mr. John L. Tomlinson, a director of the Company was
appointed a Vice President of the Company and effective October 13, 1999, was
appointed as Chairman of the Board.

Employees

In October 1997, the Company outsourced its back office operations,
which included collections, customer service and provisioning, reducing its
workforce from 26 to 7 employees. The effect of this action was to significantly
reduce overhead costs and with the direct intention of improving customer
service. As of April 30, 1999 the Company employed four full-time employees and
at January 24, 2000, the Company employed three full-time employees.

Item 2. Description of Property

The Company's offices were relocated on November 22, 1999 to 6600 N.
Andrews Avenue, Suite 140, Fort Lauderdale, Florida which comprises 910 square
feet and are leased by the Company under a six-month sub lease that expires in
July 2000. The Company pays rent of approximately $1,500 per month. Previously,
the Company was located at 1451 W. Cypress Creek Road, Suite 200, Fort
Lauderdale, Florida comprising of 7,950 square feet and paid rent of
approximately $8,000 per month.

The Company believes its existing facility is adequate to meet current
needs and it does not anticipate any difficulty in negotiating renewals as
leases expire or in finding other satisfactory space if existing facilities
become unavailable.

Item 3. Legal Proceedings

Recent Legal Proceedings The Company was a defendant in a civil action
styled Group Discount Dialing v. Group Long Distance, Inc., Case No.
CV-96-025165 S, in Connecticut. In this action brought in October 1997, Group
Discount Dialing sought approximately $500,000 as damages. The Company had also
filed a counter suit in a civil action styled Group Long Distance, Inc. v.
Sharon N. Kasek d/b/a Group Discount Dialing Case No. 94-0472 CA 5, in Florida.
The Company was seeking $50,000 in damages for breach of contract. In May 1999,
the parties signed a Mutual Release and Settlement Agreement and the action has
been dismissed in both Connecticut and Florida.

Past Legal Proceedings The Company owed AT&T approximately $548,000
under a

11
<PAGE>

previously executed settlement agreement relating to certain billing disputes.
The Company was a defendant in a civil action styled AT&T Corp. v. Group Long
Distance, Inc., Civil Action No. 97-2226 (NAP), pending in the United States
District Court for the District of New Jersey. In this action brought in April
1997, AT&T sought $612,324 and attorneys' fees as damages for breach of a
settlement agreement entered into between AT&T and the Company in 1993. AT&T
also sought to recover this $612,324 under a separate claim for unpaid tariff
charges. The Company answered the complaint and asserted certain counterclaims.
These counterclaims included claims for rescission of the settlement agreement
as well as for damages in contract, in tort and pursuant to the Federal
Communications Act. In June 1998 a Settlement Agreement was entered between the
parties on terms that were favorable to the Company.

On February 17, 1998 a Settlement Agreement was entered into between
the Company and WorldCom, Inc. ("WorldCom") whereby the Company agreed to pay to
WorldCom the total sum of $1,000,000 ("Settlement Amount") in full and complete
settlement of all claims between the parties. $75,000 of the Settlement amount
was payable upon execution of the Settlement Agreement, $75,000 was payable on
the close of business on February 23, 1998 and the balance was payable in
monthly installments of $50,000 per month commencing one month from execution of
this Agreement. The balance of the Settlement Amount bore simple interest on the
unpaid principal at the rate of 16% per annum. The Settlement Amount was fully
reflected in the books of the Company and was included in Notes Payable for the
year ended April 30, 1998. The Note was settled during the fiscal year ending
April 30, 1999.

Other Matters and Indemnification. Pursuant to the Plan and Agreement
of Merger dated November 14, 1995 (the "Plan"), Group Long Distance, Inc., a
Florida corporation ("GLD"), was merged (the "Merger") into Second ITC and
Second ITC changed its name to Group Long Distance, Inc. The Plan stated that
the shareholders of GLD would own 94% of the outstanding shares of Second ITC
and the existing shareholders of Second ITC would own the remaining 6% of the
shares outstanding. Because the founders of GLD held certain founding shares
(the "Founders' Shares") in Second ITC, there was a partial dilution of the
interests received by the shareholders of GLD in the Merger from 94% to 87.5%
(the "Dilution"). While the Merger was approved by the Board of Directors and a
majority of the shareholders of the Company that were shareholders of GLD (the
predecessor) at the time of the Merger and a majority of the then current
shareholders of the Company, shareholders affected by the Dilution may have a
cause of action against the Company. There can be no assurance that a
shareholder may not seek legal remedy against the Company or the individual
founders, notwithstanding the foregoing approvals. In the event any such action
is brought, the Company's results of operations or cash flow for a particular
quarterly or annual period could be materially affected by protracted litigation
or an unfavorable outcome.

In connection with the foregoing matter, pursuant to an indemnification
agreement, the Company and each of the founders, jointly and severally, have
agreed to indemnify the underwriters to the underwritten public offering on
March 24, 1997, and each of the founders has agreed to indemnify the Company,
for any and all losses, claims, damages, expenses or liabilities (including
reasonable legal fees and expenses) as a result of any claim arising out of or
based upon the failure to disclose the issuance of the shares to the founders
and in the event that as a result of any such claim, the Company is required to
issue additional shares of common stock, the founders have agreed to deliver an
equal

12
<PAGE>

number of shares of common stock to the Company for cancellation.

General. The Company is from time to time the subject of complaints or
litigation in the ordinary course of its business. Except as disclosed, the
Company believes that such lawsuits, claims and other legal matters to which it
has become subject are not material to the Company's financial condition or
results of operations, but an existing or future lawsuit or claim resulting in
an unfavorable outcome to the Company could have a material adverse effect on
the Company's financial condition and results of operations.

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

None.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

Price Range of Common Stock. Since December 2, 1999, the common stock has
traded on a limited basis on the pink sheets and previously on the OTC Bulletin
Board from December 2, 1998 until December 1, 1999, under the symbol "GLDI." The
Company was taken off the OTC Bulletin Board for failing to fulfill all of its
reporting requirements pursuant to the Exchange Act of 1934, as amended. The
Company anticipates filing its outstanding Quarterly Reports for the first and
second quarters of fiscal year 2000 and holding the Annual Shareholders Meeting
in the first quarter of calendar year 2000. The Company anticipates re-applying
to trade on the OTC Bulletin Board once all the reporting forms have been filed.
The Company was delisted from the Nasdaq SmallCap Market and the Boston Stock
Exchange ("BSE") on December 2, 1998. Since March 31, 1997, the date the
following shares first traded on the Nasdaq SmallCap Market, the common stock
and the redeemable warrants were quoted on the Nasdaq SmallCap Market under the
symbols "GLDI" and "GLDIW," respectively, and on the BSE under the symbols "GPL"
and "GPLW," respectively. Prior to March 31, 1997, the common stock traded on a
limited basis on the OTC Bulletin Board, under the symbol "GLDT" and prior to
that date, the redeemable warrants did not trade.

The following sets forth, for the periods indicated, high and low per
share bid information for the common stock reported on the Nasdaq SmallCap
Market and the OTC Bulletin Board. Such high and low bid information reflect
inter-dealer quotas without retail, mark-up, mark down or commissions and may
not represent actual transactions:

For the period beginning
May 1, 1998 and
Ending April 30, 1999
---------------------
High Low
-------------------------------------------------------------------
First Quarter......................... $3.000 $1.000
Second Quarter........................ 2.250 0.531

13
<PAGE>

Third Quarter......................... 1.250 0.500
Fourth Quarter........................ 1.125 0.437

For the period beginning
May 1, 1997 and
Ending April 30, 1998
---------------------
High Low
-------------------------------------------------------------------
First Quarter......................... $6.469 $3.250
Second Quarter........................ 5.375 3.875
Third Quarter......................... 4.875 3.313
Fourth Quarter........................ 5.125 2.500

While the redeemable warrants were quoted on the OTC Bulletin Board, there no
longer exists a market for the redeemable warrants as of December 2, 1999.

Dividend Information. The Company has not paid any cash dividends to
date and does not anticipate or contemplate paying dividends in the foreseeable
future. It is the present intention of management to utilize all available funds
for the development of the Company's business.

Approximate Number of Security Holders. As of April 30, 1999 and
January 24, 2000, the Company had approximately 112 and 119 registered holders
of record of the Common Stock, respectively.

Item 6. Management's Discussion and Analysis

The following discussion and analysis of significant factors affecting
the Company's operating results and liquidity and capital resources should be
read in conjunction with the accompanying financial statements and related
notes.

Overview

Group Long Distance, Inc. (the "Company") is a long distance
telecommunications provider. The Company utilizes special network service
contracts through major national long distance telecommunications carriers to
provide its customers with products and services which include basic "1 plus"
and "800" long distance services. As a nonfacilities based reseller of long
distance telecommunication services, the Company utilizes service contracts to
provide its customers with switched, dedicated and private line services to
various long distance telecommunications networks such as TALK. The Company is
dependent on TALK and numerous regional and local telephone companies to provide
its services and products. The Company's revenues are currently solely derived
from calls routed through TALK. Revenues derived from TALK represented 96% and
74% of total revenues for the fiscal years ended April 30, 1998, and 1997,
respectively.

14
<PAGE>

The Company's prior agreements with TALK provided that the Company
maintained certain monthly revenues (as defined in the agreements) to the
carrier for services provided under the agreements during stated periods. For
the fiscal year ended April 30, 1999, the Company had an exposure for a monthly
commitment for such revenues of $3,000,000 (aggregate commitment of
$36,000,000). For the fiscal year ended April 30, 1998, the Company had an
exposure for a monthly commitment for such revenues of $100,000 for the first
six months and $3,000,000 for the last six months (aggregate of $18,600,000).
The Company had previously reported in its 10-KSB for the year ended April 30,
1998 and 10-QSBs dated July 31,1998, October 31, 1998 and January 31, 1999 and
in certain press releases, that the exposure for the 1998 commitment was
$36,000,000 in the aggregate, when infact it should have been reported as
$18,600,000. For the fiscal year ended April 30, 1999, based on a settlement
agreement ("TALK Agreement") with TALK on December 8, 1999, the Company agreed
to pay $1.1 million to resolve the shortfall charge and as part of the TALK
Agreement, TALK agreed to release approximately $2.9 million dollars of cash to
the Company that was held under a lockbox arrangement, the release of all
receivables that were secured pursuant to the Partition Agreement, and that all
future minimum monthly volume commitments were waived by TALK. In addition, the
TALK Agreement provides for an extension of the current carrier agreement until
the later of August 31, 2002, and the date that all obligations to have been
satisfied in full, and the exchange of mutual releases.

The Company is no longer conducting and has no plans to conduct any
marketing campaigns to attract new customers, since the Company has determined
that it is currently unable to both procure new customers, and achieve positive
earnings after amortization of acquisition costs for these new customers. This
is due to the competitive advantage held by facilities based carriers and
Internet marketing enterprises. Many of these services and products are marketed
by companies, which are well established, have reputations for success in the
development and sale of services and products and have significantly greater
financial, marketing, distribution, personnel and other resources than the
Company. These resources permit such companies to implement extensive
advertising and promotional campaigns, both generally and in response to efforts
by additional competitors to enter into new markets and introduce new services
and products. Certain of these competitors, including AT&T, MCI/WorldCom and
Sprint, dominate the industry and have the financial resources to enable them to
withstand substantial price competition which has continued to increase.

In a further effort to improve efficiencies, the Company commenced "LEC
billing" arrangements with the Regional Bell Operating Companies and local
exchange carriers during the second quarter of fiscal year 1998. These LEC
billing arrangements have improved billing efficiencies, increased collections
and assisted in lowering customer attrition, however, there can be no assurance
that such efficiencies will improve or collections and customer retention will
continue in the future.

The Company's operating results are significantly affected by customer
attrition rates,

15
<PAGE>

particularly since the Company is no longer marketing its services. The Company
believes that a high level of customer attrition in the industry is primarily a
result of national advertising campaigns, telemarketing programs and customer
incentives provided by major competitors, as well as the termination of service
for non-payment.

In connection with the acquisition of Adventures-in-Telecom, Inc in
July 1996, the Company acquired a customer base of approximately 30,000 small
businesses and recorded an asset of approximately $6.6 million at July 31, 1996,
of which $5.6 million (net of receivables and marketing advances) was to be
amortized, over a five-year period. In December 1996, due to significant
attrition in the AIT customer base, the Company accelerated the amortization of
the acquisition costs of such base to the rate of 75% for the first year
(approximately $3,888,700) which had a material adverse effect on the Company's
operating results for the fiscal year ended April 30, 1997. The Company
amortized the remaining balance of customer acquisition costs of approximately
$1,730,000 at a rate of 15% and 10%, respectively, over the second and third
years after such acquisition. For the year ended April 30, 1999, the company
amortized approximately $598,700 and approximately $1,131,300 during the year
ended April 30, 1998.

Acquisitions

The Company has historically grown its business, in part, increased its
business through acquisition. The Company has no plans, intentions or
arrangements to enter into any acquisitions.

In August 1997, the Company acquired Eastern Telecommunications
Incorporated which consisted of a customer base with monthly revenues exceeding
$100,000 and two warrants to purchase 1,347,000 shares of TALK (formerly
Tel-Save, Inc.), at $4.08 per share ("the Warrants"). The $8.313 million
purchase price for ETI consisted of two $3.5 million notes, and the assumption
of approximately $1.2 million of certain of ETI's liabilities and the payment of
closing costs in the amount of $113,000. On August 11, 1997, the Company
exercised one of the Warrants and purchased 600,000 shares of common stock of
TALK at the aggregate exercise price of $2,448,000. In October 1997, the Company
exercised the remaining Warrant and sold the common stock for approximately
$26.6 million with a gain on sale of approximately $13.4 million.

Proceeds from the sale of the TALK shares were used to retire the
aggregate principal amount of $7,000,000 in notes (plus accrued interest) due in
connection with the ETI acquisition, together with certain related closing
costs. The balance of the proceeds from the sale of the TALK shares was used to
pay down debt and accounts payable owed to TALK, including payment of the
balance of the loan outstanding to TALK in connection with the July 1996
acquisition of all of the common stock of Adventures-in-Telecom and marketing
expenses incurred in connection with the Company's telemarketing efforts during
the first half of fiscal year 1998.

16
<PAGE>

Stock of TALK, in consideration of $1,200,000 in cash. In connection with the
acquisition, the Company borrowed $1,200,000 from TALK. In January 1997, TALK
repurchased the warrants from the Company in consideration of $1,800,000 and
credited the Company with such amount ($1,200,000 to repay the loan made in
January 1997 and $600,000 to reduce the outstanding principal balance under the
AIT Acquisition Loan, described below). The $600,000 reduction of debt by TALK
has been accounted for as a contribution to paid-in capital. In connection with
the acquisition, no value was assigned to the customer base acquired.

In July 1996, the Company acquired all of the issued and outstanding
capital stock of AIT, a non-facilities based reseller of long distance
communications services. The purchase price was comprised of $5,271,230 in cash
and 200,000 restricted shares of Common Stock of the Company. The acquired
assets consisted of a customer base of approximately 30,000 small businesses. In
December 1996, the Company agreed with the former shareholders of AIT to cancel
45,000 of the 50,000 shares that were subject to certain holdback provisions, in
settlement of certain claims by the Company against the AIT shareholders. In
December 1996, the Company accelerated the amortization of the acquisition costs
of the AIT customer base due to significant customer attrition, resulting in
$2,333,200 of additional amortization expense for the year ended April 30, 1997.
In connection with the AIT acquisition in July 1996, the Company entered into an
agreement with TALK pursuant to which it borrowed an aggregate of $5,521,230
primarily to finance the purchase price of the acquisition (the "Acquisition
Loan"). As of April 30, 1999, the note was paid in full. To induce TALK to
provide the financing for the purchase of AIT, the Company issued a warrant to
purchase 300,000 shares of Common Stock of the Company at $5.75 per share and a
warrant to purchase 50,000 shares of Common Stock of the Company at $5.00 per
share. Both warrants are exercisable through July 2001 and subject to certain
registration rights. In June 1997, these warrants were returned to the Company
from TALK for no consideration. Higher than expected customer attrition was
primarily attributable to the Company's inability to implement customer service
and retention programs, including delays in provisioning customers, as well as
increased competition with respect to such customer base.

In May 1996, the Company acquired all of the issued and outstanding
capital stock of Gulf Communications Services, Inc. ("Gulf") in consideration of
$25,000 in cash and the assumption of a promissory note in the principal amount
of $182,000. Such note was payable in equal monthly installments of $10,000 and
was repaid in full in May 1998. The acquired company operated switching
equipment in Fort Lauderdale, Florida, which allowed it to act as an
international call back and call through provider and also offered prepaid long
distance calling cards. This business was discontinued in July 1997.

Results of Operations

The following table sets forth for the periods indicated the
percentages of total sales represented by certain items reflected in the
Company's consolidated statements of operations:

17
<PAGE>

Year Ended April 30,
--------------------------
1999 1998
--------------------------
Sales 100% 100%
Cost of sales 52 70
Gross profit 48 30
Selling, general and administrative expense 15 17
Telemarketing expenses -- 49
Depreciation and amortization expense 5 4
Volume Shortfall Charge 5 --
Income (Loss) from operations 24 (40)
Gain on sale of investment -- 25
Interest expense, net -- 1
Income (Loss) before income taxes 23 (17)
Income taxes 8 1
Net Income (loss) 16 (18)

Comparison of Fiscal Year Ended April 30, 1999 to Fiscal Year Ended April 30,
1998

Sales. The Company's sales were $22,837,340 for the fiscal year ended April
30, 1999, compared to $54,340,938 for the fiscal year ended April 30, 1998, a
decrease of $31,503,598 or approximately 58%. The decrease in sales was a result
of the termination of the previous telemarketing campaign and normal attrition
of the customer base. These customers were primarily the result of the Company's
telemarketing efforts during fiscal year 1998 which added approximately $37.8
million of additional sales for the year. Management believes that the attrition
of the customer base is normal for the industry. The Company has determined that
it is currently difficult to both procure new customers and achieve positive
earnings after amortization of acquisition costs for these new customers. The
Company is not currently marketing its products and services and therefore, the
Company's revenues are likely to continue to decline. This is due to the
competitive advantage held by facilities based carriers and Internet marketing
enterprises. In addition $3,012,244 of revenues for the fiscal year ended April
30, 1999 were deferred to the fiscal year ended April 30, 2000 due to a lockbox
arrangement with TALK that existed at April 30, 1999. The lockbox arrangement
provided that all funds in the lockbox remained the property of TALK until all
amounts owed to TALK were fulfilled. These funds in the lockbox were
subsequently released under the TALK agreement dated December 8, 1999.

Cost of Sales. Cost of sales were $11,834,036 for the fiscal year ended
April 30, 1999, compared to $38,118,173 for the fiscal year ended April 30,
1998, a decrease of $26,284,137 or approximately 69%. As a percentage of sales,
cost of sales was approximately 52% and 70% for the fiscal year ended April 30,
1999 and April 30, 1998, respectively. The decrease in cost of sales between
comparative periods was due to the decrease in revenues as a result of customer
attrition. The decrease in cost of sales as a percentage of sales in the current
fiscal year is primarily as a result of the Company being able to better
negotiate its buy rate from its carrier as well as reversals of certain accruals
and settlement of disputed usage charges from carriers.

Gross Profit. Gross profit was $11,003,304 for the fiscal year ended April
30, 1999 compared to $16,222,765 for the fiscal year ended April 30, 1998, a
decrease of $5,219,461 or approximately 32%. As a percentage of sales, gross
profit was 48% and 30% for the fiscal year ended April 30, 1999 and April 30,
1998, respectively. The increase in gross profit percentages in year ended April
30, 1999 was

18
<PAGE>

due to improved margins on the remaining customer base, lower buy rates from the
carrier and the reversal of certain accruals no longer deemed necessary.

Selling,General and Administrative Expense. Selling, general and
administrative expenses ("SG&A") were $3,463,625 for the fiscal year ended April
30, 1999 compared to $9,345,163 for the fiscal year ended April 30, 1998, a
decrease of $5,881,538 or approximately 63%. This decrease in SG&A was due to
the reduced sales volumes, lower commissions payable and bad debt expense, and a
significant reduction in operating expenses as compared to the year ended April
30, 1998. As a percentage of sales, SG&A for the fiscal year ended April 30,
1999 and 1998 was approximately 15% and 17%, respectively. This decrease was due
to a reduction in costs as a result of lower sales and significantly reduced
operating expenses.

Telemarketing Expenses. There were no telemarketing expenses for the
fiscal year ended April 30, 1999. Telemarketing expenses were $26,570,215 for
the fiscal year ended April 30, 1998. These expenses were incurred as a result
of increased telemarketing efforts and which resulted in continuing revenues of
approximately $16.7 million and $37.8 million for the fiscal year ended April
30, 1999 and 1998, respectively. This telemarketing campaign was discontinued
during the second quarter of fiscal year 1998. Management believes that the
attrition of the customer base is normal for the Industry. The Company has
determined that it is currently difficult to both procure new customers and
achieve positive earnings after amortization of acquisition costs for these new
customers. This is due to the competitive advantage held by facilities based
carriers and Internet marketing enterprises.

Depreciation and Amortization Expense. Depreciation and amortization
expense was $1,019,087 for the fiscal year ended April 30, 1999 compared to
$2,369,410 for the fiscal year ended April 30, 1998, a decrease of $1,350,323 or
approximately 57%. The significant reduction in depreciation and amortization
for the fiscal year ended April 30, 1999 was attributable to the use of an
amortization rate of 10% for the current fiscal year and 15% for the year ended
April 30, 1998. The first year rate of amortization was 75% due to significant
customer attrition in fiscal year 1997. This amortization was a result of the
acquisition of the AIT customer base. As a percentage of sales, depreciation and
amortization expense was approximately 5% and 4% for the fiscal year ended April
30, 1999 and April 30, 1998, respectively.

Volume Shortfall Charge. The volume shortfall charge for the fiscal
year ended April 30, 1999 is $1.1 million based on the TALK Agreement of
December 8, 1999. The Company's agreements with TALK provided that the Company
maintained certain monthly revenues (as defined in the agreements) to the
carrier for services provided under the agreements during stated periods. For
the fiscal year ended April 30, 1999, the Company had an exposure for a monthly
commitment for such revenues of $3,000,000 (aggregate commitment of
$36,000,000). For the fiscal year ended April 30, 1998, the Company had an
exposure for a monthly commitment for such revenues of $100,000 for the first
six months and $3,000,000 for the last six months (aggregate of $18,600,000).
The Company had previously reported in its 10-KSB for the year ended April 30,
1998 and 10-QSBs dated July 31,1998, October 31, 1998 and January 31, 1999 and
in certain press releases, that the exposure for the 1998 commitment was
$36,000,000 in the aggregate, when infact it should have been reported as
$18,600,000. For the Year ended April 30, 1999, based on a settlement agreement
("TALK Agreement") with TALK on December 8, 1999, the Company agreed to pay $1.1
million to resolve the shortfall charge and as part of the TALK Agreement, TALK
agreed to release approximately $2.9

19
<PAGE>

million dollars of cash to the Company that was held under a lockbox
arrangement, and release all receivables that were secured pursuant to the
Partition Agreement, and that all future minimum monthly volume commitments were
waived by TALK. In addition, the TALK Agreement provides for an extension of the
current carrier agreement until the later of August 31, 2002, and the date that
all obligations to TALK have been satisfied in full, and the exchange of mutual
releases.

Gain on Sale of Investment. For the fiscal year ended April 30, 1998, Gain
on Sale of Investment was a direct result of the profit on sale of TALK stock,
being $13,418,926. This profit on sale arose as a result of the private sale of
1,347,000 shares of common stock of TALK at approximately $19.76 per share, for
gross proceeds to the Company of approximately $26.6 million. The Company had
acquired warrants to purchase 1,347,000 shares of TALK, at an average exercise
price of $4.08 per share in connection with its August 11, 1997 acquisition of
Eastern Telecommunications Incorporated ("ETI"). There exists no such gain on
sale of investments in the year ending April 30, 1999.

Interest Expense Net. Interest expense (net) for the fiscal year ended
April 30, 1999 was $83,094 compared to $340,333 for the fiscal year ended April
30, 1998, a decrease of $257,239 or 76%. The interest expense for the year ended
April 30, 1999 primarily related to interest paid on the WorldCom Note and for
the fiscal year ended April 30, 1998 was primarily due to the $5,521,230 loan
from TALK in July 1996, which was primarily used to complete the AIT
acquisition. The outstanding loan balance was repaid in full in October 1997
with the proceeds from the sale of the TALK common stock acquired as part of the
purchase of ETI.

Income Taxes. Income tax expense of $1,769,900 was provided for the fiscal
year ended April 30, 1999 compared to $649,900 for the year ended April 30,
1998. The income tax provision for the year ended April 30, 1999 is as a result
of a net income for the current fiscal year. For the fiscal year ended April 30,
1998 the Company recognized an additional gain for tax purposes on the sale of
Tel-Save stock acquired as part of the ETI acquisition and which has been
treated as a permanent difference for financial accounting purposes.

Net Income(Loss). The Company had a net income of $3,567,598, or net income
of $1.02 per share, for the fiscal year ended April 30, 1999, as compared to net
loss of $9,633,330, or $2.76 per share, for the year ended April 30, 1998. The
Net income for the fiscal year ended April 30, 1999 was after taking into
account the volume shortfall charge of $1,100,000. The net loss for the fiscal
year ended April 30, 1998 reflected telemarketing expenses of $26,570,215 used
to attract new customers offset by the one time gain on the sale of the TALK
common stock of $13,418,926.

Liquidity and Capital Resources

The Company's primary cash requirements have historically been to fund the
acquisition of customer bases and increased levels of accounts receivable, which
have required substantial working capital. The Company has historically
satisfied its working capital requirements principally through cash flow from
operations (including advances from TALK) and borrowings from institutions and
carriers.

20
<PAGE>

At April 30, 1999, the Company had a working capital deficit of $4,377,357,
as compared to working capital deficit of $8,851,762 at April 30, 1998. The
working capital deficit during the fiscal year ended April 30, 1999 was largely
due to the deferred revenue of approximately $3 million, which included funds,
held by TALK under a lockbox arrangement for which repayment was uncertain. The
uncertainty related to a volume shortfall charge based on monthly minimum volume
commitments as at April 30, 1999, which was resolved by the TALK Agreement. The
deferred revenue will be recognized in the third quarter of the fiscal year
ending April 30, 2000.

For the fiscal year ended April 30, 1998, the working capital deficit was
primarily attributable to the increase in accounts payable as a result of the
telemarketing efforts during the 1998 fiscal year. These telemarketing efforts
led to the Company incurring $26,570,215 in marketing expenses which was
included in accounts payable and of which $21,896,178 was repaid during the 1998
fiscal year and the balance during the 1999 fiscal year. These telemarketing
efforts resulted in approximately 360,000 new orders and additional revenues of
approximately $37.8 million for the 1998 fiscal year.

The Company's capital requirements have been and will continue to be
significant. The Company has historically satisfied its working capital
requirements principally through cash flow from operations (including advances
from TALK) and borrowings from institutions and carriers In the event that the
Company's plans change, its assumptions change or prove to be inaccurate or if
the projected cash flow prove to be insufficient to fund operations (due to
unanticipated expenses, operating difficulties or otherwise), the Company would
be required to seek additional financing earlier than anticipated or curtail its
operations.

Net cash provided by operating activities was $1,280,607 for the fiscal
year ended April 30, 1999 as compared to cash used in operating activities of
$13,515,744 for the fiscal year ended April 30, 1998. The cash provided by
operating activities for the fiscal year ended April 30, 1999 is primarily
attributable to a decrease in accounts receivable as a result of collections,
and offset by a decrease in accounts payable as a result of repayment of debt.
For the fiscal year ended April 30, 1998, the cash used in operating activities
is primarily attributable to the gain on sale of investments of $13,418,926,
proceeds of which are reflected in cash flows from investing activities. Also,
cash used in operating activities increased due to an increase in accounts
receivable offset by an increase in accounts payable as a result of the
telemarketing campaign during the 1998 fiscal year.

No cash was provided from investing activities for the fiscal year ended
April 30, 1999, as compared to cash provided by investing activities of
$21,134,760 for the fiscal year ended April 30, 1998. The cash provided by
investing activities was primarily attributable to the ETI acquisition and the
resultant sale of the TALK common shares.

Net cash used in financing activities was $1,081,623 for the fiscal year
ended April 30, 1999 as compared to $9,292,600 for the fiscal year ended April
30, 1998. The cash used in financing activities for the year ended April 30,
1999 is primarily attributable to the payment made in regards to the settlement
of the AT&T debt outstanding in July 1998 as well as all payments made to
WorldCom in terms of the Settlement Agreement. For the fiscal year ended April
30, 1998 the cash used in financing activities was primarily attributable to
paying down debt and accounts payable owed to TALK, including payment of the
balance of the loan outstanding to TALK in connection

21
<PAGE>

with the July 1996 acquisition of all of the common stock of AIT and marketing
expenses incurred in connection with the Company's telemarketing efforts during
the 1998 fiscal year. At April 30, 1999, the Company had cash of $502,946.

Net borrowings under line of credit agreement with Gateway American
Bank, Florida during the year ended April 30, 1999 reflected the repayment of
the line of credit of $87,044 compared to an advance of $87,044 during the year
ended April 30, 1998. In addition, the Company also received during the year
ended April 30, 1998 certain advances from its carrier. These advances during
fiscal year 1998 amounted to approximately $5.0 million and were included in
Accounts Payable. These advances were used for telemarketing and working capital
purposes. Repayment of long-term debt during the years ended April 30, 1999 and
1998 totaled $994,579 and $9,444,813, respectively. For the year ended April 30,
1999 these repayments represented full and final settlements of the WorldCom and
AT&T debts. For the year ended April 30, 1998 proceeds from the sale of the TALK
shares were used to retire the aggregate $7,000,000 in promissory notes (and
accrued interest) due in connection with the ETI acquisition, together with
certain related closing costs. The balance of the proceeds from the sale of the
TALK shares was used to pay off the balance of the loan outstanding to TALK in
connection with the July 1996 acquisition of all of the common stock of
Adventures-in-Telecom.

The Company's gross accounts receivable decreased by $7,271,137 during
the fiscal year ended April 30, 1999 to $1,679,461 from $8,950,598 during the
prior period. Accounts receivable were 71% of total assets at April 30, 1999,
compared to 86% of total assets at April 30, 1998. The Company's allowance for
doubtful accounts decreased by approximately $84,000, to $388,000 compared to
$472,000 in the prior period.

Accounts payable decreased during the fiscal year ended April 30, 1999
by $15,340,422, to $476,084 from $15,816,506 as compared to the fiscal year
ended April 30, 1998. Accounts payable was approximately 7% and 89% of total
liabilities at April 30, 1999 and at April 30, 1998, respectively. The volume
shortfall charge, is shown net of a receivable for which the right of offset
exists, and which relates to the Company's failure to satisfy volume purchase
commitments from its carrier, TALK. The Volume Shortfall Charge for the year
ended April 30, 1999 is $1.1 million. The Company's agreements with TALK
provided that the Company maintained certain monthly revenues (as defined in the
agreements) to the carrier for services provided under the agreements during
stated periods. For the fiscal year ended April 30, 1999, the Company had an
exposure for a monthly commitment for such revenues of $3,000,000 (aggregate
commitment of $36,000,000). For the fiscal year ended April 30, 1998, the
Company had an exposure for a monthly commitment for such revenues of $100,000
for the first six months and $3,000,000 for the last six months (aggregate of
$18,600,000). The Company had previously reported in its 10-KSB for the year
ended April 30, 1998 and 10-QSBs dated July 31,1998, October 31, 1998 and
January 31, 1999 and in certain press releases, that the exposure for the 1998
commitment was $36,000,000 in the aggregate, when infact it should have been
reported as $18,600,000. For the fiscal year ended April 30, 1999, based on a
settlement agreement ("TALK Agreement") with TALK on December 8, 1999, the
Company agreed to pay $1.1 million to resolve the shortfall charge and as part
of the TALK Agreement, TALK agreed to release approximately $2.9 million dollars
of cash to the Company that was held under a lockbox arrangement, and the
release of all receivables that were secured pursuant to the Partition
Agreement, and that all future minimum monthly volume commitments were waived by
TALK. In addition, the TALK Agreement provides for

22
<PAGE>

an extension of the current carrier agreement until the later of August 31,
2002, and the date that all obligations to TALK have been satisfied in full, and
the exchange of mutual releases.

The Company's accounts receivable, less allowance for doubtful
accounts, at April 30, 1999 were $1,291,461, as compared to $8,478,598 at April
30, 1998. Of the Company's accounts receivable at April 30, 1999, less than 2%
of the total were more than 90 days outstanding. This is due in part to the move
to LEC billing and the Company writing off of all doubtful accounts. Decreased
accounts receivable has enabled the Company to use the cash received from
customer collections to reduce debt and payables and improve its liquidity and
working capital position.

At April 30, 1999, the Company's allowance for doubtful accounts was
approximately $388,000 as compared to approximately $472,000 at April 30, 1998,
which the Company believes is currently adequate for the size and nature of its
receivables. Nevertheless, delays in collection or uncollectibility of accounts
receivable could have a material adverse effect on the Company's liquidity and
working capital position and could require the Company to continually increase
its allowance for doubtful accounts. Bad debt expense accounted for 6% of the
Company's revenues for the fiscal year ended April 30, 1999 and 10% for the
fiscal year ended April 30, 1998. This decrease was due to a decision by the
Company that significantly increased its write- off of doubtful accounts during
the 1998 fiscal year.

In August 1996, the Company entered into an agreement with Gateway
American Bank which renewed as of December 1997, provides for a line of credit
of up to $150,000, bearing interest at the prime rate plus 1%. This line of
credit was repaid in full in March 1999, and has not been renewed.

The Company continues to explore strategic opportunities, partnerships
and business combinations. Certain of these options could involve the Company
selling all or substantially all of its assets or capital stock. The Company has
no current understandings, talks or agreements to sell all or any part of the
Company.

Effects of Inflation

The Company does not believe that inflation has had a significant
impact on its operations for the fiscal year ended April 30, 1999.

Legal Proceedings

23
<PAGE>

Settlement Agreement and the action has been dismissed in both Connecticut and
Florida.

Past Legal Proceedings The Company owed AT&T approximately $548,000
under a previously executed settlement agreement relating to certain billing
disputes. The Company was a defendant in a civil action styled AT&T Corp. v.
Group Long Distance, Inc., Civil Action No. 97-2226 (NAP), pending in the United
States District Court for the District of New Jersey. In this action brought in
April 1997, AT&T sought $612,324 and attorneys' fees as damages for breach of a
settlement agreement entered into between AT&T and the Company in 1993. AT&T
also sought to recover this $612,324 under a separate claim for unpaid tariff
charges. The Company answered the complaint and asserted certain counterclaims.
These counterclaims included claims for rescission of the settlement agreement
as well as for damages in contract, in tort and pursuant to the Federal
Communications Act. In June 1998 a Settlement Agreement was entered between the
parties.

Recent Accounting Pronouncements

In June 1998 the FASB issued statement of Financial Accounting
Standards (FAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities." FAS No. 133 establishes standards for accounting and reporting for
derivative instruments, and conforms the requirements for treatment of different
types of hedging activities. This statement is effective for all fiscal years
beginning after June 15, 2000. Management does not expect this standard to have
a significant impact on the Company's operations.

Subsequent Events

On December 8th, 1999, based on a settlement agreement ("TALK
Agreement") with TALK,

24
<PAGE>

the Company agreed to pay $1.1 million to resolve the shortfall charge and as
part of the TALK Agreement, TALK agreed to release approximately $2.9 million
dollars of cash to the Company that was held under a lockbox arrangement, and
the release of all receivables that were secured pursuant to the Partition
Agreement, and that all future minimum monthly volume commitments were waived by
TALK. In addition, the TALK Agreement provides for an extension of the current
carrier agreement until the later of August 31, 2002, and the date that all
obligations to TALK in terms of the TALK Agreement have been satisfied in full,
and the exchange of mutual releases and other terms of the agreement.

On November 18, 1999, Mr. Sam Hitner was confirmed as Chief Financial
Officer of the Company by the Company's Board of Directors. Mr. Hitner had been
appointed Acting Chief Financial Officer of the Company on September 11, 1999,
following the resignation of Mr. Peter Russo.

In connection with Dunne's resignation, on October 13, 1999, the
Company and Dunne entered into a Separation Agreement (the "Separation
Agreement") pursuant to which the Company agreed to pay Dunne severance pay of
$190,000, less all applicable employment withholding taxes. The remaining
$133,000 is to be paid by the Company in such amounts, to such parties, at such
dates and upon the satisfaction of certain conditions as set forth in the
Separation Agreement. Pursuant to the Separation Agreement, Dunne is also
subject to confidentiality and non-compete provisions. Pursuant to the
Separation Agreement, Dunne is also to receive (1) health insurance benefits for
two years, (2) coverage under the Company's Directors and Officers insurance
policy for two years and (3) a car allowance for one year effective September 1,
1999. Pursuant to the Separation Agreement, Dunne and the Company have also
released each other against any and all claims that either may have against each
other in connection with Dunne's employment by the Company. As at January 24,
2000 the Company has paid out $184,468 pursuant to the Separation Agreement

Effective on October 13, 1999, Mr. Glenn S. Koach, formerly Executive
Vice President of the Company, was appointed by the Company's Board of
Directors, President of the Company, assuming the responsibilities of Mr. Dunne
in such capacity. On August 1, 1999, Mr. Koach, a former director of the Company
had rejoined the Company as Executive Vice-President and on September 11, 1999

25
<PAGE>

had been named a director of the Company, filling a void created by the
resignation of Mr. Peter J. Russo.

In May 1999, Mr. John L. Tomlinson, a director of the Company was
appointed a Vice President of the Company and effective October 13, 1999, was
appointed as Chairman of the Board.

Factors That Could Affect Operating Results

26
<PAGE>

those indicated in the forward-looking statements, due to the following factors,
among other risks and factors identified from time to time in the Company's
filings with the SEC:

o The Company's agreements with TALK provided that the Company maintain certain
monthly revenues (as defined in the agreements) to the carrier for services
provided under the agreements during stated periods. For the fiscal year ended
April 30, 1999, the Company had an exposure for a monthly commitment for such
revenues of $3,000,000 (aggregate commitment of $36,000,000). For the fiscal
year ended April 30, 1998, the Company had an exposure for a monthly commitment
for such revenues of $100,000 for the first six months and $3,000,000 for the
last six months (aggregate of $18,600,000). The Company had previously reported
in its 10-KSB for the year ended April 30, 1998 and 10-QSBs dated July 31,1998,
October 31, 1998 and January 31, 1999 and in certain press releases, that the
exposure for the 1998 commitment was $36,000,000 in the aggregate, when infact
it should have been reported as $18,600,000. For the fiscal year ended April 30,
1999, based on a settlement agreement ("TALK Agreement") with TALK on December
8, 1999, the Company agreed to pay $1.1 million to resolve the shortfall charge
and as part of the TALK Agreement, TALK agreed to release approximately $2.9
million dollars of cash to the Company that was held under a lockbox
arrangement, the release of all receivables that were secured pursuant to the
Partition Agreement, and that all future minimum monthly volume commitments were
waived by TALK. In addition, the TALK Agreement provides for an extension of the
current carrier agreement until the later of August 31, 2002, and the date that
all obligations to TALK have been satisfied in full, and the exchange of mutual
releases.

o The Company's operations are based upon an agreement with a TALK a
long-distance carrier who provides access to phone lines and transmission
facilities. The Company is dependent upon such carrier for such services, and
there is a reasonable possibility that there could be equipment failures or
other service interruptions that could materially affect the Company. Such
delays could result in postponed or possibly lost sales, which could adversely
affect the Company's results from operations.

o All of the Company's revenues are derived from calls routed through TALK, a
nationwide telecommunications provider. Such revenues represented 100% in the
current fiscal year, 96% and 74% of total revenues for the years ended April 30,
1998 and 1997, respectively. Poor performance by TALK could have material
adverse affect on the Company's operating results.

o The Company's operating results are significantly affected by customer
attrition rates. Customers are not obligated to purchase any minimum usage and
may discontinue service without penalty at any time. The Company is not
currently marketing its products or services.

o The Company is not currently marketing its products and services and
therefore, the Company's revenues are likely to continue to decline. This is due
to the competitive advantage held by facilities based carriers and Internet
marketing enterprises. Also, the Company has determined that it is currently
difficult to both procure new customers and achieve positive earnings after
amortization of acquisition costs for these new customers.

o The Company faces intense competition in the sale of its services and
products. Many of these services and products are marketed by companies that are
well established and have significantly

27
<PAGE>

greater financial resources than the Company. The Company is not engaging in any
marketing activities due to the Company having determined that it is currently
difficult to both procure new customers and achieve positive earnings after
amortization of acquisition costs for these new customers. Because the reseller
segment of the telecommunications industry has no substantial barriers to entry,
competition from smaller resellers in the Company's target markets is also
expected to continue to increase significantly. Recent regulatory changes may
also result in significantly increased competition.

o The Company is subject to federal and state regulation. Failure to comply with
applicable laws, regulations and licensing requirements could result in civil
penalties, including substantial fines, and certificates of authority may be
conditioned, modified, canceled, terminated or revoked, any of which could have
a material adverse effect on the Company.

o As a result of increased federal and state regulations governing the
telemarketing of telecommunication services. These regulations addressed the
issues of "slamming" (the unauthorized switching of a customer's preselected
telecommunications provider) and "cramming" (the unauthorized billing of
additional telecommunication services not requested by the customer) as they
affect consumers and require far more stringent rules before switching a
customers service to the Company's network. See "Industry Background and
Government Regulation."

o RBOC entry into the long distance market may mean that the Company will be
faced with new competition from well-entrenched, well-capitalized and marketable
companies, that consumers have had prior dealings with for local access service.
This may allow these RBOCs due to their name recognition and established service
practices to have a significant advantage in their ability to attract long
distance customers and to offer long distance service as an adjunct to local
service access.

Item 7. Financial Statements

The consolidated financial statements of the Company are filed as part
of this Form 10-KSB are set forth on pages F-2 to F-18. The report of Grant
Thornton LLP, independent certified public accountants, dated July 22, 1999,
except for Note M, as to which date is December 8, 1999, is set forth on page
F-1 of this Form 10-KSB.

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

None.

PART III

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

Glenn S. Koach, 43, a former Director was appointed President on
October 13, 1999. Mr. Koach was appointed as the Company's Executive Vice
President on August 1, 1999 and a Director on

28
<PAGE>

September 11, 1999. Mr. Koach succeeded Mr. Russo as a Class 1 Director upon
Mr. Russo's resignation. Mr. Koach is a Certified Public Accountant and had been
a Principal and Investment Manager of Riverside Capital Advisors, an investment
company based in South Florida. Mr. Koach has served as Chairman of the Board of
Metro Airlines from 1994 to 1997, and is also President of Harvard Corporation,
a private real estate investment company.

Gerald M. Dunne, Jr., 36, had been President, Chief Executive Officer and
Class 3 Director of the Company since February 1992 and Chairman since August
1997. From May 1989 to February 1992, Mr. Dunne was Senior Vice President and
Vice President of Sales of the Company. On October 13, 1999, Mr. Dunne resigned
as President, Chief Executive Officer, Chairman and Director of the Company and
each of its subsidiaries. In connection with Dunne's resignation, the Company
and Dunne entered into a Separation Agreement (the "Separation Agreement")
pursuant to which the Company agreed to pay Dunne severance pay of $190,000,
less all applicable employment withholding taxes. As at January 24, 2000 the
Company has paid out $184,468 pursuant to the Separation Agreement.

Sam D. Hitner, 42, On November 18, 1999, Mr. Hitner was appointed Chief
Financial Officer by the Board of Directors of the Company. Mr. Hitner had been
the Acting Chief Financial Officer since September 11, 1999 having assumed the
responsibilities of Mr. Russo in such capacity and previously was the Controller
of the Company since August 1995. He has been the Company Secretary since
October 1997. From November 1994 to August 1995, Mr. Hitner was employed with
John L. Tomlinson C.P.A., P.A., as a tax consultant.

Peter J. Russo, 42, had been Chief Financial Officer and a Director of the
Company since December 1996. On September 11, 1999, Mr. Russo resigned his
position as Chief Financial Officer and Director. On September 11, 1999, Mr.
Russo entered into a Consulting Agreement to remain as a consultant to the
Company for the four-month term of the agreement, with a two-month option to
extend by the Company. The Consulting Agreement was not renewed after the
initial four-month term. As at January 24, 2000, the Company had paid $24,000 in
consulting fees.

Stanley A. Gottlieb, 69, has been a Class 3 Director of the Company since
December 1997. Since 1966, Mr. Gottlieb is an Attorney, and prior to his
retirement in December 1997, held various positions at The Hearst Corporation,
most recently as Vice President-Taxes, and continues to act as Senior Tax
consultant to The Hearst Corporation.

Edward Harwood, 73, has been a Class 2 Director of the Company since
September 1995. Mr. Harwood retired in 1989. For the 19 years prior to his
retirement, Mr. Harwood held various executive positions with Gould Electronics
Corporation, a computer manufacturing company.

Jack Kanfer, 63, has been a Class 1 Director of the Company since December
21, 1999. Mr. Kanfer succeeded Mr. Dunne as a Director, upon his resignation.
Since 1987, Mr. Kanfer has been CEO and Director of Telecom Consulting Group and
B&D Telecom Corp., both privately held

29
<PAGE>

telecommunication companies located in Pompano Beach, Florida. From 1976 to 1987
Mr. Kanfer was a consultant specializing in turnarounds, mergers and
acquisitions. Prior to 1976, Mr. Kanfer was a Senior Vice President of SCA
Services a New York Stock Exchange listed company that was acquired by Waste
Management.

John L. Tomlinson, 50, was appointed Chairman of the Board on October 13,
1999 upon Mr. Dunne's resignation and has been a Class 1 Director of the Company
since November 1995. In May 1999, Mr. Tomlinson was appointed as a Vice
President of the Company. Mr. Tomlinson is a Certified Public Accountant and has
been in private practice since 1990. Mr. Tomlinson also serves as a director of
Gateway American Bank of Florida.

There are no family relationships between any of the Officers and
Directors of the Company.

COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10
percent of any registered class of the Company's equity securities, to file with
the Securities and Exchange Commission (the "SEC") reports of ownership of the
Common Stock of the Company. Reporting persons are required by SEC regulation to
furnish the Company with copies of all such reports that they file. To the best
of the Company's knowledge, all such reports were filed for the fiscal year
ended April 30, 1999.

Item 10. Executive Compensation

The following table sets forth the compensation awarded or paid to, or
earned by, the Company's Former Chief Executive Officer and Former Chief
Financial Officer during the fiscal years ended April 30, 1999, 1998 and 1997.
No other executive officer of the Company currently or formerly serving as an
executive officer received a total salary and bonus of $100,000 for the fiscal
year ended April 30, 1999. Accordingly, no information is reported for such
persons.

<TABLE>
<CAPTION>
Summary Compensation Table

- ----------------------------------------- ------ ---------------------------------------- --------------------------
Name and Principal Position Fiscal Annual Compensation Long Term Compensation
Year
----------- ------------ --------------- ----------- --------------
Salary ($) Bonus ($) Other Awards Payouts
Annual
Compensation
($)
----------- --------------
Securities All Other
Underlying Compensation
Options ($)
(#)
- ----------------------------------------- ------ ----------- ------------ --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gerald M. Dunne, Jr. (5) 1999 $165,000 $36,000 $17,801(1) --(4) $4,500(2)
Former Chairman, Chief Executive 1998 $150,000 $255,000 $21,296(1) -- $4,500(2)
Officer and President 1997 $122,000 $88,000 $19,897(1) 250,000 $225(2)
- ----------------------------------------- ------ ----------- ------------ --------------- ----------- --------------
Peter J. Russo (6) 1999 $100,000 $18,000 $10,043(3) --(4) $3,000(2)
Former Chief Financial Officer 1998 $85,000 $70,000 $9,132(3) 14,000 $2,550(2)
1997 $27,692 $25,000 $1,805(3) 36,000 --
- ----------------------------------------- ------ ----------- ------------ --------------- ----------- --------------
</TABLE>

30
<PAGE>

- --------------
(1) For Mr. Dunne, Jr. - Fiscal 1999 amount includes auto expenses of $11,982
and medical expense coverage of $5,819: Fiscal 1998 amount includes auto
expenses of $17,123 and medical expense coverage of $4,173: Fiscal 1997
amount includes: car allowance of $11,905, medical expense coverage of
$4,636 and commission income of $3,356.

(2) In April 1997, the Company commenced its 401(k) plan. The amount reported
represents the Company's matching contribution for the fiscal year ended
April 30, 1999. The plan was terminated in March 1999.

(3) For Mr. Russo - Fiscal 1999 amount includes auto expenses of $4,800 and
medical expense coverage of $5,243: Fiscal 1998 amount includes auto
expenses of $4,800 and medical expense coverage of $4,032: Fiscal 1997
amount includes: medical expense coverage of $1,805.

(4) On July 2, 1998 the Company's Board of Directors granted 75,000 options
and 30,000 options to purchase shares of common stock at $1.375 a share to
Mr. Dunne and Mr. Russo, respectively. These options were both
subsequently relinquished during the fiscal year ending April 30, 1999.

On October 9, 1998 the Company's Board of Directors granted 125,000
options and 50,000 options to purchase shares of common stock at $0.50 a
share to Mr. Dunne and Mr. Russo, respectively. These options were both
subsequently relinquished during the fiscal year ending April 30, 1999.

(5) On October 13, 1999, Mr. Dunne resigned as Chairman, Chief Executive
Officer and President. Mr. Glenn Koach, formerly Executive Vice President,
was appointed as President on October 13, 1999. Effective November 1999
pursuant to the terms of an employment agreement, Mr. Koach receives a
monthly salary of $12,500 and a car allowance of $500. For the year ended
April 30, 1999, Mr. Koach did not receive any compensation from the
Company.

(6) On September 11, 1999, Mr. Russo resigned as Chief Financial Officer of
the Company. Mr. Russo entered into a Consulting Agreement to remain as a
consultant to the Company for the four-month term of the Agreement, with a
two-month option to extend by the Company. The Consulting Agreement was
not renewed after the initial four-month term. Mr. Russo was succeeded by
Mr. Hitner as Chief Financial Officer, formerly the Controller of the
Company.

Employment Agreements

In November 1999, the Company and Mr. Koach entered into a one-year
employment agreement providing for his employment as the Company's President and
Chief Executive Officer with an annual base salary of $150,000 per year. The
agreement shall be automatically renewed for one-year periods, unless either
party to the agreement gives written notice to the other party not less than
ninety days (90) prior to the expiration of such period. The agreement provides
for a bonus based on the Company's performance, profitability, positive cash
flow and other factors as may be determined by the Option and Compensation
Committee of the Board of Directors. Mr. Koach shall also be entitled to stock
options in accordance with the Company's 1996 Stock Option. The agreement
provides that in the event of termination for cause, Mr. Koach shall not be
entitled to receive any further installments of base salary or other
compensation, including severance payments. In the event of termination without
cause, Mr. Koach will receive a severance payment equal to three months of his
then annual base

31
<PAGE>

salary. The agreement also includes a three-month agreement not to compete
commencing on the date of termination.

On October 13, 1999, Mr. Gerald M. Dunne, Jr. ("Dunne") resigned as
President, Chief Executive Officer and a Director of the Company and each of its
subsidiaries. In connection with Dunne's resignation, on October 13, 1999, the
Company and Dunne entered into a Separation Agreement (the "Separation
Agreement") pursuant to which the Company agreed to pay Dunne severance pay of
$190,000, less all applicable employment withholding taxes. The remaining
$133,000 is to be paid by the Company in such amounts, to such parties, at such
dates and upon the satisfaction of certain conditions as set forth in the
Separation Agreement. Pursuant to the Separation Agreement, Dunne is also
subject to confidentiality and non-compete provisions. Pursuant to the
Separation Agreement, Dunne is also to receive (1) health insurance benefits for
two years, (2) coverage under the Company's Directors and Officers insurance
policy for two years and (3) a car allowance for one year effective September 1,
1999. Pursuant to the Separation Agreement, Dunne and the Company have also
released each other against any and all claims that either may have against each
other in connection with Dunne's employment by the Company. As at January 24,
2000 the Company has paid out $184,468 pursuant to the Separation Agreement.

In February 1997, the Company and Gerald M. Dunne, Jr. had entered into a
two-year employment agreement providing for his employment as the Company's
President and Chief Executive Officer with an annual base salary of $130,000 for
the first year, increasing to $150,000 for the second year and, effective May 1,
1998, $165,000. The agreement provided for a bonus based on certain earnings
criteria. The agreement provided that in the event of termination: (i) without
cause or by Mr. Dunne for cause, or by either party in connection with a change
in control (as defined in the agreement) of the Company, Mr. Dunne would receive
a lump sum severance pay equal to his then annual base salary and disability,
accident and health insurance benefits substantially similar to those insurance
benefits Mr. Dunne was receiving immediately before the termination for cause;
(ii) as a result of the incapacity of Mr. Dunne, Mr. Dunne shall be entitled to
continue to receive 60% of his salary for a two-year period from the date of
termination; and (iii) as a result of the death of Mr. Dunne, his estate shall
be entitled to any benefits accrued under the Company's death, disability or
other benefit plan and shall be entitled to receive a lump sum payment equal to
his then annual base salary. The agreement also included a one-year noncompete
covenant commencing on the date of termination. The agreement was renewed for a
one year period.

On September 11, 1999, Mr. Peter Russo resigned as Chief Financial Officer
and a Director of the Company and it subsidiaries. On September 11, 1999 the
Company entered into a Consulting Agreement with Torbay Management Services,
Inc., a corporation controlled by Mr. Russo ("Torbay"), pursuant to which Torbay
will provide consulting services to the Company. Torbay will receive a monthly
consulting fee of $6,000 for the four-month term of the agreement. The Company
may extend

32
<PAGE>

the term for an additional two months, resulting in an additional $6,000 in
monthly consulting fees. The Company can offset payments due to Torbay by any
amount received by Mr. Russo by an acquirer of the Company that are in excess of
the amount due to Mr. Russo under the Separation Agreement. As at January 24,
2000, the Company had paid Torbay $24,000 in consulting fees. The Consulting
Agreement was not renewed after the initial four-month term.

In May 1997, the Company and Mr. Peter J. Russo had entered into a
two-year employment agreement providing for his employment as the Company's
Chief Financial Officer with an annual base salary of $85,000 per year increased
to $100,000 in the year ending April 30, 1999. The agreement provided for a
bonus based on certain earnings criteria. The agreement provided that in the
event of termination without cause, Mr. Russo would receive a lump sum severance
pay equal to twelve months of his then annual base salary. The agreement also
included a twelve-month noncompete covenant commencing on the date of
termination. The agreement was renewed for a one-year period.

The following table provides certain information regarding the stock
options granted during the year ended April 30, 1999 to certain of the Company's
former executive officers named in the Summary Compensation Table.

<TABLE>
<CAPTION>
Option Grants For the Fiscal Year Ended April 30, 1999

- ---------------------------------- ------------------- -------------------- ------------------- --------------------
Name Number of % of Total Exercise of Expiration Date
Securities Options Granted Base Price
Underlying to Employees $/Share
Options in Fiscal Year
Granted(#)(1)
- ---------------------------------- ------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Gerald M. Dunne, Jr. (1)(2) -- -- --
Peter J. Russo (1)(2) -- -- --
- ---------------------------------- ------------------- -------------------- ------------------- --------------------
</TABLE>
- ------------------
(1) On July 2, 1998 the Company's Board of Directors granted 75,000 options and
30,000 options to purchase shares of common stock at $1.375 a share to Mr.
Dunne, former President and Chief Executive Officer, and Peter J. Russo,
former Chief Financial Officer, respectively. These options were both
subsequently relinquished during the year ending April 30, 1999.

(2) On October 9, 1998 the Company's Board of Directors granted 125,000 options
and 50,000 options to purchase shares of common stock at $0.50 a share to
Gerald M. Dunne,,Jr, former President and Chief Executive Officer, and
Peter J. Russo, former Chief Financial Officer, respectively. These options
were both subsequently relinquished during the year ending April 30, 1999.

The following table sets forth certain information for the former
executive officers named in the Summary Compensation Table with respect to the
exercise of options to purchase Common Stock during the fiscal year ended April
30, 1999 and the number and value of securities underlying unexercised options
held by these former executive officers as of April 30, 1999.

33
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises In the Year Ended
April 30, 1999 and Fiscal Year-End Option Values

- -------------------------------- ----------------- --------------- ------------------------ ------------------------
Name Shares Value Realized Number of Value of Unexercised
Acquired on Securities Underlying In-the-Money Options
Exercise (#) Unexercised Options at April 30, 1999
Held at April 30, 1999 Exercisable/Unexercisable
Exercisable/Unexercisable
- -------------------------------- ----------------- --------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Gerald M. Dunne, Jr. -- -- 250,000/0 0/$0
Peter J. Russo -- -- 45,333/4,667 0/$0

- -------------------------------- ----------------- --------------- ------------------------ ------------------------
</TABLE>

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information, known to the Company with
respect to the beneficial ownership of its Common Stock as of April 30, 1999 for
(i) each person who is known to the Company to own beneficially more than 5% of
the Company's Common Stock, (ii) each of the Company's directors, (iii) each of
the Company's executive officers and (iv) all directors and former executive
officers as a group.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------- --------------------- ------------------
Name Number of Shares Percentage of
Beneficially Total Voting
Owned Shares(1)
- --------------------------------------------------------------------------- --------------------- ------------------
<S> <C> <C>
Mr. H. T. Ardinger, Jr. 400,000(2) 10.4%
9040 Governors Row
Dallas, Texas 75247-3774
Mr. Gerald M. Dunne, Jr., Former Chairman, President and Chief
Executive Officer (8) 479,182(3) 12.4%
Mr. Peter J. Russo, Former Chief Financial Officer (9) 46,333(4) 1.3%
Mr. Sam D. Hitner, Chief Financial Officer and Secretary (10) 23,483(5) 0.6%
Mr. Edward Harwood, Director 94,668(6) 2.4%
Mr. Stanley A. Gottlieb, Director 7,000 0.2%
Mr. John L. Tomlinson, Vice President, Chairman of Board and Director (11) 34,066(6) 0.9%
All directors and executive officers as a group (6 persons) (13) 687,732(7) 17.8%
- --------------------------------------------------------------------------- --------------------- ------------------
</TABLE>
- ----------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, the persons named in the table above have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. The number of shares of common stock
outstanding used in calculating the percentage for each listed person
includes the shares of common stock underlying the options or warrants
held by such person that are exercisable within 60 days of the date
hereof, but excludes shares of common stock underlying options or warrants
held by any other person.

(2) Includes 100,000 shares of common stock and 300,000 shares of common stock
issuable upon the exercise of redeemable warrants.

(3) Includes currently exercisable options to purchase 250,000 shares of
common stock at an exercise price of $5.0625 per share and expiring on
January 23, 2002.

34
<PAGE>

(4) Includes currently exercisable options to purchase 36,000 shares of common
stock at an exercise price of $5.0625 per share and expiring on January
23, 2002, and 9,333 shares of common stock at an exercise price of $3.875
per share expiring May 2002.

(5) Includes currently exercisable options to purchase 15,000 shares of common
stock at an exercise price of $1.375 per share and expiring on January 23,
2002, 1,878 shares of common stock at an exercise price of $1.375 per
share and expiring in July 2003, and 2,605 shares of common stock at an
exercise price of $0.50 per share and expiring in October 2003.

(6) Includes currently exercisable options to purchase 20,000 shares of common
stock at an exercise price of $5.0625 per share and expiring on January
23, 2002.

(7) Includes an aggregate of currently exercisable options to purchase 326,000
shares of common stock at an exercise price of $5.0625 per share and
expire on January 23, 2002, 9,333 shares of Common Stock at an exercise
price of $3.875 per share and expire in May 2002, 15,000 shares of common
stock at an exercise price of $1.375 per share and expiring on January 23,
2002, 1,878 shares of common stock at an exercise price of $1.375 per
share and expire in July 2003, and 2,605 shares of Common Stock at an
exercise price of $0.50 per share and expire in October 2003.

(8) On October 13, 1999, Mr. Dunne resigned in terms of a Separation Agreement
with the Company as Chairman, Chief Executive Officer and President of the
Company. Mr. Dunne has pledged his common stock as collateral for any
outstanding personal income tax liabilities. On October 13, 1999, Mr.
Koach was appointed as President of the Company, assuming the
responsibilities of Mr. Dunne. On August 1, 1999, Mr. Koach a former
Director had joined the Company as Executive Vice President. On September
11, 1999, Mr. Koach was appointed a Director.

(9) On September 11, 1999, Mr. Russo resigned as Chief Financial Officer and
Director of the Company. Mr. Russo entered into a Consulting Agreement to
remain as a consultant to the Company. On September 11, 1999, Mr. Hitner
was appointed as Acting Chief Financial Officer, assuming the
responsibilities of Mr. Russo.

(10) On November 18, 1999 Mr. Hitner was confirmed as Chief Financial Officer
by the Company's Board of Directors. On September 11, 1999, Mr. Hitner,
formerly the Controller of the Company, was appointed Acting Chief
Financial Officer, assuming the responsibilities of Mr. Russo in such
capacity.

(11) On October 13, 1999, Mr. Tomlinson, Vice-President and a Director of the
Company, was appointed as Chairman of the Board upon the resignation of
Mr. Dunne.

(13) Totals exclude Mr. Dunne, the former Chairman, Chief Executive Officer and
President of the Company (refer note 8) and Mr. Russo, the former Chief
Financial Officer of the Company (refer note 9). Mr. Dunne, beneficially
owns 479,182 shares, which include currently exercisable options to
purchase 250,000 shares of common stock at an exercise price of $5.0625 and
expiring on January 23, 2002. Mr. Russo, beneficially owns 49,333 shares,
which includes currently exercisable options to purchase 36,000 shares of
common stock at an exercise price of $5.0625 per share and expiring on
January 23, 2002, and 9,333 shares of common stock at an exercise price of
$3.875 per share expiring May 2002.

Item 12. Certain Relationships and Related Transactions

In September 1995, the Company issued a promissory note to John L.
Tomlinson, Chairman of the Board and a director of the Company, and Philip C.
Cezeaux, an unaffiliated third party, in the aggregate principal amount of
$100,000. The interest rate on the promissory note adjusted semi-annually based
on the prime rate plus 2% and principal and interest was payable in equal
monthly installments of $2,600 until September 1999. The promissory note was
repaid in full in February 1999. As an inducement for the loan, the Company
issued options in September 1995 to Messrs. Tomlinson

35
<PAGE>

and Cezeaux to purchase 47,635 shares of Common Stock at a price of $3.15 per
share. These options expired on September 30, 1997, and 16,700 shares were
exercised in September 1997.

For the year ended April 30, 1999 and 1998, John L. Tomlinson Chairman
of the Board and a director of the Company performed taxation services for the
Company. John L. Tomlinson CPA, PA was paid for these services approximately
$19,000 and $10,000 for the year ending April 30, 1999 and 1998, respectively.
In May 1999, Mr. Tomlinson was appointed a Vice President of the Company.

On September 11, 1999, Mr. Peter J. Russo resigned as Chief Financial
Officer and a Director of the Company and it subsidiaries. On September 11, 1999
the Company entered into a Consulting Agreement with Torbay Management Services,
Inc., a corporation controlled by Mr. Peter J. Russo ("Torbay"), pursuant to
which Torbay will provide consulting services to the Company. Torbay will
receive a monthly consulting fee of $6,000 for the four-month term of the
agreement. The Company may extend the term for an additional two months,
resulting in an additional $6,000 in monthly consulting fees. The Company can
offset payments due to Torbay by any amount received by Russo by an acquirer of
the Company that are in excess of the amount due to Russo under the Separation
Agreement.

On October 13, 1999, Mr. Gerald M. Dunne, Jr. ("Dunne") resigned as
President, Chief Executive Officer and a Director of the Company and each of its
subsidiaries. In connection with Dunne's resignation, on October 13, 1999, the
Company and Dunne entered into a Separation Agreement (the "Separation
Agreement") pursuant to which the Company agreed to pay Dunne severance pay of
$190,000, less all applicable employment withholding taxes. The remaining
$133,000, is to be paid by the Company in such amounts, to such parties, at such
dates and upon the satisfaction of certain conditions as set forth in the
Separation Agreement. Pursuant to the Separation Agreement, Dunne is also
subject to confidentiality and non-compete provisions. Pursuant to the
Separation Agreement, Dunne is also to receive (1) health insurance benefits for
two years, (2) coverage under the Company's Directors and Officers insurance
policy for two years and (3) a car allowance for one year effective September 1,
1999. Pursuant to the Separation Agreement, Dunne and the Company have also
released each other against any and all claims that either may have against each
other in connection with Dunne's employment by the Company. As at January 24,
2000 the Company has paid out $184,468 pursuant to the Separation Agreement.

Pursuant to the Separation Agreement, the Company may engage Dunne as
a consultant from time to time and Dunne will be compensated at the rate of $250
per hour for such services. As at January 24, 2000 the Company had paid out $500
to Mr. Dunne as consultant.

36
<PAGE>

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

(a) Exhibits

Exhibit
Number Description of Exhibits
- ------ -----------------------

3.1 -- Amended and Restated Articles of Incorporation of
Registrant. (Filed as an Exhibit to Amendment No. 1 to
the Company's Registration Statement on Form SB-2 (No.
333-17681) filed March 3, 1996 and incorporated herein
by reference.)

3.2 -- Amended and Restated By-laws of Registrant. (Filed as an
Exhibit to Amendment No. 1 to the Company's Registration
Statement on Form SB-2 (No. 333-17681) filed March 3,
1996 and incorporated herein by reference.)

4.1 -- Form of Representative's Warrant Agreement including
Form of Representative's Warrant Certificates. (Filed as
an Exhibit to Amendment No. 1 to the Company's
Registration Statement on Form SB-2 (No. 333-17681)
filed March 3, 1996 and incorporated herein by
reference.)

4.2 -- Form of Redeemable Warrant Agreement including Form of
Warrant Certificate. (Filed as an Exhibit to Amendment
No. 1 to the Company's Registration Statement on Form
SB-2 (No. 333-17681) filed March 3, 1996 and
incorporated herein by reference.)

4.3 -- Form of Common Stock Certificate. (Filed as an Exhibit
to the Company's Annual Report on Form 10-KSB for the
year ended April 30, 1998 and incorporated herein by
reference.)

10.11 -- Second Amendment and Renewal of Lease between Registrant
and Gateway Investments Corporation regarding 1451 West
Cypress Creek Road, Fort Lauderdale, Florida dated
February 5, 1996. (Filed as an Exhibit to the Company's
Registration Statement on Form SB-2 (No. 333-17681)
filed December 12, 1996 and incorporated herein by
reference.)

10.16 -- Purchase Agreement and Plan of Exchange between
Registrant and Adventures-in-Telecom. Inc. dated July 3,
1996. (Filed as an Exhibit to the Company's report on
Form 10-KSB dated August 12, 1996 and incorporated
herein by reference.)

10.17 -- Loan Agreement between Registrant and TALK dated July
11, 1996. (Filed as an Exhibit to the Company's report
on Form 10-KSB dated August 12, 1996 and incorporated
herein by reference.)

10.18 -- Consent and Amendment between TALK, and Registrant dated
December 2, 1996. (Filed as an Exhibit to the Company's
Registration Statement on Form SB-2 (No. 333-17681)
filed December 12, 1996 and incorporated herein by
reference.)

10.19 -- Consent and Amendment between TALK and the Registrant
dated January 31, 1997. (Filed as an Exhibit to the
Company's Annual Report on Form 10-KSB for the year
ended April 30, 1998 and incorporated herein by
reference.)

10.20 -- Agreement between TALK and the Registrant, dated
February 28, 1997. (Filed as an Exhibit to the Company's
Annual Report on Form 10-KSB for the year ended April
30, 1998 and incorporated herein by reference.)

10.23 -- Employment Agreement of Gerald M. Dunne, Jr. with
Registrant. (Filed as an Exhibit to Amendment No. 2 to
the Company's Registration Statement on Form SB-2 (No.
333-17681) filed March 21, 1997 and incorporated herein
by reference.)

10.24 -- 1996 Stock Option Plan. (Filed as an Exhibit to
Amendment No. 1 to the Company's Registration Statement
on Form SB-2 (No. 333-17681) filed March 3, 1996 and
incorporated herein by reference.)

37
<PAGE>

10.25 -- Stock Purchase Agreement dated as of August 11, 1997
between the Registrant and the selling shareholders of
Eastern Telecommunication Incorporated, together with
all exhibits thereto. (Filed as an Exhibit to the
Company's Annual Report on Form 10-KSB for the year
ended April 30, 1998 and incorporated herein by
reference.)

10.26 -- Separation Agreement between Peter J. Russo with
Registrant.

10.27 -- Consulting Agreement between Torbay Management Services,
Inc., with Registrant.

10.28 -- Separation Agreement between Gerald M. Dunne, Jr. with
Registrant.

10.29 -- Employment Agreement of Glenn S. Koach with Registrant.

10.30 -- Sublease Agreement between ADMINASSISTANCE with the
Registrant dated November 4, 1999.

21.1 -- Subsidiaries of Registrant.

27.1 -- Financial Data Schedule.

(b) Reports on Form 8-K

No reports on Form 8-K were filed for the quarter ended April 30, 1999.

38
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 24th day of
January, 2000.

GROUP LONG DISTANCE, INC.

By: /s/ Glenn S. Koach
---------------------
Glenn S. Koach

Pursuant to the requirements of the Securities Exchange Act of 1945,
this Report has been signed by the following persons on behalf of the registrant
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
-------------------- --------------------------- ----------------
<S> <C> <C> <C>
/s/ Glenn S. Koach President and Chief Executive Officer January 24, 2000
------------------------ (Principal Executive Officer)
Glenn S. Koach

/s/ Sam D. Hitner Chief Financial Officer January 24, 2000
------------------------ (Principal Financial Officer)
Sam D. Hitner

/s/ John L. Tomlinson Chairman of the Board and
------------------------ Vice President January 24, 2000
John L. Tomlinson

/s/ Edward Harwood Director January 24, 2000
------------------------
Edward Harwood

/s/ Stanley Gottlieb Director January 24, 2000
------------------------
Stanley Gottlieb
</TABLE>

<PAGE>

FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

GROUP LONG DISTANCE, INC.
AND SUBSIDIARIES

April 30, 1999 and 1998

<PAGE>

REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Group Long Distance, Inc.

We have audited the accompanying consolidated balance sheets of Group Long
Distance, Inc. and Subsidiaries as of April 30, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Group Long
Distance, Inc. as of April 30, 1999 and 1998, and the consolidated results of
their operations and their consolidated cash flows for the years then ended in
conformity with generally accepted accounting principles.

/s/ Grant Thornton LLP

Fort Lauderdale, Florida
July 22, 1999 (except for Note M, as to which
the date is December 8, 1999)

F-1

<PAGE>

Group Long Distance, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

April 30,

ASSETS

1999 1998
---------------- ---------------
<S> <C> <C>
Current assets
Cash $ 502,946 $ 303,962
Accounts receivable less allowance for doubtful
accounts of $388,000 and $472,000 at April 30,
1999 and 1998, respectively 1,291,461 8,478,598
Prepaid expenses and other current assets 6,155 98,710
---------------- ---------------
Total current assets 1,800,562 8,881,270
---------------- ---------------
Property and equipment, net 13,168 94,771
Customer acquisition costs, net - 937,484
---------------- ---------------
Total assets $ 1,813,730 $ 9,913,525
================ ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Line of credit $ - $ 87,044
Volume shortfall charge payable, net 407,738 -
Accounts payable 476,084 15,816,506
Deferred revenue 3,012,244 -
Income taxes payable 1,769,900 -
Accrued expenses and other liabilities 511,953 632,600
Current portion of long-term debt - 1,196,882
---------------- ---------------
Total current liabilities 6,177,919 17,733,032
---------------- ---------------
Long-term debt, net of current portion - 112,280
---------------- ---------------
Total liabilities 6,177,919 17,845,312
---------------- ---------------
Stockholders' deficit
Preferred stock, no par value, 2,000,000 shares
authorized; no shares issued and outstanding - -
Common stock, no par value, 12,000,000 shares
authorized; 3,500,402 and 3,502,783 shares issued
and outstanding as of April 30, 1999 and 1998,
respectively - -
Additional paid-in capital 5,913,988 5,913,988
Accumulated deficit (10,278,177) (13,845,775)
---------------- ---------------
Total stockholders' deficit (4,364,189) (7,931,787)
---------------- ---------------
Total liabilities and stockholders' deficit $ 1,813,730 $ 9,913,525
================ ===============
</TABLE>

The accompanying notes are an integral part of these statements.

F-2
<PAGE>

Group Long Distance, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended April 30,

1999 1998
---------------- ---------------
<S> <C> <C>

Sales $ 22,837,340 $ 54,340,938
Cost of sales 11,834,036 38,118,173
---------------- ---------------
Gross profit 11,003,304 16,222,765
Selling, general and administrative expenses 3,463,625 9,345,163
Telemarketing expenses - 26,570,215
Depreciation and amortization 1,019,087 2,369,410
Volume shortfall charge 1,100,000 -
---------------- ---------------
Income (loss) from operations 5,420,592 (22,062,023)
Gain on sale of investment - 13,418,926
Interest expense, net 83,094 340,333
---------------- ---------------
Income (loss) before income taxes 5,337,498 (8,983,430)
Income tax 1,769,900 649,900
---------------- ---------------
Net income (loss) $ 3,567,598 $ (9,633,330)
================ ===============
Net income (loss) per common share - basic $ 1.02 $ (2.76)
=============== ==============
Net income (loss) per common share - diluted $ 1.00 $ (2.76)
=============== ==============
</TABLE>

The accompanying notes are an integral part of these statements.

F-3

<PAGE>

Group Long Distance, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

For the Years Ended April 30, 1999 and 1998

Total
Shares of Additional Stockholders'
Common Common Paid-in Accumulated Equity
Stock Stock Capital Deficit (Deficit)
----- ----- ------- ------- ---------

<S> <C> <C> <C> <C> <C>
Balance, April 30, 1997 3,462,354 $ - $ 5,848,819 $ (4,212,445) $ 1,636,374

Exercise of stock options 40,429 - 65,169 - 65,169

Net loss - - - (9,633,330) (9,633,330)
--------------- -------------- -------------- ---------------- ---------------

Balance, April 30, 1998 3,502,783 - 5,913,988 (13,845,775) (7,931,787)

Return of stock (2,381) - - - -

Net income - - - 3,567,598 3,567,598
--------------- -------------- -------------- ---------------- ---------------

Balance, April 30, 1999 3,500,402 $ - $ 5,913,988 $ (10,278,177) $ (4,364,189)
=============== ============== ============== ================ ===============

</TABLE>

The accompanying notes are an integral part of this statement.

F-4

<PAGE>

Group Long Distance, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended April 30,

1999 1998
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 3,567,598 $ (9,633,330)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities
Depreciation and amortization 1,019,087 2,369,410
Provision for bad debts 1,389,352 2,043,301
Gain on sale of investment - (13,418,926)
Forgiveness of debt (433,484) -
Changes in assets and liabilities
Decrease (increase) in accounts receivable 5,797,785 (7,028,744)
Decrease in notes receivable - 32,261
Decrease in deferred tax asset - 649,900
Decrease in prepaid expenses and other current assets 92,555 366,845
Increase in volume shortfall charge payable 407,738 -
(Decrease) increase in accounts payable (15,221,521) 11,261,679
Decrease in accrued expenses and other liabilities (120,647) (158,140)
Increase in deferred billing revenue 3,012,244 -
Increase in income taxes payable 1,769,900 -
---------------- ---------------
Net cash provided by (used in) operating activities 1,280,607 (13,515,744)
---------------- ---------------

Cash flows from investing activities
Acquisitions of property and equipment - (23,436)
Decrease in other assets - 37,236
Purchase of investments - (5,495,760)
Proceeds from sale of investments - 26,616,720
---------------- ---------------
Net cash provided by investing activities - 21,134,760
---------------- ---------------

Cash flows from financing activities
Net (payments) borrowings under line of credit agreement (87,044) 87,044
Principal repayments of long-term debt (994,579) (9,444,813)
Proceeds from the sale of common stock - 65,169
---------------- ---------------
Net cash used in financing activities (1,081,623) (9,292,600)
---------------- ---------------

Net increase (decrease) in cash 198,984 (1,673,584)

Cash at beginning of year 303,962 1,977,546
---------------- ---------------

Cash at end of year $ 502,946 $ 303,962
================ ===============
</TABLE>

Noncash investing and financing activity:
In 1997, the Company acquired Eastern Telecommunications Incorporated
with two $3.5 million notes and the assumption of approximately
$1.2 million of liabilities.

The accompanying notes are an integral part of this statement.

F-5

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

April 30, 1999 and 1998

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Company is a non-facilities based reseller of long distance
telecommunication services. The Company utilizes service contracts to
provide its customers with switched, dedicated and private line services
through its long distance telecommunications carrier TALK.com, Inc. (herein
referred to as TALK) (formerly Tel-Save, Inc.)

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany balances have been
eliminated in consolidation.

Cash and Cash Equivalents

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

Property and Equipment

Additions and major renewals to property and equipment are recorded at
cost. The Company provides for depreciation using the straight-line method
over an estimated useful life of five years for office equipment, furniture
and fixtures and leasehold improvements. Total accumulated depreciation was
$113,877 and $273,736 at April 30, 1999 and 1998, respectively.

Customer Acquisition Costs

Customer acquisition costs represent the net cost of purchased customer
accounts which, historically, were generally amortized over five years
utilizing an accelerated method. The Company's amortization method and life
are based on estimated attrition rates and attempt to match these costs
with the corresponding revenues. Accumulated amortization was $7,607,743
and $6,670,259 at April 30, 1999 and 1998, respectively, and the customer
acquisition costs have been fully amortized as of April 30, 1999.

(continued)

F-6

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Customer Acquisition Costs - Continued

In December 1996, as a result of higher than expected customer attrition,
the Company accelerated the amortization costs of the AIT customer base.
The Company used a first year amortization rate of 75% compared to the
estimated rate of 30% which the Company was previously using. The Company
amortized the remaining balance using 15% in year two and 10% in year
three. Year three, fiscal 1999, is the final year of amortization for these
customer acquisition costs. The amortization expense for the year ended
April 30, 1999 was $937,484. The higher than expected attrition resulted
from delays in implementing the Company's service and retention program
which relied in part, on TALK's installation of its AT&T (now Lucent
Technologies, Inc.) digital switching equipment. Additionally, increasingly
competitive industry conditions have affected the attrition rate.

Employee Benefit Plan

The Company adopted the Group Long Distance Inc. Retirement Savings and
401(k) Plan (the "Plan") effective January 1, 1997. Participation in the
Plan was offered to eligible employees of the Company. Generally, all
employees of the Company who are 21 years of age and who have completed
three months of service were eligible for participation in the Plan. The
Plan is a defined contribution plan which allows participants to make
voluntary salary deferral contributions of between 1% and 15% of their
compensation up to a maximum amount as statutorily determined. The Company
made matching contributions of 50% of the first 6% of the participant's
contribution of $17,186 and $16,400 for the year ended April 30, 1999 and
1998, respectively. The Company terminated the Plan as of March 31, 1999.

Income Taxes

Deferred income taxes have been provided for elements of income and expense
which are recognized for financial reporting purposes in periods different
than such items are recognized for income tax purposes. The Company
accounts for deferred taxes utilizing the liability method, which applies
the enacted statutory rates in effect at the balance sheet date to
differences between the book and tax basis of assets and liabilities. The
resulting deferred tax liabilities and assets are adjusted to reflect
changes in tax laws.

(continued)

F-7

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Deferred Revenues

Deferred revenue includes the funds collected from its customers and held
by the Company's long distance telecommunications carrier. The funds were
being held by the carrier as a result of the Company's failure to satisfy
the volume purchase commitment in the contract with the carrier for which
collectibility is uncertain. The Company will continue to defer additional
funds held as they are earned until they are received. The revenue will be
recorded in income in the period in which the uncertainty is lifted.

In December 1999, the Company's carrier remitted all funds held (see Note
M). At that time, the related revenue was recognized as the uncertainty was
lifted.

Earnings (Loss) Per Share

Basic earnings per common share are based on the weighted average number of
common shares outstanding. Diluted earnings per common share are based on
the assumption that all dilutive potential common shares and dilutive stock
options were converted at the beginning of the year. The total number of
such weighted average shares was 3,502,463 and 3,487,922 for the years
ended April 30, 1999 and 1998, respectively. Stock options and warrants are
considered common stock equivalents unless their inclusion would be
antidilutive.

The following table illustrates the reconciliation of the income (loss) and
weighted average number of shares of the basic and diluted earnings per
share computations:

Year Ended April 30, 1999 Year Ended April 30, 1998
------------------------------------------ -----------------------------------------
Weighted Weighted
Average Per Share Average Per Share
Net Income Shares Amount Net Loss Shares Amount
---------- ------- ---------- --------- -------- -----------

<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 3,567,598 3,502,463 $ 1.02 $(9,633,330) 3,487,922 $ (2.76)

Diluted EPS 3,567,598 3,584,327 $ 1.00 $(9,633,330) 3,487,922 $ (2.76)
</TABLE>

Included in diluted shares are common stock equivalents relating to options
of 81,864 for 1999. All stock options were anti-dilutive in 1998. Options
to purchase 465,000 shares of common stock at prices ranging from $1.38 to
$5.06, which were outstanding during 1999, were not included in the
computation of diluted EPS because the options' exercise prices were
greater than the annual average market price of the common shares. These
options were granted in 1997 through 1999 and become exercisable over the
next two years.

(continued)

F-8

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Use of Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires disclosure of estimated fair
values of financial instruments. These estimated fair values are to be
disclosed whether or not they are recognized in the balance sheet, provided
it is practical to estimate such values. The Company estimates that the
fair value of its financial instruments approximates the carrying value of
its financial instruments at April 30, 1999 and 1998.

Stock Options

Options granted under the Company's Stock Option Plans are accounted for
under APB 25, "Accounting for Stock Issued to Employees," and related
interpretations. In October 1995, the Financial Accounting Standards Board
issued Statement 123, "Accounting for Stock-Based Compensation," which
require additional proforma disclosures for companies, such as Group Long
Distance, Inc. that will continue to account for employee stock options
under the intrinsic value method specified in APB 25 (see Note H).

Comprehensive Income

In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes
standards for reporting and displaying of comprehensive income and its
components in the Company's consolidated financial statements. The new
standard has no effect on the Company's financial condition or results of
operation.

(continued)

F-9

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Segment Reporting

In June 1997, the FASB issued Statement of Financial Accounting Standard
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"), which establishes standards for reporting information about
operating segments and related disclosures about products and services,
geographic areas and major customers. SFAS 131 requires that the definition
of operating segments align with the measurements used internally to assess
performance. These financial statements reflect the adoption of SFAS 131.
The Company has one single reporting segment. The Company's revenues are
derived from customers located in the United States and all the Company's
long lived assets are located in the United States.

Recently Issued Pronouncement

In June 1998, the FASB issued Statement of Financial Accounting Standards
(FAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities." FAS No. 133 establishes standards for accounting and reporting
for derivative instruments, and conforms the requirements for treatment of
different types of hedging activities. This statement is effective for all
fiscal years beginning after June 15, 2000. Management does not expect this
standard to have a significant impact on the Company's operations.

NOTE B - CONCENTRATIONS OF RISK

Financial instruments that potentially subject the Company to
concentrations of credit risk consist of accounts receivable which are due
from small and medium size businesses. The Company continually evaluates
the creditworthiness of its customers; however, it generally does not
require collateral.

The Company's revenues are derived from calls routed through TALK network
switching equipment utilizing AT&T transmission facilities. The use of the
equipment and transmission facilities are afforded through the Partition
Agreement the Company has with TALK. TALK may suspend services or terminate
the agreement upon the occurrence of any event of default by the Company.
Such revenues represented 100% and 96% of total revenues in fiscal 1999 and
1998, respectively.

NOTE C - LINE OF CREDIT

In 1999, the Company repaid the line of credit of $87,044 and did not renew
the line of credit agreement.

F-10
<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE D - LONG-TERM DEBT

Long-term debt is comprised of the following at April 30:

1999 1998
---------- ----------
<S> <C> <C>
Unsecured promissory note payable to a Corporation
in connection with an acquisition. The note
was paid in full in May 1998. $ - $ 7,394

Unsecured non-interest bearing settlement payable
to AT&T. In June 1998, the parties executed
mutual releases and the action was dismissed
and settled. - 547,500

Unsecured promissory note payable to a director
of the Company and an unaffiliated third party.
The note was paid in full. - 41,988

Unsecured interest bearing note at 16% relating
to the WorldCom accounts payable. The
note was settled. - 712,280
---------- ----------

- 1,309,162

Less current portion of long-term debt - 1,196,882
---------- ----------

$ - $ 112,280
========== ==========

</TABLE>

NOTE E - INCOME TAXES

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" which
requires the use of the "liability method" of accounting for income taxes.
Accordingly, deferred tax liabilities and assets are determined based on
the difference between the financial statement and tax bases of assets and
liabilities, using statutory federal income tax rates in effect for the
year.

(continued)

F-11

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE E - INCOME TAXES - Continued

The provision for income taxes consists of the following at April 30,:

1999 1998
--------------- ---------------
<S> <C> <C>
Current
Federal $ 1,502,600 $ -
State 267,300 -
Deferred - 649,900
--------------- ---------------

$ 1,769,900 $ 649,900
=============== ===============

</TABLE>

The expense (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable statutory federal income tax
rates to pretax income as a result of the following differences at April
30, 1999 and 1998:

1999 1998
--------------- ----------------
<S> <C> <C>
Expense (benefit) for income taxes, at 34% $ 1,814,700 $ (3,054,400)
Increase (decrease) in tax resulting from:
Change in valuation allowance - 886,900
Additional tax on gain on sale of stock - 2,837,400
Nondeductible items 3,800 3,000
Nontaxable gain on forgiveness of debt (147,400) -
State taxes, net of federal tax benefit 178,200 (23,000)
Utilization of net operating loss (60,900) -
Other (18,500) -
--------------- ----------------
$ 1,769,900 $ 649,900
=============== ================
</TABLE>

Deferred tax assets are comprised of the following at April 30, 1999 and
1998.

1999 1998
--------------- ----------------
<S> <C> <C>
Allowance for doubtful accounts $ 145,900 $ 177,600
Customer acquisition costs 1,799,100 1,747,400
Net operating loss 28,800 262,000
--------------- ----------------
Deferred tax assets 1,973,800 2,187,000
Less valuation allowance 1,973,800 2,187,000
--------------- ----------------
$ - $ -
=============== ================
</TABLE>

(continued)

F-12

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE E - INCOME TAXES - Continued

The valuation allowance decreased $213,200 in 1999. This was primarily the
result of the decrease in the net operating loss and difference in customer
acquisition cost amortization between tax and financial reporting. The
valuation allowance also decreased due to the Company electing to reduce
the tax basis of the customer acquisition costs due to the exclusion of
forgiveness of debt for tax purposes.

At April 30, 1999, the Company had net operating loss carryforwards for
federal tax purposes of $76,631, expiring April 30, 2011.

NOTE F - LEASES

As of April 30, 1999, the Company leased one office facility under a
noncancellable operating lease which expired in March 2000. In December
1999, the Company subleased this space and leased a new office facility
under a noncancellable operating lease which expires June 30, 2000. Rent
expense for the years ended April 30, 1999 and 1998 totaled approximately
$98,000 and $108,000.

Approximate future minimum lease payments applicable to the noncancellable
operating lease is as follows:

Year Ending April 30,
--------------------
2000 $ 7,500

NOTE G - COMMITMENTS AND CONTINGENCIES

The Company's network service agreement with TALK contains provisions for
guaranteed monthly volume and network usage which is the basis for
determining volume discounts and other special billing features. The
Company had failed to meet this commitment resulting in a volume shortfall
charge. In December 1999, the Company settled this charge for $1,100,000
(see Note M).

There is no volume and network usage commitment for the fiscal year ending
April 30, 2000. The Partition Agreement between the Company and TALK
terminates the later of August 31, 2002 or the date that all obligations of
the Company to TALK have been satisfied in full.

(continued)

F-13

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE G - COMMITMENTS AND CONTINGENCIES - Continued

Pursuant to the Plan and Agreement of Merger dated November 14, 1995 (the
"Plan"), Group Long Distance, Inc., a Florida corporation ("GLD"), was
merged (the "Merger") into Second ITC and Second ITC changed its name to
Group Long Distance, Inc. The Plan stated that the shareholders of GLD
would own 94% of the outstanding shares of Second ITC and the existing
shareholders of Second ITC would own the remaining 6% of the shares
outstanding. Because the founders of GLD held certain founding shares (the
"Founders' Shares") in Second ITC, there was a partial dilution of the
interests received by the shareholders of GLD in the Merger from 94% to
87.5% (the "Dilution").

While the Merger was approved by the Board of Directors and a majority of
the shareholders of the Company that were shareholders of GLD (the
predecessor) at the time of the Merger and a majority of the then current
shareholders of the Company, shareholders affected by the Dilution may have
a cause of action against the Company. There can be no assurance that a
shareholder may not seek legal remedy against the Company or the individual
founders, notwithstanding the foregoing approvals. In the event any such
action is brought, the Company's results of operations or cash flow for a
particular quarterly or annual period could be materially affected by
protracted litigation or an unfavorable outcome.

In connection with the foregoing matter, pursuant to an indemnification
agreement, the Company and each of the founders, jointly and severally,
have agreed to indemnify the underwriters to the offering (see Note J), and
each of the founders has agreed to indemnify the Company, for any and all
losses, claims, damages, expenses or liabilities (including reasonable
legal fees and expenses) as a result of any claim arising out of or based
upon the failure to disclose the issuance of the shares to the founders and
in the event that as a result of any such claim, the Company is required to
issue additional shares of Common Stock, the founders have agreed to
deliver an equal number of shares of Common Stock to the Company for
cancellation.

NOTE H - STOCK OPTIONS

The Company's 1996 Employees' Stock Option Plan provides for granting of
options of not more than 950,000 shares of common stock. The Option and
Compensation Committee has the sole discretion to determine to whom options
will be granted and the terms and conditions of such options.

(continued)

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE H - STOCK OPTIONS - Continued

Prior to April 30, 1996, the Company accounted for such options under APB
Opinion 25 and related Interpretations. Commencing May 1, 1996, the Company
accounts for non-qualified options issued to non-employees, under SFAS 123,
Accounting for Stock Based Compensation.

The exercise price of all options granted by the Company equals the market
price at the date of grant. No compensation expense has been recognized.

On July 2, 1998, the Board of Directors approved and ratified the repricing
of certain unexercised employee stock options granted under the Company's
1996 Stock Option Plan. As a result, options granted to purchase 420,000
shares of the Company's common stock were repriced from $5.0625 to $1.375
per share. In addition, options granted to purchase 14,000 shares of the
Company's common stock were repriced from $3.875 to $1.375. On April 29,
1999, 346,000, of the 420,000, were repriced to the original exercise price
of $5.0625 and the 14,000 options were priced to the original exercise
price of $3.875.

On July 2, 1998, the Company's Board of Directors granted 148,000 options
to purchase shares of common stock to various directors, officers and
employees at $1.375 a share. On April 29, 1999, 135,000 of these options
were relinquished by the directors and officers.

On October 9, 1998, the Company's Board of Directors approved and ratified
an increase of 350,000 in the number of options available for grant under
the terms of the Stock Option Plan.

On October 9, 1998, the Company's Board of Directors granted 247,000
options to purchase shares of common stock to various directors, officers
and employees at $0.50 a share. On April 29, 1999, 225,000 of these options
were relinquished by the directors and officers.

(continued)

F-15

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE H - STOCK OPTIONS - Continued

Had compensation cost for the Employees' Stock Option Plan's options issued
to employees been determined based on the fair value of the options at the
grant dates consistent with the method of SFAS 123, the Company's net
income (loss) and income (loss) per share would have been changed to the
pro forma amounts indicated below.

1999 1998
--------------- ----------------
<S> <C> <C>
Net income (loss)

As reported $ 3,567,598 $ (9,633,330)
Pro forma $ 2,659,694 $ (10,067,283)

Basic income (loss) per share
As reported $ 1.02 $ (2.76)
Pro forma $ .76 $ (2.87)

Diluted income (loss) per share
As reported $ 1.00 $ (2.76)
Pro forma $ .74 $ (2.87)
</TABLE>

The above pro forma disclosures may not be representative of the effects on
reported net income (loss) for future years as options vest over several
years and the Company may continue to grant options to employees.

The fair value of each option grant is estimated on the date of grant using
the binomial option-pricing model with the following weighted-average
assumptions used for grants in 1999 and 1998, respectively: dividend yield
of 0.0 percent for all years; expected volatility of 129.78 and 67.30
percent; risk-free interest rate ranging from 4.51% to 5.49% and 6.57%; and
expected holding periods ranging up to 5 years.

(continued)

F-16

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE H - STOCK OPTIONS - Continued

A summary of the status of the Company's fixed stock options as of April
30, 1999 and 1998, and changes during the years ending on those dates is as
follows:

1999 1998
--------------------------------- --------------------------------
Weighted - Weighted -
Average Average
Shares Exercise Price Shares Exercise Price
-------- --------------- ---------- ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year 449,707 $ 5.02 602,716 $ 4.70
Granted 395,000 .83 32,000 4.46
Exercised - 40,429 1.57
Expired - 38,080 2.08
Forfeited 357,707 1.20 106,500 5.06
------------- -------------
Outstanding at end of year 487,000 4.15 449,707 5.02
============= =============
Options exercisable at end
of year 458,906 391,832
Weighted-average fair value
of options granted during
the year $ .54 $ 2.32

</TABLE>

The following information applies to options outstanding at April 30, 1999.
<TABLE>
<CAPTION>

Options Outstanding Options Exercisable
------------------------------------------- ----------------------------
Weighted -
Average Weighted - Weighted -
Range of Remaining Average Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
--------------- ------ ---------------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C>
$ .50 22,000 4.45 $ .50 7,333 $ .50
$ 1.375 87,000 3.18 1.38 78,333 1.38
$3.875-$5.0625 378,000 2.81 5.01 373,240 5.07

</TABLE>

NOTE I - SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosure of cash flow information:

1999 1998
--------------- ----------------
<S> <C> <C>
Cash paid during the year for interest $ 95,578 $ 160,000
=============== ================

</TABLE>

F-17

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE J - EQUITY

In March 1997, the Company completed an underwritten public offering of its
common stock and warrants. The Company sold 1,250,000 shares and warrants
to purchase 1,437,500 shares at an exercise price of $5.40 per share (the
"Redeemable Warrants"). The Company realized proceeds of $3,895,455, net of
underwriter's discount and out of pocket expenses. In connection with the
offering, the underwriter was granted warrants to purchase 125,000 shares
of common stock at $4.95 per share. The underwriter also was granted the
right to purchase 125,000 redeemable warrants at $.11 per redeemable
warrant all of which are exercisable at any time within the three years
ending March 24, 2000. None of the warrants issued to the underwriter have
been exercised, and none of the redeemable warrants have been exercised.

In connection with the financing of the AIT acquisition, the Company issued
warrants to TALK to purchase 300,000 shares of common stock of the Company
at $5.75 per share and 50,000 shares at $5.00 per share. In June 1997,
these warrants were returned to the Company from TALK for no consideration.

NOTE K - RELATED PARTY TRANSACTIONS

For the years ended April 30, 1999 and 1998, a vice president and director
of the Company performed tax preparation services for the Company, was paid
approximately $19,000 and $10,000 for the years ending April 30, 1999 and
1998, respectively.

NOTE L - FOURTH QUARTER ADJUSTMENT

The fourth quarter of 1999 includes a $1.1 million volume shortfall charge,
which arises from the failure of the Company to meet its volume purchase
agreement commitment as discussed in Note G. This charge relates to the
Company's failure to satisfy volume purchase commitments from its carrier,
TALK. The Company had committed to purchase certain minimum volumes of long
distance services during stated periods, whether or not such volumes are
used. In December 1999, the Company finalized negotiations with TALK to
settle the volume shortfall charge for $1.1 million.

F-18

<PAGE>

Group Long Distance, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

April 30, 1999 and 1998

NOTE M - SUBSEQUENT EVENTS

On December 8, 1999, the Company entered into a settlement and amended
agreement with its carrier TALK which resolved the Company's violation of
the purchase commitment. The agreement includes a payment to TALK of $1.1
million, the release of receivables and the release of $2.9 million dollars
of cash to the Company, the resolution of the shortfall charge, an
extension of its carrier agreement and the exchange of releases.

On November 18, 1999, Sam Hitner was confirmed as Chief Financial Officer
of the Company.

On October 13, 1999, Glenn Koach was appointed by the Company's Board of
Directors as President of the Company. In November 1999, the Company and
Mr. Koach entered into a one-year employment agreement with a base salary
and a bonus based on the Company's performance, profitability, and positive
cash flow.

On October 13, 1999, the then President and Chief Executive Officer
resigned his positions with the Company as well as resigning as a Director
of the Company and its subsidiaries. On that same day, the Company and the
former President entered into a Separation Agreement pursuant to which the
Company agreed to pay the former President severance pay of $190,000 less
all applicable employment withholding taxes.

Mr. Hitner had been appointed Acting Chief Financial Officer of the Company
on September 11, 1999, following the resignation of Mr. Peter Russo.

On September 11, 1999, the then Chief Financial Officer resigned his
position with the Company as well as resigning as a Director of the Company
and its subsidiaries. On that same day, the Company and the former Chief
Financial Officer entered into a Separation Agreement to pay him severance
pay of $120,000, $60,000 of which was paid on September 11, 1999 and
$60,000 of which is payable in $10,000 monthly payments thereafter from an
escrow account established by the Company in connection with the Separation
Agreement.

On September 11, 1999 the Company entered into a Consulting Agreement with
Torbay Management Services, Inc. ("Torbay"), a corporation controlled by
the former Chief Financial Officer, pursuant to which Torbay will provide
consulting services to the Company. Torbay will receive a monthly
consulting fee of $6,000 for the four-month term of the agreement. The
Company may extend the term for an additional two months. The Company can
offset payments due to Torbay by any amount received by the Chief Financial
Officer by an acquirer of the Company that are in excess of the amount due
to the Chief Financial Officer under the Separation Agreement.

F-19

Exhibit 10.26
SEPARATION AGREEMENT

Agreement made as of the 11th day of September, 1999, between Group
Long Distance, Inc., a corporation organized under the laws of the State of
Florida (the "Company"), and Peter J. Russo ("Russo").

WHEREAS, Russo has been employed by the Company as its Chief Financial
Officer, pursuant to an Employment Agreement dated May 1, 1997 (the "Employment
Agreement"); is a member of the Board of Directors of the Company and serves as
an officer and director of a subsidiary of the Company; and

WHEREAS, the Employment Agreement, by its terms, expires on April 30,
2000; and

WHEREAS, the Company and Russo wish to terminate the employment
relationship and the Employment Agreement, as well as terminate Russo's service
as a director of the Company and as an officer and director of the Company's
subsidiary effective September 11, 1999 (collectively referred to as
"Employment")

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Russo hereby agree as follows:

1. (a) Russo's employment with the Company shall terminate effective
September 11, 1999. Contemporaneously with the execution of this Separation
Agreement, Russo shall execute the following documents:

(i) Resignation as a member of the Board of Directors of
the Company.

(ii) Resignation as an officer of the Company.

(iii) Resignation as a director of Eastern Telecommunications
Incorporated.

(iv) Resignation as an officer of Eastern Telecommunications
Incorporated.

(b) In connection with the termination of Russo's Employment, Russo
shall receive a severance package consisting of (i) severance pay in the amount
of one hundred twenty

<PAGE>

thousand dollars ($120,000.00), less applicable withholdings, sixty thousand
dollars ($60,000.00) of which shall be paid to Russo contemporaneously with the
execution of this Separation Agreement by both parties. The remaining sixty
thousand dollars ($60,000.00) shall contemporaneously be deposited with John
Tomlinson, ("Escrow Agent") to be held by him in escrow in accordance with the
terms of this Agreement. Commencing October 11, 1999, and the eleventh day of
each month thereafter, Escrow Agent shall disburse the sum of ten thousand
dollars ($10,000.00) to Russo until this remaining sixty thousand dollars
($60,000.00) is paid in full. In the event that all of the Company's securities
or assets are sold or acquired or if legal proceedings or legal actions for the
liquidation of the Company are initiated during the term of this Separation
Agreement, then any payments due Russo from the funds deposited with the Escrow
Agent shall become immediately due and payable to Russo. In the event of Russo's
death during the term of this Separation Agreement, any sums due and owing shall
be paid to Russo's estate in accordance with the terms of this Separation
Agreement.

(c) In the event that all of the Company's securities or
assets are sold or acquired during the term of this Separation Agreement, then
any payments by the acquirer, or any person or entity on the acquirer's behalf,
paid to Russo or to any person or entity on Russo's behalf, shall be offset
against the funds paid to and due to Russo under this Separation Agreement. The
application of the offset shall not result in Russo receiving less than the sum
of one hundred twenty thousand dollars ($120,000.00) due Russo under this
Separation Agreement. As an example, in the event the acquirer is to pay Russo
in excess of one hundred twenty thousand dollars ($120,000.00), Russo shall
direct the acquirer to pay the sum of one hundred twenty thousand dollars
($120,000.00) the Company. In the event the acquirer is to pay Russo less than
one hundred twenty thousand dollars ($120,000.00), then Russo shall direct the
acquirer to pay the entire sum it is to pay Russo to the Company.

<PAGE>

Russo agrees to execute any documents necessary to facilitate the acquirers
payment of any such funds to the Company.

(d) Russo acknowledges the existence of a Consulting Agreement
executed contemporaneously with this Separation Agreement by and between the
Company and Torbay Management Services, Inc. Russo specifically agrees to abide
by the terms of P. 3(c) of such Consulting Agreement. Russo agrees to execute
any documents necessary to facilitate the acquirer's payment of any such funds
to the Company.

2. The Employment Agreement is incorporated herein and made a part
hereof as if it was fully set forth in this Separation Agreement. Russo hereby
ratifies and confirms all of the terms and conditions of the Employment
Agreement, including P. 7 AGREEMENT NOT TO COMPETE. The term of the AGREEMENT
NOT TO COMPETE shall be extended until the expiration of thirteen (13) months
from the date Company pays the last installment of severance pay to Russo.

3. Russo ratifies and confirms P. 13 CONFIDENTIALITY of the Employment
Agreement. In the event Russo is required by law to testify in any proceeding
involving the Company or its records, then before doing so, he shall immediately
advise Company and provide Company with a copy of any paper or pleading which
requires Russo to testify. Unless Company waives its rights in writing under P.
13 CONFIDENTIALITY of the Employment Agreement, Russo shall assert the existence
of the confidentiality provision of the Employment Agreement and shall not
testify until ordered to do so by a court or tribunal of competent jurisdiction.

4. Russo acknowledges the existence of a Consulting Agreement between
Company and Torbay Management Services, Inc. executed contemporaneously with
this Separation Agreement. Any breach by Torbay Management Services, Inc. under
the Consulting Agreement, shall constitute a breach under this Separation
Agreement. In the event of a breach of the Consulting Agreement or

<PAGE>

Separation Agreement, then Company is authorized to immediately notify Escrow
Agent of the existence of the default and order the Escrow Agent not to make
further payments of severance pay to Russo.

5. (a) (i) In consideration of the payments and other undertakings
provided for herein, the sufficiency of which is hereby acknowledged, Russo does
hereby fully, finally and unconditionally release and forever discharge the
Company and its affiliates and their respective employee welfare benefit plans,
fiduciaries, trustees, officers, directors, employees and agents from and waives
any and all claims Russo had, now has, or may have against any of them, whether
known or unknown, arising from his employment, his separation from employment,
or otherwise, under any local, state or federal statute, ordinance or law, or
under the common law of the United States or any of the states thereof,
concerning any matter or thing whatsoever, which arose from the beginning of
time up to and including the date on which this Agreement is fully executed.

(ii) For two years after the date all parties have executed
this Separation Agreement, the Company shall maintain its director and officer
insurance policy with benefits at least equal to the benefits provided under the
Company's present director and officer policy, American International Union Fire
Insurance Company of Pitts., P.A., policy number 861-41-13 (Directors' and
Officers' Policy). For the three year period following the expiration of the
initial two year period, so long as it is commercially reasonable, the Company
shall use its best efforts to maintain director and officer insurance coverage
with benefits at least equal to the benefits provided under the Directors' and
Officers' Policy.

<PAGE>

had, now has, or may have against him, whether known or unknown, arising from
his employment, his separation from employment, or otherwise, under any local,
state or federal statute, ordinance or law, or under the common law of the
United States or any of the states thereof, concerning any matter or thing
whatsoever, which arose from the beginning of time up to and including the date
on which this Agreement is fully executed.

6. In the event of any dispute between the parties hereto arising out
of or relating to this Agreement, such dispute shall be settled by arbitration
in Fort Lauderdale, Florida, in accordance with the commercial arbitration rules
then in effect of the American Arbitration Association, except that there shall
be one arbitrator selected with respect to any such arbitration proceeding.
Judgment upon the award rendered may be entered in any court having jurisdiction
thereof. Notwithstanding anything to the contrary, if any dispute arises between
the parties under P. 2 of this Separation Agreement, the Company shall not be
required to arbitrate such dispute or claim, but shall the right to institute
judicial proceedings either at law or equity, in any court of competent
jurisdiction with respect to such dispute or claim. If such judicial proceedings
are instituted, the parties agree that such proceedings shall not be stayed or
delayed pending the outcome of any arbitration proceedings hereunder.

7. Any notice or other communication required or permitted under this
Agreement shall be effective only if it is in writing and delivered personally
or sent by registered or certified mail, postage prepaid, addressed as follows:

If to the Company: Glenn Koach, Executive Vice President
Group Long Distance, Inc.
1451 West Cypress Creek Road
Suite 200
Fort Lauderdale, Florida 33309

with copy to: Thomas R. Tatum, Esq.

<PAGE>

Brinkley, McNerney, Morgan, Solomon &
Tatum, LLP
200 East Las Olas Boulevard
Suite 1800
Fort Lauderdale, Florida
33301

If to Russo: Peter J. Russo
12685 Torbay Drive
Boca Raton, Florida 33428

or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.

8. This Agreement constitutes the entire agreement between the parties
hereto with respect to Russo's employment with, and separation from, the
Company, and supersedes and is in full substitution for any and all prior
understandings or agreements with respect to Russo's employment with the
Company.

9. This Agreement may be amended only by an instrument in writing
signed by the parties hereto, and any provision hereof may be waived only by an
instrument in writing signed by the party or parties against whom or which
enforcement of such waiver is sought. The failure of either party hereto at any
time to require the performance by the other party hereto of any provision
hereof shall in no way affect the full right to require such performance at any
time thereafter, nor shall the waiver by either party hereto of a breach of any
provision hereof be taken or held to be a waiver of any succeeding breach of
such provision or a waiver of the provision itself or a waiver of any other
provision of this Agreement.

10. This Agreement is binding on and is for the benefit of the parties
hereto and their respective successors, heirs, executors, administrators and
other legal representatives. Neither this Agreement nor any right or obligation
hereunder may be assigned by the Company (except to an affiliate) or by Russo.

<PAGE>

11. This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida (without giving effect to its choice of
law principles).

12. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
instrument.

13. In the event of any dispute between the parties arising from this
Separation Agreement, the prevailing party shall be entitled to its costs and
reasonable attorney's fees, including all appellate levels.

IN WITNESS WHEREOF, the Company and Russo have executed this Agreement
as of the date first written above.

/s/ Peter J. Russo
- ------------------------ -------------------------
PETER J. RUSSO COMPANY

GROUP LONG DISTANCE, INC.

By: /s/ Glenn S. Koach
-------------------------
GLENN S. KOACH

Exhibit 10.27

CONSULTING AGREEMENT

Agreement made as of the 11th day of September, 1999, between Group
Long Distance, Inc., a corporation organized under the laws of the State of
Florida (the "Company"), and Torbay Management Services, Inc., a corporation
organized under the laws of the State of Florida ("Torbay").

WHEREAS, the Company desires to engage Torbay to provide consulting
services, and Torbay desires to provide consulting services to the Company, but
only on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Torbay hereby agree as follows:

1. The Company shall engage Torbay and Torbay shall serve the Company, for
the period beginning September 11, 1999 and expiring on January 10, 2000 (the
term of this Agreement).

2. During the term of this Agreement, Torbay shall be available to
provide such consulting services as may be requested of it by the Company, it
being expected that such services will require approximately eighty (80) hours
of Torbay's time each month. It is anticipated that the services to be performed
by Torbay during the term of this Agreement will consist of the following:
answering inquiries from and assisting officers and employees of the Company
concerning the Company's operations including, but not limited to, collating,
accounting and tax information concerning the Company's operations, providing
background information, as necessary on the Company's operations, preparing
replies for officers and employees of the Company regarding administrative
matters relating to inquiries, whether pending or which arise during the term of
this Consulting Agreement, from regulatory authorities such as public service
commissions, public utilities commissions, State Attorney General's offices and
the Federal Communication Commission and attending meetings and providing other
services normally associated with assisting in the management of the Company as
may be requested by the Company from time to time. In providing consulting
services under this Agreement, Torbay (and any of its officers, directors and
employees) will not have the authority to bind the Company and may not hold
itself out as a representative or agent of the Company. All of Torbay's
consulting services shall be performed to the satisfaction of the Company.

(a) During the term of this Agreement, the Company shall pay Torbay a
consulting fee of twenty four thousand dollars ($24,000.00) (the "Consulting
Fee"), payable as follows: (payable in equal monthly installments of six
thousand dollars ($6,000.00) over the term of this Agreement.)

<PAGE>

(b) At the option of Company, this Consulting Agreement can be extended for
two (2) additional months, at six thousand dollars ($6000.00) per month, by
giving thirty (30) days written notice to Torbay prior to the expiration of the
initial four (4) month term of this Consulting Agreement. In the event all of
the securities or assets of the Company are sold or acquired or if legal
proceedings or legal actions for the liquidation of the Company are initiated
during the period of this Consulting Agreement, the Consulting Fee shall become
due and payable as of the date of acquisition. In the event the date of
acquisition is prior to the expiration of the initial four (4) month term of
this Consulting Agreement, the term Consulting Fee shall include those payments
due for the extended two (2) month period, as if Company had exercised its right
to extend the term of this Consulting Agreement.

(c) In the event that Company is acquired during the term of this
Consulting Agreement, then any payments by the acquirer, or any person or entity
on the acquirer's behalf, paid to Peter J. Russo ("Russo"), or to any person or
entity on Russo's behalf, then any Consulting Fee payments made or due to Torbay
under this Consulting Agreement shall be offset against the funds paid to and
due to Torbay under this Consulting Agreement. The Company's right of offset for
sums paid to Torbay under this Consulting Agreement shall apply to any portion
of funds due to Russo by the acquirer in excess of one hundred twenty thousand
dollars ($120,000.00). As an example, in the event the acquirer is to pay Russo
in excess of one hundred twenty thousand dollars ($120,000.00), Russo shall
direct the acquirer to pay to the Company any amount in excess of one hundred
twenty thousand dollars ($120,000.00) and up to the amount paid to Torbay under
the terms of this Consulting Agreement. Torbay agrees to execute any documents
necessary to facilitate the acquirer's payment of any such funds to the Company.

(d) Other than out-of-pocket expenses preapproved by Company, Torbay shall
not be entitled to payment or reimbursement for any expense in connection with
performance of the services under this Consulting Agreement. Company shall not
be responsible to provide Torbay or any of its employees with reimbursement for
automobile, medical or disability insurance benefits and shall not be
responsible for the direct payment of any such benefits.

(e) During the term of this Consulting Agreement, Company shall provide
Torbay with office space and support necessary to the performance of Torbay's
consulting services, such office space and support services to be determined by
Company.

2
<PAGE>

(f) Torbay (and any of its officers, directors and employees) shall
be an independent contractor, not an employee of the Company, in the performance
of the consulting services under this Agreement, and, accordingly, shall be
responsible for the payment of any and all taxes associated with the Consulting
Fee.

(g) (g) All of Torbay's consulting services shall be performed by Russo. In the
event Russo fails to perform such consulting services or if Russo dies during
the term of this Agreement, then this Agreement shall terminate and the Company
shall not be obligated to pay the Consulting Fee.

3. The parties acknowledge that Torbay, for the term of this Agreement,
will be covered under the Company's Professional Indemnity Insurance policy and
will not be covered under the Company's Directors and Officers Insurance policy.

4. Torbay (and any of its officers, directors and employees) shall not
divulge or communicate to any person (except in performing the consulting
services under this Agreement) or use for its own purposes trade secrets,
confidential commercial information, or any other information, knowledge or data
of the Company or of any of its affiliates which is not generally known to the
public and shall use its best efforts to prevent the publication or disclosure
by any other person of any such secret, information, knowledge or dat All
documents and objects made, compiled, received, held or used by Torbay while
performing consulting services for the Company in connection with the business
of the Company shall be and remain the Company's property and shall be delivered
by Torbay to the Company upon the termination of this Agreement or at any
earlier time requested by the Company.

5. In the event of any dispute between the parties hereto arising out of
or relating to this Agreement (except any dispute with respect to paragraph 5
hereof), such dispute shall be settled by arbitration in Fort Lauderdale,
Florida, in accordance with the commercial arbitration rules then in effect of
the American Arbitration Association, except that there shall be one arbitrator
selected with respect to any such arbitration proceeding. Judgment upon the
award rendered may be entered in any court having jurisdiction thereof.
Notwithstanding anything herein to the contrary, if any dispute arises between
the parties under paragraph 5, the Company shall not be required to arbitrate
such dispute or claim but shall have the right to institute judicial proceedings
either at law or in equity, in any court of competent jurisdiction with respect
to such dispute or claim. If such judicial proceedings are instituted, the
parties agree that such proceedings shall not be stayed or delayed pending the
outcome of any arbitration proceeding hereunder.

3
<PAGE>

6. Any notice or other communication required or permitted under this
Agreement shall be effective only if it is in writing and delivered personally
or sent by registered or certified mail, postage prepaid, addressed as follows:

If to the Company: Glenn Koach, Executive Vice President
Group Long Distance, Inc.
1451 West Cypress Creek Road
Suite 200
Fort Lauderdale, Florida 33309

with copy to: Thomas R. Tatum, Esq.
Brinkley, McNerney, Morgan, Solomon & Tatum, LLP
200 East Las Olas Boulevard
Suite 1800
Fort Lauderdale, Florida 33301

If to Torbay: Peter J. Russo
12685 Torbay Drive
Boca Raton, Florida 33428

1. This Agreement constitutes the entire agreement between the parties
hereto with respect to Torbay's relationship with the Company, and supersedes
and is in full substitution for any and all prior understandings or agreements
with respect to Torbay's consulting relationship with the Company.

2. This Agreement may be amended only by an instrument in writing signed
by the parties hereto, and any provision hereof may be waived only by an
instrument in writing signed by the party or parties against whom or which
enforcement of such waiver is sought. The failure of either party hereto at any
time to require the performance by the other party hereto of any provision
hereof shall in no way affect the full right to require such performance at any
time thereafter, nor shall the waiver by either party hereto of a breach of any
provision hereof be taken or held to be a waiver of any succeeding breach of
such provision or a waiver of the provision itself or a waiver of any other
provision of this Agreement.

3. This Agreement is binding on and is for the benefit of the parties
hereto and their respective successors, heirs, executors, administrators and
other legal representatives. Neither this Agreement nor any right or obligation
hereunder may be assigned by the Company (except to an affiliate) or by Torbay.

4. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida (without giving effect to its choice of law
principles).

5. This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same
instrument.

<PAGE>

6. The obligations of Torbay set forth in paragraphs 5 and 6 represent
independent covenants by which Torbay is and will remain bound notwithstanding
any breach by the Company, and shall survive the termination of this Agreement.

7. In the event of any dispute between the parties arising from this
Separation Agreement, the prevailing party shall be entitled to its costs and
reasonable attorney's fees, including all appellate levels.

8. IN WITNESS WHEREOF, the Company and Torbay have executed this Agreement
as of the date first written above.

- --------------------------------
TORBAY COMPANY

TORBAY MANAGEMENT SERVICES, INC. GROUP LONG DISTANCE, INC.

By: /s/ Peter J. Russo By: /s/ Glenn S. Koach
---------------------------- ----------------------------

Exhibit 10.28

SEPARATION AGREEMENT
--------------------

Agreement made as of October 13, 1999, between Group Long Distance,
Inc., a corporation organized under the laws of the State of Florida (the
"Company"), and Gerald M. Dunne, Jr. ("Dunne").

WHEREAS, Dunne has been employed by the Company as its President and
Chief Executive Officer, pursuant to an Employment Agreement effective February
28, 1997 (the "Employment Agreement"); is a member of and Chairman of the Board
of Directors of the Company and serves as an officer and director of
subsidiaries of the Company; and

WHEREAS, the Employment Agreement, by its terms, expires on February
27, 2000; and

WHEREAS, the Company and Dunne wish to terminate the employment
relationship and the Employment Agreement, as well as terminate Dunne's service
as a director of the Company and as an officer and director of the Company's
subsidiaries effective October 13, 1999 (collectively referred to as
"Employment")

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Dunne hereby agree as follows:

1. (a) Dunne's employment with the Company shall terminate effective
October 13, 1999. Contemporaneously with the execution of this Separation
Agreement, Dunne shall execute the following documents:

(i) Resignation as a member of the Board of
Directors of the Company.

(ii) Resignation as an officer of the Company.

(iii) Resignation as a director of Eastern
Telecommunications Incorporated.

(iv) Resignation as an officer of Eastern
Telecommunications Incorporated.

(v) Resignation as an officer and director of all
other subsidiaries of the Company.

<PAGE>

(b) In connection with the termination of Dunne's Employment,
Dunne shall receive severance compensation consisting of (i) severance pay in
the amount of one hundred ninety thousand dollars ($190,000.00), ("Lump Sum
Amount"), less all applicable employment withholding tax in an amount not less
than thirty percent (30%) of the Lump Sum Amount. The remaining balance of the
Lump Sum Amount in the approximate amount of one hundred thirty three thousand
dollars ($133,000.00) shall be distributed as follows:

(i) the approximate sum of sixty six thousand five
hundred dollars ($66,500.00) shall be retained by GLD and remitted directly to
the Internal Revenue Service for credit against any unpaid personal or
employment tax obligations, including penalties and interest, for bonuses,
salary or other compensation paid by GLD to Dunne in 1997, 1998 and 1999. Such
remittance shall be applied to the oldest outstanding tax obligation.

(ii) the sum of twenty two thousand one hundred
sixty-five dollars ($22,165.00) of the Lump Sum Amount shall be distributed to
Dunne contemporaneously with the execution of this Agreement.

(iii) the remaining balance of approximately forty
four thousand three hundred thirty-five dollars ($44,335.00) of the Lump Sum
Amount shall be distributed to Dunne when all the conditions set forth below
have been fulfilled:

(a) Dunne shall pledge all GLD stock owned
by him as collateral for the payment of any outstanding tax obligation as
described above. Dunne shall execute a pledge agreement in the form attached as
Exhibit "A"; and

(b) Dunne shall file personal federal income
tax returns for 1997 and 1998. Dunne's personal federal income tax returns shall
be executed by Dunne and

2
<PAGE>

subsequently certified by the tax preparer, who shall forward the returns to the
Internal Revenue Service for filing.

(i) Dunne shall cooperate with Company and the
resolution of any claim by the Internal Revenue Service for unpaid taxes as
described above.

(ii) Dunne shall indemnify Company against any loss
or damage, including costs and attorney's at any level, in connection with
damages, penalties or interest imposed by the Internal Revenue Service regarding
Dunne's nonpayment of the taxes described above.

(c) In the event that all of the Company's securities or
assets are sold or acquired during the term of this Separation Agreement, then
any payments by the acquirer, or any person or entity on the acquirer's behalf,
paid to Dunne or to any person or entity on Dunne's behalf, shall be offset
against the funds paid to and due to Dunne under this Separation Agreement. The
application of the offset shall not result in Dunne receiving less than the sum
of one hundred ninety thousand dollars ($190,000.00) due Dunne under this
Separation Agreement. As an example, in the event the acquirer is to pay Dunne
in excess of one hundred ninety thousand dollars ($190,000.00), Dunne shall
direct the acquirer to pay the sum of one hundred ninety thousand dollars
($190,000.00) to the Company. In the event the acquirer is to pay Dunne less
than one hundred ninety thousand dollars ($190,000.00), then Dunne shall direct
the acquirer to pay the entire sum it is to pay Dunne to the Company. Dunne
agrees to execute any documents necessary to facilitate the acquirers payment of
any such funds to the Company.

(d) GLD shall provide to Dunne, for the twenty-four (24) month
period following the date of the execution of this Severance Agreement by all
parties, health insurance substantially similar to those insurance benefits
which Dunne is receiving, immediately prior to the date of execution of this
Severance Agreement by all parties. Notwithstanding the foregoing, the health

3
<PAGE>

insurance provided pursuant to this paragraph shall immediately cease in the
event GLD ceases doing business.

(e) GLD shall pay the September and October, 1999, monthly
installments of nine hundred ninety-eight and 54/100 dollars ($998.54)
representing lease payments on Dunne's lease with Lexus Financial Services,
Account No. 04064282148. GLD shall thereafter pay ten (10) months of the monthly
installments of approximately six hundred ($600.00) dollars representing lease
payments on Dunne's newly-leased automobile. All payments made by GLD pursuant
to this paragraph shall be paid directly to the automobile lessor under their
lease with Dunne.

2. At the sole discretion of GLD, it may offer Dunne specific
consulting assignments at the rate of two hundred fifty dollars ($250.00) per
hour. All such assignments accepted by Dunne shall be performed by Dunne within
a reasonable amount of time. Such assignments will consist of duties
commensurate with those duties you have customarily discharged during your term
of employment. All assigned work shall be preapproved by GLD, and GLD shall have
the right to place a limitation on the total number of hours with respect to a
specific assignment. GLD is not required to assign any work to Dunne pursuant to
this paragraph.

3. Dunne waives any and all rights under the Employment Agreement and
acknowledges that this Separation Agreement is the sole repository of the terms
and conditions of Dunne's Separation from employment by GLD.

4. Dunne hereby ratifies and confirms all of the terms and conditions
of P. 8 Non-competition of the Employment Agreement and acknowledges that the
terms of such paragraph are incorporated herein by reference and made a part
hereof. The term of the Non-competition shall be extended until the expiration
of thirteen (13) months from the date Company pays the last installment of
severance pay to Dunne.

4
<PAGE>

5. (a) Dunne shall keep confidential all proprietary and other
information concerning the Company and its business, including but not limited
to information concerning the Company's customers, vendors and others with whom
it transacts business, its methods of operation and other trade secrets, its
future plans and strategies, and any financial information concerning the
Company (collectively, "Confidential Information"). Dunne agrees that all
Confidential Information is the exclusive property of the Company and that Dunne
will not remove the originals or make copies of any Confidential Information
without the Company's prior written consent. Dunne shall not use Confidential
Information for any purposes other than to carry out his obligations under this
Agreement and will not divulge Confidential Information to any other person or
entity during or after the term of this Agreement without the Company's prior
written consent, unless required by law or judicial or other process. The
provisions of this Section 13 shall continue to apply to the parties after this
Agreement is terminated.

(b) Unless Company waives its rights in writing under P. 13
CONFIDENTIALITY of the Employment Agreement, Dunne shall assert the existence of
the confidentiality provision of the Employment Agreement and shall not testify
until ordered to do so by a court or tribunal of competent jurisdiction.

6. (a) (i) In consideration of the payments and other undertakings
provided for herein, the sufficiency of which is hereby acknowledged, Dunne does
hereby fully, finally and unconditionally release and forever discharge, for
himself, his personal representatives, successors, heirs and assigns, the
Company and its affiliates and their respective employee welfare benefit plans,
fiduciaries, trustees, officers, directors, employees and agents from and waives
any and all claims Dunne had, now has, or may have against any of them, whether
known or unknown, arising from his employment, his separation from employment,
or otherwise, under any local, state or federal statute,

5
<PAGE>

ordinance or law, or under the common law of the United States or any of the
states thereof, concerning any matter or thing whatsoever, which arose from the
beginning of time up to and including the date on which this Agreement is fully
executed.

(b) In consideration of the payments and other undertakings
provided for herein, the sufficiency of which is hereby acknowledged, Company
does hereby fully, finally and unconditionally release and forever discharge
Dunne from and waives any and all claims Company had, now has, or may have
against him, whether known or unknown, arising from his employment, his
separation from employment, or otherwise, under any local, state or federal
statute, ordinance or law, or under the common law of the United States or any
of the states thereof, concerning any matter or thing whatsoever, which arose
from the beginning of time up to and including the date on which this Agreement
is fully executed.

7. In the event of any dispute between the parties hereto arising out
of or relating to this Agreement, such dispute shall be settled by arbitration
in Fort Lauderdale, Florida, in accordance with the commercial arbitration rules
then in effect of the American Arbitration Association, except that there shall
be one arbitrator selected with respect to any such arbitration proceeding.
Judgment

6
<PAGE>

upon the award rendered may be entered in any court having jurisdiction thereof.
Notwithstanding anything to the contrary, if any dispute arises between the
parties under P. 2 of this Separation Agreement, the Company shall not be
required to arbitrate such dispute or claim, but shall the right to institute
judicial proceedings either at law or equity, in any court of competent
jurisdiction with respect to such dispute or claim. If such judicial proceedings
are instituted, the parties agree that such proceedings shall not be stayed or
delayed pending the outcome of any arbitration proceedings hereunder.

8. Any notice or other communication required or permitted under this
Agreement shall be effective only if it is in writing and delivered personally
or sent by registered or certified mail, postage prepaid, addressed as follows:

If to the Company: Glenn Koach, Executive Vice President
Group Long Distance, Inc.
1451 West Cypress Creek Road
Suite 200
Fort Lauderdale, Florida 33309

with copy to: Thomas R. Tatum, Esq.
Brinkley, McNerney, Morgan, Solomon & Tatum, LLP
200 East Las Olas Boulevard
Suite 1800
Fort Lauderdale, Florida 33301

If to Dunne: Gerald M. Dunne, Jr.
1379 NW 100th Drive
Coral Springs, FL 33071

or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.

9. This Agreement constitutes the entire agreement between the parties
hereto with respect to Dunne's employment with, and separation from, the
Company, and supersedes and is in

7
<PAGE>

full substitution for any and all prior understandings or agreements with
respect to Dunne's employment with the Company.

10. This Agreement may be amended only by an instrument in writing
signed by the parties hereto, and any provision hereof may be waived only by an
instrument in writing signed by the party or parties against whom or which
enforcement of such waiver is sought. The failure of either party hereto at any
time to require the performance by the other party hereto of any provision
hereof shall in no way affect the full right to require such performance at any
time thereafter, nor shall the waiver by either party hereto of a breach of any
provision hereof be taken or held to be a waiver of any succeeding breach of
such provision or a waiver of the provision itself or a waiver of any other
provision of this Agreement.

11. This Agreement is binding on and is for the benefit of the parties
hereto and their respective successors, heirs, executors, administrators and
other legal representatives. Neither this Agreement nor any right or obligation
hereunder may be assigned by the Company (except to an affiliate) or by Dunne.

12. This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida (without giving effect to its choice of
law principles).

13. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which shall constitute one and the same
instrument.

14. In the event of any dispute between the parties arising from this
Separation Agreement, the prevailing party shall be entitled to its costs and
reasonable attorney's fees, including all appellate levels.

8
<PAGE>

IN WITNESS WHEREOF, the Company and Dunne have executed this Agreement
as of the date first written above.

GROUP LONG DISTANCE, INC.

/s/ Gerald M. Dunne, Jr. By: /s/ Glenn S. Koach
- ---------------------------------- --------------------------------
GERALD M. DUNNE, JR.

EMPLOYMENT AGREEMENT
--------------------

This AGREEMENT between GROUP LONG DISTANCE, INC. (hereinafter the
"Company") and GLENN KOACH, an individual (hereinafter the "Employee") is
entered into as of and will be effective as of November 15, 1999.

WHEREAS, the Employee is currently employed as President and Chief
Executive Officer of the Company and serves as a Director of the Company; and

WHEREAS, the Company desires that the Employee continue to be employed
and serve as President and Chief Executive Officer of the Company and to serve
as a Director of the Company; and

WHEREAS, the Employee wishes to be so employed;

NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows:

1. EMPLOYMENT.
-----------

The Company agrees to employ the Employee in the position of President
and Chief Executive Officer, as provided for in the By-Laws of the Company and
the Employee agrees to continue employment with the Company on the terms and
conditions hereinafter set forth. The Employee shall serve as a Director of the
Company during the term of this Agreement.

2. DUTIES.
-------

(a) The Employee shall perform satisfactorily all duties of his
position, as provided for in the By-Laws of the Company and as determined from
time-to-time by the Board of Directors of the Company ("Board of Directors").

(b) The Employee shall devote such time to the development and
operations of the Company's business as is necessary or advisable.

<PAGE>

(d) As Chief Executive Officer, all employees of the Company shall
report directly to Employee.

(e) The Employee shall abide by the policies, standards and rules
established from time-to-time by the Board of Directors for the conduct of the
business of the Company. The Employee will not intentionally or negligently act
in any manner to cause financial or other damage to the Company or the Company's
reputation the community in which its business is located. The Board of
Directors reserves the right to change, interpret, withdraw or add to any of the
policies, standards and rules of the Company at any time as it deems
appropriate. The Board of Directors shall not entertain discussion regarding
amendments to this Agreement or the termination of Employee without prior notice
to Employee.

(f) In the operations of the Company, the Employee will continue to
cooperate in allowing information from key employees of the Company to be
communicated to the Board of Directors. The Employee will not interfere with
members of the Board of Directors making reasonable inquiry into the affairs of
the Company and will not stifle free flow of information to them.

3. TERM.
-----

(a) The term of this Agreement shall commence as of November 15,
1999, and shall be in force for one (1) year. The Agreement shall be
automatically renewed for one,(1) year periods in full force and effect from
the expiration of any period hereunder, unless one of the parties

2
<PAGE>

hereto shall give written notice to the other party not less than ninety (90)
days prior to the expiration of such period, of the party's intention to
termninate the Agreement at the expiration of such period.

(b) If one of the parties hereto gives proper notice to the other
party that this Agreement will not be automatically renewed pursuant to the
provisions of Section 3(a) hereof, the Employee (i) shall continue his
employment with the Company until the expiration of the current term of this
Agreement; and (ii) shall continue to receive all compensation and benefits to
which the Employee is entitled under this Agreement until the expiration of such
period.

4. COMPENSATION AND BENEFITS:
--------------------------

(a) For all services rendered by the Employee for each contract
year, the Employee shall receive a base salary of ONE HUNDRED FIFTY THOUSAND
DOLLARS ($150,000.00) per year.

(b) Upon execution of a Settlement Agreement between the Company and
TALK.COM, Employee shall be entitled to the immediate receipt of a cash bonus in
the amount of FIFTEEN THOUSAND DOLLARS ($15,000.00).

(c) The Employee shall be entitled to stock options in accordance
with the Company's 1996 Stock Option Plan on the terms and conditions of the
Option Agreement.

(d) The Employee shall be entitled to fifteen (15) days of vacation
which maybe used as long as such vacation time does not interfere with normal
business operations and the Employee's duties as President and Chief Executive
Officer.

(e) The Employee shall be entitled to such sick days and personal
days as may be established by the Company for officers of the Company.

3
<PAGE>

(f) At the sole discretion of the Option and Compensation Committee
of the Board of Directors (the "Committee") the Employee may be granted a bonus
from time to time, the amount of which shall be determined by the Committee. The
Committee will consider certain factors in making such determination, including
but not limited to, the Company's performance, profitability, positive cash
flow, and any other significant event or matter.

(g) The Employee shall be entitled to a car allowance equal to Five
Hundred Dollars ($500.00) per month.

(h) The Employee shall be entitled to full health benefits during
the term of this Agreement.

5. TERMINATION OF EMPLOYMENT.
--------------------------

(a) During the term of this Agreement, the Company may terminate the
Employee for Cause (as defined herein) and without Cause. The Company must give
written notice of any such termination.

(b) If the Company terminates the Employee during the term of this
Agreement for Cause, the Employee shall not be entitled to receive any further
installments of Employee's base salary or any other compensation (including
severance payments) from the Company pursuant to this Agreement or otherwise.

(c) If the Company terminates the Employee during the term of this
Agreement without Cause, the Employee shall be entitled to receive a severance
payment equal to three (3) months of the Employee's base salary. The Employee
shall cease to be entitled to such severance payment in the event that the
Employee violates the terms of Section 7 of this Agreement. The Employee shall
be entitled to such severance payment as of the date written notice of
termination

4
<PAGE>

is provided to the Employee. Such compensation shall be paid in equal monthly
installments over a period of three (3) months.

(d) "Cause" for purposes of this Section 5 shall mean the
Employee's: (a) engagement in gross misconduct materially injurious to the
Company; or (b) knowing and willful neglect or refusal to attend to the material
duties assigned to him by the Board of Directors of the Company, which is not
cured within thirty (30) days after written notice; or (c) intentional
misappropriation of property of the Company to the Employee's own use; or (d)
commission of an act of fraud or embezzlement; or (e) conviction for a crime
(excluding minor traffic offenses).

6. REIMBURSEMENT OF EXPENSES.
-------------------------

The Company shall reimburse the Employee for the Employee's reasonable
expenses incurred by the Employee in connection with the Employee's duties under
this Agreement. The Employee shall comply with all reasonable record keeping
requirements of the Company with respect to the reimbursement of expenses.

7. AGREEMENT NOT TO COMPETE.
-------------------------

(a) During the terms of this Agreement and for a period of three (3)
months after the termination of this Agreement, the Employee agrees not to
engage in the telecommunication business, either directly or indirectly, other
than on behalf of the Company and its affiliated companies without the written
approval of the Board of Directors of the Company. The term telecommunication
business shall be deemed to include long distance business (national and
international), mobile communications, beepers, local access communications and
debit card or other prepaid calling services and other similar business.
Further, during the period of employment, the Employee agrees not to undertake
any outside business investment opportunity that may reasonably

5
<PAGE>

be deemed to conflict with the interests of the Company or an usurpation of
corporate opportunity for the Company, without the written approval of the Board
of Directors of the Company.

(b) If any portion of the restrictions set forth above should, for
any reason whatsoever, be declared invalid by a court of competent jurisdiction,
the validity or enforceability of the remainder of such restrictions shall not
thereby be adversely affected.

(c) The Employee declares that the foregoing scope, territorial and
time limitations are reasonable and properly required for the adequate
protection of the business of the Company. In the event any such scope,
territorial or time limitation is deemed to be unreasonable by a court of
jurisdiction, the Employee agrees to the reduction of said scope, territorial or
time limitation to such scope, area or period which said court shall have deemed
reasonable.

(d) The existence of any claim or cause of action by the Employee
against the Company other than under this Agreement shall not constitute a
defense to the enforcement by the Company of the foregoing restrictive
covenants, but such claim or cause of action shall be litigated separately.

8. ENTIRE AGREEMENT.
-----------------

This instrument contains the entire agreement of the parties. It may
not be changed orally. It may only be changed by an agreement in writing signed
by the party against whom enforcement of any waiver, change, modification,
extension or discharge is sought

This Agreement supersedes in its entirety all prior employment
agreements between the Company and the Employee.

9. SITUS.
------

This Agreement shall be governed by the laws of the State of Florida.

6
<PAGE>

10. SUCCESSORS AND ASSIGNS.
-----------------------

This Agreement shall be binding on the Company's successors and
assigns.

11. SEVERABILITY.
-------------

The invalidity or unenforceability of any provision of this Agreement
shall in no way affect the validity or enforceability of any other provision.

12. WAIVER OF BREACH.
-----------------

The waiver by the Employee or the Company of any breach of any
provision of this Agreement by the other shall not operate or be construed as a
waiver of any subsequent breach by the other.

13. CONFIDENTIALITY.
----------------

The Employee shall keep confidential all proprietary and other
information concerning the Company and its business, including but not limited
to information concerning the Company's customers, vendors and others with whom
it transacts business, its methods of operation and other trade secrets, it
future plans and strategies, and any financial information concerning the
Company (collectively, "Confidential Information"). The Employee agrees that all
Confidential Information is the exclusive property of the Company and that
Employee will not remove the originals or make copies of any Confidential
Information without the Company's prior written consent. The Employee shall not
use Confidential Information for any purposes other than to carry out his
obligations under this Agreement and will not divulge Confidential Information
to any other person or entity during or after the term of this Agreement without
the Company's prior written consent, unless required by law or judicial or other
process. The provisions of this Section 13 shall continue to apply to the
parties after this Agreement is terminated.

7
<PAGE>

14. ARBITRATION.
------------

In the event the Employee has any dispute, controversy or claim with
the Company, including but not limited to arty claim for wrongfull termination,
sexual harassment or discrimination under the laws of the State of Florida or
the United States (excepting only worker's compensation, unemployment or
temporary disability claims submitted in accordance with State law), any such
dispute, controversy or claim shall be submitted to arbitration in accordance
with the American Arbitration Association's National Rules for the Resolution of
Employment Disputes. The American Arbitration Association shall appoint a single
arbitrator to hear and decide the dispute and any locate for any hearing will be
at the American Arbitration Association's office closest to the Company's
offices in Fort Lauderdale, Florida, or at such other location as the parties
may mutually agree upon. The arbitrator appointed by the American Arbitration
Association shall issue an opinion and award which shall be final and binding
upon both the Employee and the Company. All such disputes, controversies or
claims shall be filed with the American Arbitration Association within six (6)
months after the alleged incident, event or circumstance which gave rise to the
dispute, controversy or claim. The alternative dispute resolution mechanism
provided for in this Section 14 shall not preclude the Company from seeking or
obtaining judicial relief in the event the Employee violates any provision of
this Agreement, particularly any breach of Sections 7 and 13.

IN WITNESS WHEREOF, the parties have executed the Agreement effective
as of the date first above written.

GROUP LONG DISTANCE, INC.

By: /s/ Glenn Koach By: /s/ John L. Tomlinson
- ------------------------------- -------------------------------
Glenn Koach John L. Tomlinson
Chairman of the Board

SUBLEASE AGREEMENT

This Sublease Agreement (the "Sublease") is executed this 4th day of
November, 1999, by and between ADMINASSISTANCE, INC., a District of Columbia
corporation ("Sublessor") and GROUP LONG DISTANCE, INC. a Florida corporation
("Sublessee").

WITNESSETH:

WHEREAS, 15-PLUS HOLDING COMPANY, a California corporation, as
Landlord ("Landlord") and Sublessor as Tenant executed a Lease Agreement dated
June 2, 1997 (the "Lease"), with respect to certain Premises described therein
(the "Premises"), a copy of which is attached hereto as Exhibit A; and

WHEREAS, Sublessor desires to sublease the entire Premises (the
"Subleased Premises") under and subject to the terms of the Lease and Sublessee
desires to lease the Subleased Premises from Sublessor.

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto covenant and
agree as follows:

1. Lease. This Sublease is expressly made subordinate and subject to all of the
terms, conditions and limitations contained in the Lease, with which Sublessee
agrees to comply, to the extent applicable, except Sublessee's rental
obligations shall be as set forth in this Sublease. Should Sublessor default in
payment of Rent due to the Landlord under the Lease, Sublessee has the right to
pay any amounts not paid by Sublessor and Landlord's consent to such payment is
acceptance by Landlord as performance on the part of Sublessor, in keeping the
Lease in full force and effect. Any such payment by the Sublessee shall be
credited on the amounts next due from Sublessee to Sublessor under this
Sublease. If any conflict between the Lease and the Sublease occurs, the
provisions of the Lease shall control.

2. Term. The term of this Sublease shall be for the period from November 15,
1999, through June 30, 2000, the termination of the Lease by its terms.

3. Rent; Default.
--------------

a. Sublessee shall pay for the use and occupancy of the Subleased
Premises a monthly total rental in the amount of One Thousand
Five Hundred Dollars ($1,500.00). Sublessee shall not be
obligated to pay any Additional Rent as defined under the
Lease, except for Additional Services as provided under
Paragraph 5 of this Sublease. Sublessee's payments of rent
under this Sublease shall be due on or before the first day of
each month for the term of the Lease and Sublease, and
Sublessee shall be deemed to be in default hereunder if rent
is not paid by the tenth (10th) day of the month.

b. Sublessor unconditionally assigns to Landlord any and all
payments due from Sublessee to Sublessor under the Sublease
(the "Rents"). Sublessor acknowledges that this assignment is
present, absolute and unconditional and Landlord shall
therefore have the right to collect the Rents and to apply
them in payment of any sums payable by Sublessor under the
Lease. However, Sublessor shall have a license to collect the
Rents until the occurrence of a default by Sublessor under the
Lease. If a default occurs, Sublessor's right to collect the
Rents shall be suspended until the default is cured. During
such period, Landlord shall have the right to collect the
Rents and apply them toward Sublessor's obligations under the
Lease. Landlord's acceptance of any payment from

<PAGE>

Sublessee as a result of any default does not release
Sublessor from liability under the terms, covenants,
conditions, provisions or agreements under the Lease.

c. Sublessee shall pay Rents to Sublessor at the Washington, D.C.
address set forth in Paragraph 7 of this Sublease, below, or
at such place as Sublessor may designate from time to time in
writing (and such rent payments shall be delivered to
Sublessor at such address by the due date therefor), unless
and until Sublessee is notified by Landlord that it shall
begin paying rents directly to Landlord, in which event
Sublessee shall pay the Rents to Landlord at

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

d. Sublessee shall be deemed to be in default under this Sublease
in the event that Sublessee (i) fails to pay the rent due
hereunder within ten (10) days after the date such rent is
due, or (ii) fails to observe or perform any of the other
terms hereof, and the same continues for a period often (10)
days after written notice thereof from Sublessor.

e. Upon the execution hereof, Sublessee shall pay Sublessor
an amount equal to Three Thousand Dollars ($3,000.00), which
amount represents One Thousand Five Hundred Dollars
($1,500.00) for the first full month's rent (the "First
Installment") and One Thousand Five Hundred Dollars
($1,500.00) for the last month's rent (the "Last Installment")
payable by Sublessee hereunder.

f. Because the term hereof is expected to commence in the middle
of November, 1999, Sublessor shall apply the First Installment
toward the rent due for November, 1999 (a partial month), and
the remainder of the First Installment toward the rent due for
December, 1999, so Sublessee's rental payment for December,
1999, shall be reduced by that portion of the First
Installment so applied. Sublessor will credit the Last
Installment against Sublessee's rental payment for the last
month of the term hereof.

4. Termination.
------------

a. If at any time prior to the expiration of the term of the
Sublease, the Lease shall terminate or be terminated for any
reason (or Sublessor's right to possession shall terminate
without termination of the Lease), the Sublease shall
simultaneously terminate. However, Sublessee agrees; at the
election and upon written demand of Landlord prior to the
termination of the Lease, and not otherwise, to attorn to
Landlord for the remainder of the term of the Sublease, such
attornment to be upon all of the terms and conditions of the
Lease. The foregoing provisions shall apply notwithstanding
that, as a matter of law, the Sublease may otherwise terminate
upon the termination of the Lease and shall be self-operative
upon such written demand of Landlord, and no further
instrument shall be required to give effect to said
provisions. Upon demand of Landlord, however, Sublessee agrees
to execute, from time to time, documents in confirmation of
the foregoing provisions satisfactory to Landlord in which
Sublessee shall acknowledge such attornment and shall set
forth the terms and conditions of its tenancy. Nothing
contained in this paragraph shall be construed to impair or
modify any right otherwise exercisable by Landlord, whether
under the Lease, any other agreement or by law.

b. Landlord shall not (i) be liable to Sublessee for any act,
omission or breach of the Sublease by Sublessor, (ii) be
subject to any offsets or defenses which Sublessee might have
against Sublessor, (iii) be bound by any rent or additional
rent which Sublessee might have paid in advance to Sublessor,
or (iv) be bound to honor any rights of

2
<PAGE>

Sublessee in any security deposit made with Sublessor, except
to the extent Sublessor has turned over such security deposit
to Landlord. Sublessor hereby agrees that in the event of
Lease Termination, Sublessor shall immediately pay or transfer
to Landlord any security deposit, rent or other sums then held
by Sublessor.

5. Additional Services. Should Landlord furnish additional services to Sublessee
in addition to those provided under the Lease, Sublessor consents to Landlord
billing Sublessee directly, without notice to Sublessor; provided that Sublessee
must obtain Sublessor's prior written consent if Sublessee obtains such
additional services from Landlord, and Sublessee shall not procure any such
additional services for which the cost exceeds commercially reasonable amounts.
Should Sublessee fail to pay said amounts as additional rent under the Lease,
Sublessor agrees to pay such amounts to Landlord upon written demand. A failure
by Sublessor to pay upon demand shall constitute a payment default under the
Lease.

6. Use. Sublessee shall use the Subleased Premises for the operation of general
office space and ancillary uses, and for no other purpose, without the prior
written consent of Sublessor and Landlord.

7. Notice. Notices given hereunder shall be given as required under the Lease to
the parties at the following addresses:

SUBLESSOR: ADMINASSISTANCE, INC.
c/o Hire Standard Staffing
1350 Connecticut Avenue, NW
Suite 1050
Washington, D.C. 20036
Attention: Helen Hopkins

SUBLESSEE: GROUP LONG DISTANCE
6600 North Andrews Avenue
Suite 140
Fort Lauderdale, Florida 33309
Attention: Glenn Koach

8. Indemnification.
----------------

a. Sublessor and Sublessee agree to indemnify and hold Landlord
harmless from and against any loss, cost, expense, damage or liability,
including reasonable attorneys' fees, incurred as a result of a claim
by any person or entity (i) that it is entitled to a commission,
finder's fee or the like payment in connection with the Sublease or
(ii) relating to or arising out of the Sublease or any related
agreements or dealings.

b. Sublessee agrees to indemnify Sublessor against, and hold Sublessor
harmless from, any loss, cost, liability or expense (including, without
limitation, reasonable attorneys' fees and related disbursements)
incurred by Sublessor by reason of (i) any injuries to persons or
damage to property occurring in, on or about the Subleased Premises,
other than those arising from the gross negligence or willful
misconduct of Sublessor, or (ii) any work or thing whatsoever done or
condition created by Sublessee in, on, or about the Subleased Premises
or the Building, or (iii) any act or omission of Sublessee, its agents,
contractors, servants, employees, invitees or licensees, or (iv) any
failure by Sublessee to perform or observe any of the covenants and
obligations required of Sublessee under this Sublease. In furtherance
of the foregoing, Sublessee shall not (y) do or permit to be done
anything prohibited to Sublessor, as tenant under the Lease,

3
<PAGE>

or (z) take any action or do or permit any action which would result
in any additional cost or other liability to Sublessor or Landlord
under the Lease or this Sublease and that is prohibited under the
Lease or this Sublease. Sublessee's obligations under this paragraph
shall survive the expiration or termination of this Sublease.

c. Sublessor agrees to indemnify Sublessee against, and hold
Sublessee harmless from, any loss, cost, liability or expense
(including, without limitation, reasonable attorneys' fees and related
disbursements) incurred by Sublessee by reason of (i) any injuries of
persons or damage to property which occurred prior to the commencement
of the term of this Sublease, on or about the Subleased Premises,
other than those arising from the gross negligence or willful
misconduct of Sublessee; or (ii) any work or thing whatsoever done or
condition created by Sublessor in, on, or about the Subleased Premises
or the Building; or (iii) any act or omission of Sublessor, its
agents, contractors, servants, employees, invitees or licensees; or
(iv) any failure by Sublessor to perform or observe any of the
covenants and obligations required of Sublessee under this Sublease.
In furtherance of the foregoing, Sublessor shall not (y) do or permit
to be done anything prohibited to Sublessor, as tenant under the
Lease, or (z) take any action or do or permit any action which would
result in any additional cost or other liability to Sublessee or
Landlord under the Lease or this Sublease and that is prohibited under
the Lease or this Sublease. Notwithstanding anything to the contrary
herein, Sublessor's agreement to indemnify Sublessee hereunder shall
be subject to the waiver of subrogation endorsement more fully
described in Paragraph 11, below.

9. Covenant Regarding Lease. Sublessee covenants and agrees that Sublessee shall
not do anything that would constitute a default under the Lease or omit to do
anything that Sublessee is obligated to do under the terms of this Sublease so
as to cause a default under the Lease. Sublessor covenants and agrees that
Sublessor shall not do anything that would constitute a default under the Lease
or omit to do anything that Sublessor is obligated to do under the terms of this
Sublease so as to cause a default under the Lease. Sublessor represents and
warrants to Sublessee that the Lease is currently in good standing and all sums
due under the Lease have been paid current as of November 1, 1999.

10. As Is Condition. Sublessee represents it has made a thorough examination of
the Subleased Premises and it is familiar with the condition hereof. Sublessee
acknowledges that it enters into this Sublease without any representations or
warranties by Sublessor or the Landlord, or anyone acting or purporting to act
on behalf of Sublessor or Landlord, as to the present or future condition of the
Subleased Premises or the appurtenances thereto or any improvements therein, or
of the Building, except as specifically set forth in this Sublease. It is
further agreed that Sublessee does and will accept the Premises "AS IS" as of
the date of this Sublease.

11. Insurance. Sublessee acknowledges that neither Landlord nor Sublessor will
carry any insurance, in favor of Sublessee, on Sublessee's furniture, fixtures,
equipment, improvements, appurtenances or other property of Sublessee in or
about the Subleased Premises. Sublessee agrees to carry the insurance coverages
specified in paragraph 14 of the Lease throughout the term of the Sublease, and
the original policy or policies or duly executed certificates for the same, and
satisfactory evidence of payment of the premium thereof, shall be delivered to
Sublessor on or before the commencement date of this Sublease, and upon renewals
of such policies, not less than fifteen (15) days prior to expiration of the
term of any such coverage. To the extent Landlord has agreed to reduce the
required insurance coverage limits for Sublessor's insurance policies, Landlord
also agrees to reduce the required insurance coverage limits for Sublessee's
insurance policies. The property damage, fire or extended coverage insurance
policy obtained by Sublessee, and covering the Subleased Premises, or the
personal property, fixtures and equipment located therein, shall contain an
endorsement pursuant to which the respective insurance companies waive
subrogation against Landlord and Sublessor (provided such endorsement is
available),

4
<PAGE>

and Sublessee hereby releases Sublessor and Landlord to the limits of such
insurance policies with respect to any claim which it might otherwise have
against Sublessor and Landlord for loss, damage or destruction with respect to
its property by fire or other casualty.

12. Notices. Sublessor shall provide to Sublessee within ten (10) business days
of receipt of same, any notices received from Landlord or its agents in
connection with this Lease or Sublease.

13. Miscellaneous.
--------------

a. This Sublease may not be amended without the prior written
consent of Landlord and Sublessor. Sublessee shall have no
right to assign the Sublease or further sublet the Subleased
Premises without the prior written consent of Sublessor and
Landlord.

b. If any provision of this Sublease shall be invalid or
unenforceable, such provision shall be severable and such
invalidity or unenforceability shall not impair the validity
of any other provision of this Sublease.

c. This Sublease may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

d. This Sublease shall be binding upon and inure to the benefit
of the parties' respective successors and assigns, subject to
all agreements and restrictions contained in the Lease and
this Sublease with respect to sublease, assignment or other
transfer. The agreements contained herein and the Lease
constitute the entire understanding between the parties with
respect to the subject matter hereof and supercede all prior
agreements except for the Lease, written or oral,
inconsistent herewith.

e. If Landlord elects to charge such fee, Sublessor shall be
responsible for paying to Landlord the transfer fee pursuant
to Section 13.B(6) of the Lease in the amount of One Thousand
Five Hundred Dollars ($1,500.00).

f. In the event of any litigation between the parties hereto,
the prevailing party shall be entitled to obtain, as part of
the judgment, all reasonable attorney's fees, costs and
expenses incurred in connection with such litigation, except
as may be limited by applicable law.

14. Landlord's Consent. This Sublease is conditioned upon Landlord's consent to
this Sublease, in the form attached hereto as Exhibit B. Sublessor shall be
responsible for requesting Landlord's consent.

[Signatures appear on following page]

5
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Sublease the
day and year first above written.

SUBLESSOR:

ADMINASSISTANCE, INC.

By: /s/ Helen Hopkins, President
-----------------------------

By:
-----------------------------

SUBLESSEE:

GROUP LONG DISTANCE, INC.

By: /s/ Glenn Koach
-----------------------------

By: President
-----------------------------

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GROUP LONG
DISTANCE, INC. FINANCIAL STATEMENTS ENDED APRIL 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1999
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0
0
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</TABLE>